How Oura Ring is redefining health tech, with CEO Tom Hale

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1:17The ring looked like something that a Roman emperor might wear to a coliseum.

1:26black with gold. It was very Gucci. And it was like a rocket ship.

1:37Gucci put it into their stores and priced it at about a thousand euros for each one, a thousand dollars. So two and a half times roughly. Roughly. Yeah, it was more expensive. As the new CEO of Aura, Tom Hale was eager to experiment with partnerships for the health tracker ring. But Tom says even he was surprised that the luxury model of their wearable tech did so well. And they flew off the shelves. My jaw dropped to the floor because I couldn't. I was like, wait, you triple the price and it goes faster? Yeah. How does that work? By the way, like the thing about Gucci that was so surprising was that like we learned that people wanted to touch the ring and they wanted to put it on.

2:16They want to see it against their skin. They want to see how it looked on their hand because it's a very physical and intimate product. Since joining Aura in 2022, CEO Tom Hale has led the company to more than double the number of rings sold. It's up to more than 2.5 million now. This unicorn wearable tech business is a stunning example of scale.

2:44You've got to have incredible talent at every position. It's like this huge push. There are fires burning when you're going home. Can you believe it? Such an idiot. And then you go back to, this is totally going to be amazing. There are so many easy ways. I have no idea what to do. Sorry, we made a mistake. But you have to time it right. Oops. Working out of a three-bedroom apartment. Stuff that just seems absolutely nut balls. Ten years later, we're like, well, that's just how you do it. We haven't made it just how you do it. This is Masters of Scale. I'm your host, Jeff Berman. Tom Hale's history of success in the software industry has informed how he's scaling Aura to new heights now.

3:28But it took some convincing for the company to let someone like Tom, with virtually no experience in hardware, take the helm.

3:42Tom, welcome to Masters of Scale. Thank you, Jeff. I'm thrilled to have you for lots of reasons, not least of which being I have my aura ring with me. You're representing. Thank you. I'm representing. It is circa 2020. Wow. Gen 2 or Gen 3? Gen 2. Wow. Old school. So I am due for an upgrade soon. And I'm keen to hear about the Gen 4 and how my life is going to change. But before we get there, for those who haven't yet worn an Oura ring, haven't tried one, what is the ring? So the Oura ring is a very small device. It's very light. It's a couple of grams. Kind of a miracle of modern technology. There's a ton of technology packed in here.

4:19A very small battery, much, much smaller than the battery on your Apple Watch. And what it is, is you wear it on your body, which turns out to be a really good place for measuring some core biometrics. If you think about it, you ever been to a hospital and they put a clamp on your finger and that's because they're shining light into your body and then determining your pulse ox, which is your blood oxygenation. They're also determining your pulse and other things. That's why they do it there. And it doesn't beep or bloop or talk to you. It doesn't have a screen. It's not trying to notify you about somebody talking about you on Twitter or LinkedIn.

4:51It's just very sort of silently, calmly, passively tracking your body in the background. And it's coupled with an app on your mobile phone. And the device syncs your data from your biometrics to the mobile phone. And on the mobile phone, there's a lot of computing that's going on that's making insights about your health. And every day it gives you three basic scores. It tells you about how you slept, how much activity you had, and what your readiness for the coming day is. The whole idea is to sort of give you insights about how to make healthy choices and healthy habits without being too much of a load.

5:22You joined the company just a few years ago. So when did you first encounter the product? I first bumped into it. I guess it was the fall of 2022. Okay. And there's a little bit of a story here, which is I had just been part of a company that we had sold to Zendesk. The company was called Momentive, but it was really SurveyMonkey was the main product. We had sold it and we were high-fiving all around. And then it was in the process of getting unsold. Basically, the shareholders of Zendesk rejected the deal. very stressful time. Not an easy moment. Very difficult moment. And I think, you know, a lot of things were happening during that timeframe.

6:01I had some challenges with my family. I, you know, I was getting older, all these things that were going on. And for the first time in my life, I lost sleep. I don't know if you've ever had this experience where like, I'm a championship sleeper. I mean, my entire life, I could probably fall asleep, you know, in five seconds and stay asleep for 12 hours. Yeah. I long for those days. Okay. Well, yeah. So this was the moment when those days ended. And I was really, I was like, I've never had a hard time sleeping and this is a real, I should really pay attention to this. And what am I going to do?

6:28So I was researching and looking for things to do and trying to learn, you know, educate myself about sleep and bumped into the aura ring and like, well, I'll give it a try. I gave it a try. And I had worn wearables before. I'm kind of fitness adjacent. So, you know, I like to try and, you know, get two or three workouts. I like to drive by the gym. I'm, I'm, you know, and I do my best, But, you know, I'm a busy person and it's hard to fit it in. So I kind of knew what the deal was with wearables. And I put this thing on and within the space of about three or four weeks, one, I'd learned a ton.

7:00I'd learned a lot about like what was going on for me when I did certain behaviors, when I drank alcohol, when I had too much coffee, when I didn't take a walk or work out. Like I could see all these things in my body. And then secondary, I learned a lot about sleep. I learned a lot about how sleep can really improve your life because within three or four weeks, I kind of had improved my sleep. Yeah. And it was like night and day. It is fascinating. The three biggest aura insights for me were alcohol kills my sleep. It's a massive sleep disruptor to high intensity workouts late in the day. Bad news.

7:33Brutal for me. Like my heart rate's just up too high and I can't come down. And then the third one, oh, it was caffeine after about 2 p.m. And so like those three changes have completely changed my sleep profile. Yeah. And it's all aura driven. It was for me, it was like I was living in a black and white movie. Basically, since the time I'd had my kids, you know, I'd had them in my 30s and I'd been sleep deprived more or less up until that moment. Yeah. And then made us a few key behavior changes. And it was like walking into like a 4K technicolor movie. I was like, whoa, this is what life could be like.

8:06Yeah. Where has it been? So, I mean, one of the great things about Aura is you get all this insight from the data that doesn't make it necessarily actionable. So how does Aura help the customer close the loop and actually act on the data to improve their health? There's three ways. The first way is the daily insights that we give you contain kernels of behaviors that might be healthy for you. So for example, your heart rate lowered late last night. Did you eat a late meal? And that's a sort of a reinforcing and education of, hey, you should eat three hours before you go to bed because if you go to bed and your body's still digesting, your deep sleep will be reduced and less effective.

8:45And deep sleep is how your body repairs and grows. And so if you want to be giving as much value to each minute of sleep you get, don't eat too early. So insights that sort of come up and they come up sort of on a couple times a day or they come up within the experience in a really sort of very subtle way, insights is the first way. The second way is this idea of the advisor. And the advisor is an AI chat kind of coach that knows all about you and makes recommendations and does education and gives you visibility to trends and helps you understand and maybe place a context around that and then makes suggestions.

9:21And those suggestions are things that would be better for your health. And then the third way, and this is probably the earliest, but maybe it could be compelling, I think, is something called experiments. And an experiment is basically a protocol. Like try doing this for two weeks and then see what the impact on your metrics are. And then we'll show you actually how you compare it to everybody else. And we'll also show you what the impact was on you. And the classic one is we have this stop drinking coffee experiment. And so stop drinking coffee for two weeks and let's show you what happens. And those three things are really potent because what's measured is managed, but you also need some context and you need some instruction.

9:55Well, and also that lets you isolate variables, right? As you do one experiment at a time that you're recommending and everything else is largely consistent, you're able to see, oh, this is the impact from that. So the leadership position at Aura came open and you did not get a call out of the blue from a recruiter. Yeah, actually, I think when I learned that there was a search going on, I might have said something like, hey, this seems really interesting. And they're like, yeah, no, that's a little out of your range. But you've been a serial tech executive. You've had a lot of experience in Silicon Valley.

10:26I am probably what you would call kind of a software person by train. I've come up the ranks in various software companies and have worked almost exclusively in software. I have a couple of investments in hardware, but mostly in software. And I think the board had this view that what they were looking for was a CPG, you know, consumer product goods person, maybe with a sports background, you know, really like, you know, somebody who had a real name profile. And there were certainly candidates in the mix. And so I didn't fit the profile. And they kind of told me that. And I basically, you know, kind of did something.

11:00It's very uncharacteristic for me, which is I ended up saying, like, you guys really you really need to hire me. Like, this is I love this product. This product has changed my life. I can see the impact that it can have on other people's lives. I am aligned with this mission. And by the way, I think I know what we need to do to take it to the next level. How did you do that? What was the format for that? Somebody advised me to write a letter and put your thoughts down, make the case for why you think it's a good fit and what you should do. And that's very uncharacteristic of me. I tend to be someone who I'm happier being pursued than pursuing.

11:32But I really just went out there and I wrote this letter that said, listen, I think you guys, this is a software problem and a data problem. And it's data at scale, which is something that I know because of my days at SurveyMonkey and Momentive. And it's a user experience problem. And it's about transforming people's lives and behavior. And I've spent my entire life thinking about how much the product experience matters for people. And here's the case. You should have a software person leading this company. Every company is a covered dish. You think you know what it is. You come in, you lift the top off and it's something different.

12:04So how do you have such confidence. I think for me, the sort of foundational belief was wearables are going to be a thing. Everyone's going to have one. And a wearable that's tracking your health and continuously monitoring your health, which is what the Oura Ring kind of does, is going to be a thing that everyone's going to have. And the thing that was different about the Oura Ring, and I knew this because I'd worn a bunch of other wearables, was a seven-day battery life, unobtrusive, and it's just on your body producing this stream of data. And then making sense of it is something that software and data analytics and machine learning is going to have to do.

12:38And by the way, the whole point of this is that on the averages, it's personalized to you. And so the sort of vision of an AI intelligence that was tuned to your needs and understand everything about you and understands all your context and then can make recommendations about your health, whether it's an intervention or a prevention, that's an incredibly powerful idea. And I think at the heart of it, that's a software and data problem. Yeah. And that's what convinced the board. You know, I think so. Yeah. Yeah. My winning personality, maybe. I don't know. Naturally. Naturally. When you came into the company, I believe the company had sold about a million rings to date and you're now like two and a half million.

13:13That's right. Right. So you have this significant jump in a very short period of time on the hardware side, which still accounts for what, like 80 plus percent of your revenue. So what did you do? What did you bring to the company? What did your team bring in that accelerated this growth? so extraordinarily? Yeah, well, let's set the scene. Okay. Yeah, please. Because it is like early 2023, there's still kind of a growth at all costs mindset going on where like, we, you know, keep spending money, keep hiring people, spend more money on marketing, you know, like you've just got to break through.

13:50That was kind of the mindset. And hey, we just introduced this subscription business model. And quite frankly, I think it was a change in the bargain with our customers. Six bucks a month. Six dollars a month. Yeah. Like, you know, barely a cup of coffee and a half. Yeah. Depending on where you shop, depending on where you drink your coffee. And in LA, it's like half a cup of coffee. Exactly. Exactly. So it's a nominal fee. And I think the idea was that, hey, we really believe that this should be a subscription product and it should deliver enough value, more than enough value to sort of justify that.

14:21And I think that's true. We've seen that in the last two years. We've seen that. it's absolutely true that people see the value and renew and pay and they pay us every month. So we made that transition and it was pretty rough. And so I came in in that post transition moment and there was a lot of upset. And I think this is sort of a classic maybe lesson for me in my career, which is that you got to engage with customers directly and you got to like kind of be present, particularly in early businesses that are building up because the people who are, you know, evangelizing you in your early days as a company and a product, they feel like they own you.

14:57And in some ways they kind of do. They've made some incredible contributions. They're your best marketers for sure. So sort of the first thing was like, let's engage, let's go out there. And so I wrote a blog post that said, Hey, here's what I think about the subscription business model and why I think it's really a great value and why we're doing it. And just having some level of transparency and engagement actually made a big difference. And actually the economy had gone a little south at this time. We were like, what are we going to do here? How are we going to navigate this? And we thought there's two or three things that really matter.

15:27One is women because women love the product. They retain better. It's a ring. That's a form factor that there's no other substitute for it. It fits in with every fancy outfit you've got. So we thought women would be important. Second thing we thought was going to be really important was going to be retail. and we learned this by launching with gucci i don't know if you remember this but there was a gucci ring and it was like a rocket ship gucci put it into their stores put it into their online stores and they have you know gucci stores around the world and we had made a whole bunch and priced it at about a thousand euros for each one a thousand dollars so two and a half times roughly roughly yeah yeah it was it was more expensive yeah and they flew off the shelves and my jaw I dropped to the floor because I couldn't, I was like, wait, you triple the price and it goes faster.

16:17How does that work? I think it shows you the power of both a brand like Gucci, but it also shows you the power of jewelry. We learned that people wanted to touch the ring and they wanted to put it on. They wanted to see it against their skin. They want to see how it looked on their hand because it's a very physical and intimate product. They care what the thing looks like. The ring looked like something that a Roman emperor might wear to a Colosseum, you know, like a sort of black with gold. And it was very, very Gucci. But for a certain set of people, like that kind of statement was, that's what they wanted.

16:45This growth through kind of non-obvious partnerships is fascinating. And you all have done hundreds of partnerships. Was that something that changed when you came in? Did you empower the team on that? Did you bring a team to do this? Or had this been like late in the company and people were dying to try it? I think we'd always believed that there was going to be things like Gucci, where brand partnerships were going to be the key. What we didn't necessarily think about until I came in was the platform and how to think about a platform enabling other partners. And by enabling other partners, they become your salespeople and your distribution channel and your referral network.

17:20What's a good example of that beyond your tree? Natural Cycles would be one. Strava would be another. Chronometer, the CGM apps like vary. Like there's basically a whole set of apps for health and wellness. Right. And in many ways, we sort of power them with our data. Natural Cycles in particular is one that has been very successful. So partnership was a clear catalyst. But we saw these three things. We saw women. We saw retail from Gucci. Number three, we thought about like, how do we provide access to people? And the idea there was something called HSA and FSA. These are basically kinds of accounts that your employer usually provides for you.

17:57And they hold back a little bit of your paycheck and put in these accounts. And then you can spend it on health, whether it's a doctor or glasses or Band-Aids or whatever. It's a whole range of things you can buy. So by putting the Oura Ring into HSA FSA, we are effectively giving people the ability to use pre-tax dollars that, frankly, had been sort of already set aside. So it's already been taken out of their pocket in some way and that they actually have an incentive to use because some of the programs are spend it or lose it. And so going into that second year, we ended up launching with Best Buy and later with Amazon.

18:33We introduced HSA FSA and we really focused on women and women's health. And those three things, it was like we set a fuse on a bomb and it really blew up. More with Tom Hale on leading Aura through its rapid scale story in just a minute.

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19:50And here's the best part. Join AWS Activate today and you could score up to$100 ,000 in AWS credits tailored to your stage and network. Go to aws.amazon.com slash activate and start building. Expanding your business in the U.S. can feel like a maze. Every state has its own payroll, benefits, and compliance rules, which can pull your focus away from growth. That's why founders use Deal. Deal is the professional employer organization, or PEO, that gives you a dedicated HR expert plus Fortune 500 level benefits for your team. The National Association of PEOs says businesses can grow twice as fast if they use one.

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20:47Welcome back to Masters of Scale. You can find this conversation and more on the Masters of Scale YouTube channel.

20:57One of the interesting differences between software and hardware is software you sell over and over again. And I mean, Exhibit A sitting here as a super loyal, like, you know, top tier promoter score user lover of the brand, by the way, or is not a sponsor. We're not. This is just pure love for the product. Thank you. But also, I'm sure that the Gen 4 will give me massive upgrades over the Gen 2. And it's not$1 ,000 or$2 ,000 or$10 ,000 purchase like a mattress or refrigerator or whatever, but it's still hundreds of dollars. So the business model is different. You don't have the customer coming back every month or every quarter of a year to buy.