Calm: Alex Tew and Michael Acton Smith

0:11 Launch. A website which you called Do Nothing for Two Minutes. Wha w what was this thing? Yeah, it's it was really a fun exercise. that came out of a late night brainstorming session just Yeah, what would the

0:25 World simplest webpage B. Well it would do nothing. and you would go on it and it would just have a countdown clock. And you do nothing. It wanted you to do nothing for two minutes. Yeah.

0:36 picture of a sunset, sounds of waves crashing on a beach. And If you moved your mouse or keyboard. it would reset to two and say try again. Wow.

0:46 Only about fifty percent of people who went on a page could actually Do nothing. Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements. They built.

1:09 I'm Guy Roz, and on the show today, how two struggling tech entrepreneurs decided to go all in on an ancient practice. Meditation. And built an app. that's now valued at nearly two billion dollars. Mm-hmm.

1:28 Over the past fifteen years, meditation, at least in the West, has gone from fringe to By twenty twenty four The global meditation market hit nearly$9 billion, with about a quarter of that driven by meditation apps. And a few years ago we told the story of one of those apps, Headspace, and if you haven't heard it, it's worth looking up, because there are obvious parallels with today's story.

1:55 The story of Headspace's biggest competitor Calm. When Com launched in 2012, Headspace had already been around for two years. And coincidentally Independently of each other.

2:08 Both apps were started by British co-founders. And just like the Headspace team, Com's founders, Michael Acton Smith and Alex Tew, had a hard time raising money early on. In twenty twelve, a lot of investors just

2:24 didn't believe people would pay to meditate. Especially on their phones. But Pay they did. By twenty twenty two?

2:33 Cal had more than four million paying subscribers. But what makes this story even more interesting is what Michael and Alex were doing before Calm. Both had already launched a bunch of internet businesses. For starters, Alex had created something called the Million Dollar Homepage, a viral stunt that actually made him the million dollars. And Michael

2:56 He opened one of the very first online gadget shops in the 1990s, back when most brands didn't even know what e-commerce was. Both Michael and Alex grew up in the UK. We'll hear from Alex in a bit, but first... To Michael. He was a student at the University of Birmingham in the mid-1990s, and it was there that he made a friend named Tom Bordman. Who would go on to become his very first business partner.

3:22 I met Tom at chess club. We were both uh real rock and roll students and yeah, we just became great friends. And uh the internet was just getting going. You know, we we started university, I think about 1993. So it was very, very early days, and Tom was doing a degree in artificial intelligence, and everyone would make fun of him because no one really knew what that meant back then. People thought you were a bit weird if you were going into internet cafes and banging on about the internet, but we both definitely saw uh an extraordinary revolution taking shape. And so we had a lot of different ideas, but um yeah, we settled on uh e commerce as the the starting point.

4:04 Wh which is kind of amazing because even doing it in the US and again, no shade to the UK, but like The UK was uh was was behind the US, right? At which the revolution happened. But be gett getting into e commerce anywhere in the world in nineteen ninety seven was like w totally nuts. People like what what? Credit card internet? Like what are you talking how do you sell to the internet? It's a it's it's a computer. How do you sell through that? But I guess you guys start talking about

4:34 This idea. And at the time and I remember this and I might still be around There was a a shop in in the UK called the Gadget Shop. In the US I guess it would it would be similar like the sharper image. Right.

4:46 That was exactly it. That was our uh inspiration to to get going. All sorts of quirky gadgets and games and, you know, chairs would massage you as you watch TV, cocktail shakers, uh Swiss army knives. It just felt like um selling these products online would be a really fun thing to do. But we have to solve a lot of early Problems because Uh Shopify was not around, Stripe was not around, we um Tom was

5:15 obviously very, very good at engineering and was able to solve a lot of these uh early challenges, but it wasn't easy. Yeah, it's amazing. I read about how you guys move basically nineteen ninety seven time frame. You move to His parents house in Cardiff. Yes. And you use like a spare room in the house to

5:33 Start. Nineteen ninety seven, ninety eight, like this was r a really hard challenge. First of all, most people didn't have access to the internet yet, and if they did it was dial up. Secondly, Building a website it's complicated. It was really hard to do.

5:49 He knew how to do this. He figured it out. We'd been in this bookshop in Cardiff and we saw this book called Doing Business on the Internet. And uh it was massive. Um and we bought it. We clubbed our money together and we both just absolutely devoured it as if it was uh uh a holy script and then were able to to build the first version of the site.

6:11 Uh and it was still really, really clunky. We couldn't quite figure out how to get people to input their credit cards. So if you wanted to order anything, you'd print off a sheet of paper and fill in your credit card details and then fax it to us. Fortunately we only got about one order every few days and so so uh we weren't too worried about scaling. I mean, you have this website and you call it Hotbox. Did you have inventory or were you just advertising things that you saw in catalogs? And then people could order them from you and then you would order from a catalog like how were you selling? Yeah. Good good question. Well we um we put photos of products on the site and if anyone

6:49 ordered one of them. We would then uh go and try and buy it and uh wholesalers were not too impressed at selling one unit at a time to us. So often we just buy it from some other location we could find it and sell it for the same price we were buying it for. It was basically just testing things, no margin, um and just seeing what products would resonate, whether we could actually make this work. And so it was very Very slow progress. Alright, you have a big break.

7:18 It's a first break. Which is you guys start to sell something called the shot glass chess set. So basically I'm s I'm imagining it's a a chess set, but each piece is a shot glass. And this is something you guys came up with. You created this product, right? Yes, yeah. We were dreaming up all sorts of weird and wild ideas for new products and um we were in a bar one night in Cardiff. And saw some tequila's lined up across the bar to killer shots.

7:46 And I think in our slightly drunken state. You know, I think I mentioned they look like pawns on a chessboard. And then it got into a conversation of how you could make chess more exciting by making it a party game. So we call it the Thinking Person's Drinking Game. And you could play with red wine against white wine, whiskey against vodka if if you're a little more hardcore. But every time you capture an opponent's piece, you have to drink their shot. And uh Usually you don't remember who wins by the end of the game. It's actually

8:15 A a great idea. How did you get it made? Yeah, so it took quite a long time. It it was quite expensive assembling all those pieces. Yes. We eventually cobbled it all together. We we tested the market. by going to a shop that sold loads of magazines and scribbling down the um the names of the editors and the addresses of these magazines and then sent out our press release. We took some photos of the chest set and we sent it off to these editors, personalized everyone.

8:46 And The hit rate was incredible. You know something like half of them came back saying, what a genius idea. We want to feature this. And we were featured in Oh all the the men's magazines all around the world.

8:59 It was amazing. So that was the the sort of the tipping point, the the start where we thought, wow, you know, storytelling is so important. This wasn't just a chess set. We were telling these editors we were two students um building an internet company and uh I think it it really resonated. I mean in and th this is now we're talking about ninety eight, ninety nine here getting a lot of attention for this Shot glass chest set. And meantime you you're having some issues with your name, which is Hotbox. You guys owned Hotbox dot co dot UK, but you did not own Hotbox dot com, which was a different website, I guess. Yes. Have you ever been to hotbox.com?

9:36 I have not, no. I promise. Everyone listening, I have not. No, I wouldn't I wouldn't advise it. Um especially not at work. So we we didn't think it mattered that we uh didn't own the dot com to our name. Uh we love the name Hotbox because our products were so hot they were bursting out of the box. But it did matter because Hotbox.com was at the time one of the biggest porn sites in the world. So um we Yeah.

10:00 That was a a little awkward, especially when my mum, who was so proud of her son, finally doing something and uh building a business, she'd tell all her friends to check out her son's new business hotbox and uh cause some very awkward moments. So you had to change the name. We changed it to Firebox, which um didn't have uh any negative connotations. Firebox dot com. And this is again the late nineties.

10:24 And you start to attract interest from investors. Um you guys moved to London. And I think you even raised a little bit of money, right, to expand Firebox Out. Yeah, so we were building this internet company from this attic in in Cardiff and uh no one was doing anything similar around then. The bank thought we were completely mad

10:45 Um but then we read uh an article in a newspaper uh talking about an event in London called First Tuesday, which gathered uh internet entrepreneurs with investors, and we both looked at each other and went, wow, we literally decided to move to London almost the next day. We throw all our things in a van and uh let's get there before Tuesday! Pretty much. And uh and the very first event we went to, we met an investor who um Light. the sound of what we were doing and he invited us into the office.

11:17 And a couple of meetings later we had a half a million dollars of investment and we just could not believe it. Um so this starts uh I mean you start to really expand half a million dollars you probably I mean God Yeah. like twenty five, you know. Years old, twenty four years old. I mean it just must have been mind blowing to imagine what

11:38 Did it make any money? It did. Yeah, we um we were profitable from fairly early on. We got our own office and uh grew the team to 10 and 20 people, then 30, 40 we took on our own warehouse. So we kind of expanded at a nice sensible rate. I know that you

11:59 You would eventually leave um and start a another business. And I wanna come back to that in a sec,'cause we're around two thousand three two thousand four. Um but I I want to turn to you, Alex, for a moment because You're about ten years younger than Michael. You were um you also grew up in England. Yeah. You have

12:18 very unusual interest as a I shouldn't say unusual. It's just I've never s in these seven hundred interviews I've done on this show, I've never had somebody who was a like a semi professional beatboxer. Yeah. Yeah. Yeah.

12:35 Beatboxing's a funny one'cause at the time When I started doing it it was It wasn't something that I knew anyone else did. Uh, it was just something that came naturally. And so from the age of maybe four, you know, was running around the house just making

12:50 Rhythmic. Sounds and then took it a bit more seriously as I got older. Yeah. Do you when you get close to a microphone like you are now? Is it hard to resist the urge?

13:02 Come on, Alex. My instinct uh is to just Just lay it out. Every every event we always ask Alex to beatbox and every now and then he does it. So Guy, I don't know if anyone's ever done it on the show before, but could Could this be a first? And

13:18 Yeah. Not bad. I wouldn't be a competitive beatboxer. Uh I'm not gonna make you do it. So so but talk about this because you're

13:33 entree into the internet. was setting up a beatboxing website. For like a forum. Beatboxing.co.uk. You started this, you were

13:43 What, like fifteen years old, sixteen? Yeah, I was sixteen. Uh seventeen, something like that. Um it was actually my My second website. So

13:54 But uh it just became this natural idea to create a forum uh and so use some software V Bulletin, which was like the premier forum software back in the day. And uh and then suddenly just all these beatboxes from around the world started logging on. It was like the first place It turns out that they were.

14:13 Tens of thousands of people also. Enjoying the same you know, the same hobby, if you like. Uh So it was super cool to like Build that community.

14:23 and and actually learn better bee boxing techniques. We were all trading techniques. Uh on this website. I love this so much because you weren't just doing it, you were like leading the you were like organizing events you organized I guess after you finished.

14:39 high school, what we call high school, you you decided not to go to university right away, but to Organiz the world Beatbox Convention. In London. Yeah, but I mean you're 18? That's a pr that's pretty awesome. Who who came? How many people showed up? We had three hundred

14:56 beatboxers from all over the world uh come to London and um yeah the event was amazing. We just sort of had this big showcase think we may have a had a competition and I think my entrepreneurial instinct was like, you know Could this become a business? The answer is no. There's not much money in beatboxing. It wasn't enough for me to move out of

15:17 Of home. Living with my parents and uh decided okay, I should probably take the traditional path that everyone is encouraging me to to take. I should go to university. Get a job.

15:30 Maybe Leave the beatboxing behind. So you get to university in Nottingham. And One of the things that you

15:38 A web page. You you you bought a domain. called million dollar homepage. dot com. And

15:48 Tell me what this idea was.'Cause this would I'm I'm giving away the plot here. It's gonna we're gonna get some attention, but what was the idea for Million Dollar Homepage? Yeah. The the idea was very simple. It was to Try and make a million dollars. Uh

16:02 uh w w with the silliest possible uh method which is to sell a million pixels For one dollar each. on this one page website. Yeah, it was just One of those.

16:14 That I thought okay, that's It's quite funny, it's quirky enough that It might just get a bit of attention. Just to describe this for people. It's so crazy. It's like um imagine A collage of just a million

16:30 Like Logos. And basically You would sell Pixels to anyone.

16:37 Who wanted to put and then you could just hover your pointer over each pixel and click it and it would take you to a website. But you got you you start to get attention I mean again, this is I can think people should remember this is like Early internet days when Websites would just get attention.

16:54 Like just a weird website would just get news coverage, right? Yeah. Um, but people were getting something in in return. You know, they were getting an advert that people could click on and some of those early Advertisers. Got an insane return on their investment.

17:08 I I should mention that the million dollar homepage was to help finance your college tuition. And so that was a great sort of made for media story because like oh here's this poor college student trying to raise money, but he's come up with this cool idea. Yeah, and and then every piece of press was making it more valuable. I remember One of the early interviews I did was on the BBC uh breakfast show. So this is like Good Morning America, right? But in the UK. Yeah. And I'm sitting on the couch and like, Yeah, why is this

17:36 Why is this working? And I was like, Well you know, the fact I'm on the couch talking about it is why it's working. You know, they it it it was because of the The attention gave it oxygen and made me money. You earned a million dollars within four months. Yeah.

17:52 Yeah, it was uh it was it was crazy. And so I would open up my laptop one day. and just look at all the orders coming in through PayPal. Uh and there'll just be like a ten thousand dollar payment and I'm just like, that's awesome. Yeah.

18:07 Alright. Prompt you Understandably the drop out of out of university because you're thinking, look, uh the internet is the way to go. I don't wanna spend all this time getting a degree is that is that fair to say that you thought I I just I need to just focus on on this world.

18:23 Yeah. It just Opened my eyes to what was possible. I've had a lot of agency. You know, I could I could And I

18:30 And I didn't really want to go to university in the first place. I was Trying to be an entrepreneur. And uh so so dropped out. And um And move to London.

18:39 Similar story, I guess, to Michael, where all roads lead to London in the UK. I want to turn back to you, Michael. Um And jump back on on your timeline because you know, you left work with a job with Firebox and you decided to start something new. which was a video game company. And because of I am assuming because of the your reputation with Firebox and and what you you guys managed to do,

19:02 you managed to get some significant funding. Like you you raised like ten million dollars to start this video game company called Mind Candy. Tell me about that. Yeah, didn't happen immediately, but um One of my loves. Is games. You know, we we've talked about chess, but I I love everything from

19:19 poker to Batgam and to Scrabble to video games, and around this time it felt like gaming was going through a huge revolution. Video games had been one or two player, and now we were seeing games with multiple players, sometimes tens, hundreds of thousands of of people online. So I just thought the next big revolution would be to make our fun multiplayer games. And so like the name Mine Candy. That was the starting point. And we created a game called Perplex City, inspired by a movie I'd seen, um, The Game by David Fincher. Oh with Michael Douglas. Exactly, yeah. But um I just thought how cool to turn your life into a game. You don't know what's real and what isn't. So I thought, wow, why don't I try and make a a real life version of that. So that's what perplexity was and to cut a very, very long story short.

20:07 We buried a treasure worth two hundred thousand dollars somewhere in the world, and then we set about releasing clues across all sorts of different media. Real cash. You buried it in a real place. Well, we buried we created a story and all these characters, uh, we buried this cube in a secret location, and anyone that found this secret cube with all these strange engravings on would bring it to our office and win two hundred thousand dollars. That was the idea behind this game. Wow. Where where was it buried? It w it was buried in a field about a hundred and twenty miles north of London, and we put clues in the classified sections of uh newspapers around the world. We h had helicopters uh at live events and uh there was these cards that you could buy if you squeeze lemon juice on them or hold them up to sunlight, passwords would appear. And and I guess the the idea was to make money by

21:00 W like by what? Selling what? The business model was um inspired by Pokemon, we created these puzzle cards. And so you'd buy a pack with six cards and rip it open, but on the backs of the cards uh if you put all two hundred and fifty six together would create this massive map of the world of Perplex City where all the deeper clues were hidden. So yeah, the idea was to sell these packs for a a few pounds each, and it was very, very complex. Probably the most uh creative thing I've ever worked on. But uh one of the most commercially

21:32 Disastrous things I've worked on, so I I learned some lessons from that adventure. This game was considered I mean I think it was widely um like critically acclaimed. What was the problem? What happened? Well, as I say, it was it was extraordinary and incredibly creative and we had a a very, very passionate audience of players, but unfortunately the game was just so complex that uh the audience was relatively small. It was a few thousand people. So you're right, we won awards, we had incredible publicity.

22:03 But the commercial piece of it was not there. So this is around around two thousand six. Um Your paths. cross Michael and Alex, you guys meet for the first time.

22:15 In London Alex um you'd come down Of course to pursue the next thing big thing of the internet, Michael you Been there building. Mine candy and

22:24 And you guys just met at like a a random event or a party or what how did you meet? Well I I remember reading about the million dollar homepage. And um I wanted to connect and meet this genius that that had created this. I just thought, wow. And I I tried to get in touch with Alex and uh no joy. In fact I had some of my investors pinging me saying, who is this guy? Let's find him and no luck.

22:51 And then we met at a a party, didn't we? Uh a mutual friend. We did, yeah. And I had known about Firebox because I used to log on to Firebox. when I was broke, uh, looking at all the products that I wanted to buy but couldn't afford.

23:04 Mm-hmm. And uh I think I may have even bought a few of them once the Melinda homepage started working. So I think I was a fan of of Michaels. And then we just sort of hit it off from that moment. Definitely. And we got on really well when we met at this event and I was renting a house in Soho. which is right in the beating heart of London. And we had a spare room and I

23:26 I I said to Alex, Do you wanna do you wanna move in? Yep, and yeah, then we lived together for quite a few years. In in Soho. It was a great house, wasn't it? Very entrepreneurial. We'd sit playing. FIFA on our Xbox in the evenings, uh talking about business and ideas and we throw great dinners and and parties. Most of our friends were were building tech companies. So it was a a really, really exciting time.

23:51 So all right, so you guys are in this house and meantime, Alex, you start a business called Pixelato, which I guess is inspired by this million dollar homepage where you're selling pixels of things. But from m what I read, it it didn't traction with it. You weren't kind of it wasn't taking off in the same way. No.

24:12 Yeah, business. It's so much about storytelling. And the Millennium homepage had Had a great story. With Pixelotto it was Yeah. It was not that at all. And I I I look back and I sort of

24:23 I squirm at the fact I I did that. as opposed to create something more meaningful, but I think It's just a it's part of learning. You know, w what works, what's worth working on.

24:34 And I think the reasons for For doing Pixelotto weren't Th they weren't the right reasons. I was just trying to

24:41 create another version of the Millennial homepage, which um is not so exciting. Meantime, Michael, you're still trying to get Perplexity. T. gained some traction, but it's really not I mean, you I think y you get to a point in two thousand seven

24:57 where you have like less than a million dollars in the bank and you guys had raised ten. So you're I mean and and you're not bringing in any significant revenue. So Tell me about that time. I mean that that must have been quite stressful for you because y you know, that means like this thing is probably gonna die.

25:16 Yeah. horrible, really, really difficult and and stressful. I would wake up every single night at four AM. just staring at the ceiling, knowing in the pit of my stomach, and I think most entrepreneurs have had this feeling that it is not working. You can't continue like this. You have to do something, but it was so hard to kind of change. And I didn't know what else to do. And uh just watching the bank balance dwindle, um, board meetings were getting more stressful.

25:44 And then eventually I thought we have to try something new, um a Hail Mary. And Within the world of Perplex City, there was this legend that we had created called Puzzle Monsters. And the world was all about puzzles and if kids didn't do their homework, uh the puzzle monsters would come and get them in the middle of the night. It was quite dark. Um but I love the name puzzle monsters, and even though I'd never built anything in the kids space before, I thought Um maybe we could create a a website for kids. And uh

26:14 I'd loved The pet rock story. Yeah. And then um Tamagotchi came along and Neo Pets. Oh, Tamagotchi were those like um keychains, right? It was like a pet that you take take care of. Yeah, a little pixelated pet that you would look after and feed, and very, very simple, but nurturing is a really powerful human emotion. And um all ages uh love it. And so we thought could we create Uh sort of digital pet.

26:40 a little monster for kids to to look after and feed and dress up and go exploring this world. Yeah. So I basically said let's try this completely new idea. And to the board's credit, they were obviously a a little surprised, but they were like, Okay, you know, I think they saw the writing on the wall, the money was running out, we didn't really have many options left. So it was one almighty pivot. And uh we we gave it a go. So with a little bit of cash left, we started trying to build this uh kids entertainment company. Called M Moshi or Machi Monsters. Was it sort of inspired like that name sounds a little Japanese, was it was inspired by that kind of Japanese aesthetic? Yeah, we explored lots of different names. We just quite like the um the alliteration of Marshy Monsters and and then I didn't want to start it as a completely new company. I felt really bad for all the investors that had backed me and believed me. So I wanted to keep the same cap table. Um, even though it probably would have been simple to to start from a fresh sheet of paper.

27:40 And again, it was a a website that where what kids would like Create a pet and then they would care for the pet. Uh like just briefly explain how it worked. Yeah, so you would adopt your own pet monster, you'd give it a name, you'd customize it, it lived in its own room, so you could design what its environment was, and kids don't have an awful lot of uh control over their their world. They're told, you know, what to eat and when to go to school and so to have their own space, their own

28:08 on online environment where they are in control was really exciting. And one of the key things we did in this world uh we talk about this idea of stealth education. So the core loop of the game was to look after your monster, but then you would go to the puzzle palace and do puzzles every day, learning maths of the world, how to tell the time So parents liked it and um Definitely odd not overnight, but after a lot of tweaking and iterating, we we got product market fit and it just took off like a rocket. Mm.

28:38 So How was Moshi Monsters gonna make money? Was parents would would Pay A fee or subscription model? How did it work? Well, we just made the decision, why don't we just make the game free and allow any

28:50 Any person that wants to come along, any children to adopt a monster to enable them to do it for free. And wow, the floodgates opened, you know dozens of signups the first day, hundreds, day two, the first month. We were thousands a day. It was just it was incredible. So we still hadn't figured out how it's going to make money. So we just grew the the audience and and kept improving the product. And then we added a subscription. Six dollars a month, roughly, I think. It was about that, yeah. And again, very challenging because, you know, it was the parents that would pay, but the the kids were the one playing the game. But I think because the parents could see it was a safe world, there was an educational component, um that uh they were happy to do so.

29:33 So this is two thousand eight, two thousand nine, and I mean from what I gather it was It actually hit profitability pretty quickly, like you guys We're getting you know, within uh two or three years, like

29:47 eighty million dollars in revenue. I'm just curious, how did you How did you get the word out? How did people find out about Was it just that the I mean, it's two thousand eight, two thousand nine, the internet is still fairly new that It was still. easier to get attention for a website? Yeah, it you know, if you create something incredible.

30:06 for kids that they love, there's the few things that spread faster in the playground. You know, you think of all the big hits from Pokemon to cabbage patch dolls, Par Patrol you name it. All these worlds and and Moshi was uh at the right moment in time. And one of the really key turning points in the growth of the business was when we decided to do physical products. When you say physical products, toys? Well a whole range of things. So one of the first things we made was a magazine that featured content from the world. Um and then we did trading cards. And then we did books. In fact the first deal was a a book deal we did with Penguin, talking about all the different Mm. And uh and then a music album that went to number four in the charts, and a movie with Universal. It was just A movie.

30:56 Moshi Monsters the movie. Exactly. Yeah. And the the magic of this was We had two flywheels spinning. We had the digital world and then we have the physical world. And so the two helped the world grow much, much quicker. I I read somewhere and it this makes a lot of sense to me'cause I've had

31:16 I've I've encountered this on the show in the past, where we've had guests who have started media companies that have Blown up. And Inevitably there's a conversation where somebody in the organization says Or the next Disney.

31:32 Like this is just the start look how fast we're growing. And I think I think those conversations were happening at Mine candy around Moshi Monsters, right? Yes, yeah, we we did think we could be the next Disney, the future of entertainment. And uh I think we got a bit too big for our boots, or or I certainly did. Disney came knocking and and we had some conversations. They'd bought one of our competitors called Club Penguin.

31:57 Oh wow. But they came pot possibly looking to acquire you guys. Yes. Yeah, we never got to term sheet phase, but they were very, very interested. But um I was just full of confidence and and wanted to keep building and creating new worlds and and universe. And to be honest, I was just having too much fun. When you're an entrepreneur, you do need to think of all the stakeholders and investors and employees. Um, not selling was was probably uh a mistake. In hindsight.

32:23 I mean in hindsight, right, but but I mean you're on this rocket ship, right? From the time you launch it. Got movie deals, licensing deals, merchandise. But from what I rebuching the lines already by twenty twelve, even with all of the acclaim and attention You guys were running into problems.

32:43 What happened? Well, we we kind of first of all, when this happens, uh you think it's just a blip and then it happens a second month and a third month and you think, hang on, what's going on here? And what was happening was that um I didn't realise this because I'd never built a kids entertainment company before. But kids moved on. They get bored. Yeah, they become obsessed and then the new phenomenon comes along. And so as soon as kind of younger kids were starting to play the game, older brothers and sisters were moving on and Moshi went from being Cool in the playground to not so cool. And we saw it on our numbers and there was we did everything we could to try and turn it round, but but we couldn't.

33:22 Yeah. But you still you were the hottest tech company in one of the hottest tech companies in London. It's this horrible situation to be in where, you know, I was on billboards and poster around East London and was being interviewed on TV shows, um, winning awards left, right, and centre, but knowing in the pit of my stomach and at four a.m. that this was unraveling and this was falling apart. This rocket ship suddenly started fall back to Earth. When we come back in just a moment, Michael leaves the frenetic world of Moshi Monsters to work with Alex on something completely different.

33:58 An app? Called Calm. Stay with us. I'm Guy Raz and you're listening to how I built this. Hey, welcome back to How I Built This. I'm Guy Raz. So when we left off, it was 2012, and Michael's huge success with Moshi Monsters was starting to unravel.

34:34 Meanwhile, the whole time he's been building that franchise, his housemate Alex has been trying to launch his own new ideas, but nothing is gelling. Still, there's one idea Alex just can't shake. And it's sort of out of left field. E even back when I was a teenager.

34:54 I was a practitioner of meditation and relaxation techniques and self hypnosis I was interested in. Uh it's remarkable to me because I don't I have teenage boys. I was a teenage boy. I don't know any teenage boys who can sit still. H what would you do? It it was born from a general interest in in the mind and in psychology and in self improvement. So you know, I I read all sorts of books. Um

35:21 I read Tony Robbins' books. I read books about improving My memory And then there was this one book I I read called The Relaxation Response, written by a guy called uh Dr. Herbert Benson. And he was one of the first researchers into

35:37 Uh meditation from a scientific perspective. And I remember at the time I was kind of stressed out with exams and the general pressures of of Being a teenager. And I'll just sit and try and

35:49 practice. And and meditation I did find difficult, I think at the time it was it was a bit too esoteric. Um I found it easier to memorize relaxation techniques. And um and then also started sourcing on online, but also in quirky bookshops. C D would have

36:08 On the whole, incredibly cheesy. recordings. Uh with panpipes and You know, lots of reverb And I just thought a lot of this content

36:20 That I'm consuming. It's really not designed for a m a mass audience. It's not very well presented, even though the techniques are incredibly simple and powerful. And I even had that thougar round meditation, you know, it's been around for thousands of years in various forms. But to the average person. It's unapproachable.

36:38 Yeah. I think you Launch. kind of an experiment. Do nothing for two minutes, which I've seen. I mean you can see this on the Internet Archive, um this the the web archive.

36:52 Uh and and this was literally a website. Uh and you go on it and it would Just have a a countdown clock and you would do Nothing. It w it wanted you to do nothing for two minutes. Uh and then the clock just runs down and you're s uh looking at uh sunset over the ocean.

37:08 Was this just a gimmick? Was it was this gonna be a business? Was w what was this thing? It was really uh A a thumb exercise. the a again s similar to the Millendal homepage came out of a late night Brainstorming session. Just

37:23 You know, what would the World simplest webpage B. Oh well it would do nothing. And came up with this idea. Of this web page it'd have a

37:32 Pitch of sunset. Sounds of waves crashing on a beach. Countdown from two minutes. uh which would start as soon as you hit the page. And

37:42 If you moved your mouse or keyboard. It would reset to two and say try again. And I thought it was just a fun idea, and Together with a friend, uh a guy called Ben Darwing, we Just we built it one afternoon and

37:55 tweeted about it and it just went viral. And within a week had about two million visitors. Wow. And and and funny enough, only about fifty of people who went on a page could actually Do nothing. Like not touch the mouse or keyboard. Hm.

38:09 also think happens around this time, Alex, which is that you leave London and you move uh to the US to take a job. Like I think tech incubator in San Francisco.

38:22 So I mean I mean this was a a big change for you, right? I mean this this is a major move. Yeah. So that was my first um In a in a way my first job.

38:31 Uh apart from working in the supermarket when I was Very young. Right. That was my first sort of s first proper job, if you like. Yeah, I'm just just uh curious. I mean, from the time you started Million Dollar Homepage, right, you you mean a million dollars literally.

38:46 Uh obviously a third of that or more went to to tax. But you made a million bucks from that. By two thousand eleven when you left for San Francisco, it sounds like you had not really made any significant money. After that. No.

39:00 No. I hadn't really Invest in it. Well, I had spent a lot, you know, I I really needed to You know.

39:08 Find a way to To make money. And take the pressure off. So I think that was part of it. Yeah. You know, and and I think it was an important moment, move to San Francisco. learn a lot from the Silicon Valley culture and

39:20 meet lots of interesting people, which I did. And you and Michael are uh of course staying in touch because Your friends and your collaborators are And At a certain point you you you buy this domain site. This is I think in two thousand eleven.

39:36 Called Cal.com. Calm. C A L M dot coming. uh initially what this idea was, but from what I understand

39:47 You've been wanting to buy this domain for like two years already, been negotiating with the guy who owned the domain name. To buy it from him. Yeah. Michael and I would always riff on business ideas and

40:00 I think I had shared my passion around Meditation and relaxation and We talked. Generally about This bigger idea, this simple idea.

40:09 And so We had discovered that this domain name Calm dot com wasn't being used. It was owned by this guy actually, fortunately, in England. But he didn't want to sell it unless we gave him, I think, something like a million pounds. Just an absurd mount amount relative to Yeah. It wasn't the right time, but then

40:30 Yeah, at some point in I think it was the summer of two thousand eleven he He was like, Yeah, I I actually I actually want to sell it. And thankfully Michael Michael had enough money To uh to to buy it. Think a hundred and forty thousand dollars about.

40:42 About that. Yeah. I w I'd earmarked that money for a deposit for a house, but uh uh so my parents were a little surprised. It's a lot still a lot of money to pay for a domain name. I mean it worked out, but like still that's a pretty big Bad.

40:58 It was a huge risk. Yeah, huge, huge bet. But you know, to Alex's point, we both believed in this word and this opportunity so much. I think it's one of the most beautiful Words calm is a superpower. It helps us.

41:12 In so many ways. So yeah, we thought it was uh a bet worth making. Yeah. The world needs more calm. And I felt like I was probably more representative of the average person who

41:24 Wanted to find the A way to relax really and calm the mind for ten or twenty minutes. They're not looking for Some spiritual awakening. They they're actually looking to manage

41:36 Stress. the appeal of building calm. Like could we build a product that we wish Existed. Right. Okay, so Alex

41:45 Я You're in San Francisco. Uh Michael, you are still in London. Uh and you've got this domain name now, com dot com, and And I guess around twenty twelve you decide to to build a website around this domain name. Uh, which is just I I guess initially it's just it just had sounds, right? Like the ocean and and birds and like a bubbling brook.

42:08 Uh that you could just kind of like sit and chill out and and listen to these sounds. Yeah. Yeah, so that was really the first thing we we we put up. And it was just Something we could get out quickly. We knew that

42:20 Do nothing for two minutes that very, very simple website. had a lot of attention and It was kind of a better version of that, instead of just This static scene with some wave sounds. There's gonna be these full screen visuals. Yeah. At the time.

42:35 There weren't many websites you could go to and just suddenly would have a full screen video playing. So it it it looked quite You had these beautiful scenes of nature with really high quality audio, but there was only ten scenes or something. Where were you getting that video from? W did you have it made for you?

42:51 Yeah, the the first ones were actually made. I I hired someone on Yeah, it was maybe Craigslist or something, a videographer who went out and filmed some some beach scenes in in the Bay Area. um and some other forest scenes and things. It got some really good organic traffic. I think there was a few hundred thousand people a month using that. So it it it served a

43:11 uh need, albeit millions of users, but there was definitely an audience for it. When you had that website do nothing for two minutes dot com. At the end of it. If you got through it. Without moving your mouse.

43:23 It would ask for your email address. And I guess You guys ended up collecting like tens of thousands of email addresses that way. Yeah. Yeah, I think even maybe a hundred thousand emails.

43:34 And so that hundred thousand emails when we launched Khan dot com with the sort of Nature scenes. Those people Turned out you know they really loved com dot com because it was a much better version of Do nothing for two minutes. They got an email. And so

43:48 That was sort of our initial audience. Basically it starts as this web page. But this is already now twenty twelve. The iPhone is out.

43:59 the app store is open, it's clear that you guys were gonna move into that direction. But just initially Just to get something out there. Um, you have This this webpage with some Were there guided meditations yet?

44:13 In twenty twelve or not yet. At at some point in twenty twelve, I I I can't remember exactly when we put them on. I think it was Not too long after we put just the scenes up. And the idea of just starting on web

44:26 Was it was super cheap. You know, we didn't need much, but we wanted to have something. To prove to investors that There was interest. And it was free. There was no business model, right, yet. There was no business, no. Um

44:39 We were very serious about making it a a company. We just started in a very, very simple way. And when you say we, was it I mean you are you talking about you and Michael? Michael's in the UK, you're in San Francisco or did you have anybody else working on it with you? No, but when I say we yeah, m Michael and I. So it it's um even though Michael was still in the UK, yeah, we would we would talk all the time. I was super excited to work with Michael and Um I was just waiting for him to move to San Francisco. And

45:06 You know, my my first sort of job really was to try and raise some money. you know, to actually build up the mobile app, build a small team. And uh That was kind of the next step. Alright, so you had launched in May of twenty twelve, but you now

45:19 You want to prove this concept out, so you had to raise some money. Given that you were at that incubator and you already had a track record. Was it hard finding Angel investors or were there plenty of people who were like, I believe in this guy. I think this is there's something here. Yeah, but it was actually much harder than We had anticipated, so

45:39 It it actually ended up taking uh Yeah, good six months. well over a hundred meetings, I think in i in the end we we raised from about twelve twelve people. And they were all I individual angels.

45:52 The biggest concern people had was how is this gonna be a business? You know, med it you're gonna Build a business around Calm. You're going to Bring meditation. Like, are people gonna pay for that? They just most investors just thought it was an admirable

46:07 Mission. And a terrible business idea. But nonetheless, we we we persisted and uh cobbled together just over four hundred thousand. Dollars.

46:18 And that was enough to kind of get get to the next phase. So You've got some cash to start this up. And Also that month, February of twenty thirteen, you debut

46:29 A mobile app. Did you build the app yourself or did you hire uh with the money that you raised, did you hire some people? Uh hi hired one IOS uh person and I did the design and then we had a few contractors helping with audio The meditation recordings. So it was

46:46 Yeah. Basically m me and one engineer. Yeah. And what could you get what did you get on it? Yeah, so there was I think there was maybe twelve

46:55 twelve audio recordings in it. Literally. Plus upon you maybe twelve scenes. So there was a course called The Seven Days of Calm. And it was ten minutes stay for seven days and it taught you the basics of um meditation.

47:10 We actually didn't use the word meditation. At that time we thought we're gonna teach people this stuff without telling them it's meditation. We later changed our mind on that. That strategy because Meditation became this hugely mainstream thing. So we embraced it. But at that time we just

47:24 call it the seven days of calm and There was like a couple of audio recordings for free and then you would pay five dollars to unlock the full app. There was no subscription. In fact at the time Apple hadn't embraced subscriptions at all. Uh

47:36 But it was encouraging because ten percent of people who downloaded the car map, we're paying the five dollars. And that was right out of the gate. So that was a great signal that people would pay for this. They it was small numbers and small money, but they were paying. Alright, so Let's get back to you.

47:53 Michael, you are Still in the UK. Calm has has debuted. You're you're kinda spinning. out of

48:02 running mochi monsters. And I I know that you I mean, I don't know how significant this is, but I read about a trip you just you had to just get out. I mean you were like Not sleeping, it was just stressful. you the business was you could see it slipping away. And you decide that you need this the summer of twenty fourteen, you need a break.

48:21 And I guess you just got like a A room and a Hotel in it. in the mountains of Austria and you just brought some books and you just like But this was kind of an important thing.

48:34 Turning point. What what happened there? I was Just s yeah, really struggling um with the business and burnout and lack of sleep. And I think sometimes as entrepreneurs, you've you've just got to step away from that cold face. You've just got to get perspective and realise you are not your business and get into nature and fresh air and just kind of calm your nervous system. So that was a a really important trip for me and it was unusual as well because it was on my own. I just was alone with my thoughts and Um, as you mentioned, I was reading books and research papers and just so fascinated by what we were doing with with calm. And it really was the the really bright light bulb moment going, What am I doing? I need to be

49:16 I need to be working on this full time with Alex. I've gotta find a way to make this this can't change the world. I just realized that it was uh it's a way of rewiring. The human brain. It's it's been around for thousands of years for good reason. And so I started practicing myself and realized the value. And B.

49:36 If we could make this ancient practice accessible and relatable and simple. We could connect with millions, maybe tens, maybe even hundreds of millions of of people. Okay, so you Um so you decide

49:52 That you're gonna move to San Francisco. And you're gonna do it. Throw yourself into this full time. Yeah. I think we'd we'd both

50:01 Realize that. Silicon Valley was the place to build this business. You know, the there was more investors who were open. Um to ideas like this, the climate was more open to it as well, a lot of our friends and people we knew in London were were very

50:17 very sceptical of meditation and mindfulness and talking about mental health. It was really not Not the hot, uh important topic that it is now. So California was much more open to that. I think another reason was there was just so much more talent who had been at companies like LinkedIn and Facebook and and others who had

50:40 Same. You know, first hand how to build and scale. companies rapidly. We didn't have as much as that in in London. And then finally, I think we both just wanted to prove ourselves in the cauldron of of the valley. extreme place to to build a business and and wanted to see if we could uh cut our teeth there.

51:00 So So Alex, you are um You're kind of manning the the the store in San Francisco.

51:08 And you launch the app. Um in twenty fourteen you raise another five hundred and almost six hundred thousand dollars in in angel funding. So Yeah. In twenty fourteen the book Ten Percent Happier came out, which I've read Dan Harris's book, I know Dan

51:24 It was a very accessible book. It was it was talking about all of these people who brought eastern mindfulness ideas and and into the West. And how he, Dan Harris, kind of What in this journey to learn about it and I wonder if that book

51:42 was kind of a turning point just in mainstreaming meditation in your view. I think that book was was definitely part of it. I think there were I think there were other things going on. I think the body of scientific research

51:54 was kind of exploding. Yeah. So there had been this sort of growing wave, this this growing swell of interest in meditation and mindfulness. And I think part of What we got right through Luck or foresight was just the timing. We were just well placed to benefit from this

52:12 Huge wave. And um and I I I do also Yeah, credit Andy Puddicom and and and and and Rich Pearson from Headspace, you know, they They were I think maybe a year. year ahead of us, um, in terms of getting an app out. And I think they were

52:25 Also part of that. Um That story. But Headspace was

52:31 You know, as you say, it'd been out a year longer. Andy had done a very popular Ted talk. He was getting more attention, and Or do you worry that they would dominate the market share and that maybe you couldn't compete, or did you think oh there's enough space we'll we'll be fine? Well, a lot of investors pushed back and and said Yeah.

52:51 Headspace uh the winners, this market has sewn up. And um but we we believe so strongly in in what we were doing. That's we didn't think it was an issue that we were behind, we were closing the gap. And to your point, the market we did feel was absolutely enormous. It wasn't just the the people who are meditating, it was pretty much anyone with a mind. So um we felt there were gonna be multiple winners. Not a winner takes all market, but a a winner.

53:19 Um takes most. Why don't we come back in just a moment? How Calm gets a major boost for people like Steven Fry Matthew McConahe? And LeBron James. Stay with us, I'm Guy Raz, and you're listening to How I Built This.

53:50 Hey, welcome back to how I built this. I'm Guy Raz. So it's 2014, and Calm has hundreds of thousands of users and a core team of just four people. But they're about to make one very significant hire. One of the key turning points was around this time.

54:09 When Instead of us having all these pre recorded meditation content. for people to listen to that was the same every day. We had the idea to create The Daily Calm.

54:20 which was going to be a unique Meditation every day. And crucially, one one of the the most important people in the early days was um Tamera Levit, who uh was the initial and early voice of Calm. She's the one that you would hear you you hear. Calm.

54:37 That's right, like calm. And that the that voice is so It's like Andy Putticom's voice. But she was somebody who contacted you guys, right? She was she got in touch with you In twenty fourteen to say hey you need a community manager, right? Like what tell me the story'cause she would become a turning point for you.

54:57 Yeah, she um she applied for our community manager role and Alex and I got on a I think it was a Skype call with her. And um really liked her and really liked her voice and I think she offered to do some meditations, didn't she? She'd been a meditation teacher. Um we felt

55:15 her voice and her experience as a meditation teacher was going to be much more valuable than than joining on the community team. And Tamera recorded these and it suddenly made Meditation and developing a habit easier for people. You'd come back every day and hear a new story, a new lesson. There'd be an inspiring quote at the end. And um, even though it was a huge amount of work to create all this unique content, it was a step change for the business. I think you were doing about at least three to four million dollars by twenty sixteen.

55:46 Something like that. Yeah, I think i i the revenue may have even been close to seven million for for twenty sixteen. millions of downloads now. We thought now surely people must get it. We we must be able to to raise raise a series A. And I don't know whether it was just we weren't good at fundraising or whether people just the the V C community was still Not ready. Or did not see this as a VC scale business.

56:09 Yeah, we we went up and down Sandhill Road and struck out. And it w it was really frustrating, wasn't it? Because we felt we had something special. What would they say? I mean this is 2016, it's like there's a lot of money flying around. Silicon Valley. for all kinds of businesses.

56:25 What was the pushback that you were getting?'Cause I mean, these guys are smart. You know, they're gonna make mistakes. Obviously but They're experienced. And they have pretty good perspective. I think we we had a fair bit of different feedback. I think a lot of people dismissed it as

56:40 Content. app and so very readily copied. You know, you could get free meditations on YouTube. There's going to be thousands of competitors, you're not going to be able to build a moat, and I think a lot of the VCs discounted the fact that we were very focused on brand. And uh that you know, it it's a little more intangible and it it's hard to believe.

57:01 um that that could have become so valuable. But so we just kept our heads down, kept the costs very low. Yeah. We didn't overhire. We could use equity.

57:12 Um Is it Big part of compensation. Over cash. Um We

57:18 had a one bedroom apartment rather than some fancy office. Uh you know, well even before that we were in just a little co working space with like a hundred other start ups, you know, so it's just that traditional arc of you know, being very, very scrappy. Um And I think we thought well we might

57:33 No. Everyone So we're just gonna have to make this business Super profitable. I I understand that that you had to make it profitable, but I want to just dig into this for m for a moment.

57:47 In order to grow you needed money. Right. You are now getting some revenue coming in. Uh and it's probably certainly help very helpful. But you're still small. Twenty twenty sixteen you've got

57:59 Fewer than ten people. You're working a presumably really long hours. I mean w we're we're both of you guys just saying to each other, How is it that nobody wants to put money into this thing? It doesn't make sense. Yeah, it was I do remember s twenty sixteen being somewhat

58:16 Mystifying. And tricky Because we felt like we had proven that there's a business here. So it was actually an incredible signal there's

58:25 Amazing word of mouth. the market really wants it. We've had some good press. Yeah, we've got millions of users that have all come effectively, organically. We've tried paid user.

58:36 User acquisition, but we haven't quite cracked it. And You know, there may have been some sense that well Th this business is is not it's a nice Small business, but it's not gonna they're not gonna be able to scale it.

58:48 Well I I think one of the things that happened that year. And it might m may or may not have been a turning point, but you've launched sleep stories and um I mean lots of people Including my One of my children.

59:01 They fall asleep too. boring stories every night. And I will come into his bedroom. at like eleven at night and turn the story off'cause it's like four hours long. You know, it's like hit stop on his his iPhone.

59:17 And um But this is something you guys started Yeah. Mm.

59:25 What did you notice about how the app was being used? Like how or how did you come to this? this realization that this was something that was worth trying. Yeah, it was around twenty fifteen where we started to, um Think about it.

59:40 And I'd been seeing a few signals that there could be something here. So I think there was a podcast called Sleep with me, where uh the narrator would just tell boring long stories. Still there, still uh still around. Still going. Yeah. And Alex and I just chatted about it and we thought, well, could this be an opportunity for us? And um we'd also looked at the the data. We had a a a brilliant person we'd hired called Dunn, who um uh looked at the data with us, and we realized that a lot of people were falling asleep to Tamara's voice in the evening about eleven o'clock at night. So they were using her voice to help them drift off. You could see that data, you could see how people were using the app.

1:00:21 We saw the spike and we were obviously like, Well, hang on, that's not how you meditate. But we adapted the product for them and thought Um yeah, w why don't we create a new type of content? We hacked it together very quickly in weeks and created a few of these uh sleep stories, we called them. Put it out and Very early on we could see the signal that people were like using this. And the key thing was that There's still, even today, a fair bit of stigma around meditation. It's not easy for people to develop a regular Meditation habit, but everybody goes to sleep. Every night. So many people struggle.

1:00:57 uh falling asleep. And so this was such a absolutely key turning point in the growth of the company. All right. So now we're in Well into the We're now into twenty seventeen. And again, like are you guys using any money to advertise, to do social media ads, or is it just you're on the app store and you've got your mailing list and

1:01:20 It's just growing organically, or are you are you spending money on on on customer acquisition? N now we are. Yeah. So at the end of twenty sixteen Um Michael mentioned Dun Dun Wang, who uh came on board as our first product manager, but actually ended up

1:01:35 um doing so much more than just product management. She helped do our first successful User acquisition. And it was in I think January twenty seventeen we had our first million dollar month. It's because we're crack the U code.

1:01:50 How'd you do that? Well. The the the fun story is that we um We'll sort of reached back to the past and took the idea of do nothing for two minutes.

1:02:00 And we made an advert. You know, out of it. And it was do nothing for th thirty seconds. And it was a video advert, which is a pretty new format. Time.

1:02:09 Primarily on Facebook where we've had first success. And we had these adverts that didn't look like adverts in people's social media feeds. You know, with rain and a countdown saying do nothing for thirty seconds. It just looked very, very different to

1:02:24 other ads for for for mobile apps. And the ads were so successful. And so So profitable. For us that

1:02:32 We were able to scale that channel up massively. People shared the ad. You know, it's unusual for people to send an advert to their friends, but they did it in droves. And so that was a a a really key moment for us because that meant we could put a dollar into our marketing and get, you know, um a big multiple of that out. And so we just scaled that up very, very, very rapidly. So our revenue went from you know, seven million to to twenty one million to eighty million. It it was uh it was extraordinary. W one of the things you guys also did was I think you did did it the year previously was you raised the price

1:03:07 Which meant that you had fewer people paying for it,'cause there's a fre meum. It was free too. There's a free version, but the paid version you raise the price, which meant that you had fewer subscribers initially, but more more money in'cause the price was higher. Yeah. Yeah. So you know, the very first subscription we had was ten dollars a year.

1:03:24 And then I think in twenty Fifteen, we made it forty. Then it was fifty and then sixty. And each time the conversion rate would w w would be lower. the net of it would be that we would make more money. You would have more money

1:03:37 to spend on user acquisition would have a higher Lifetime value. And and it worked partly because you know, people were willing to pay more for their personal well being, but also because the app got better.

1:03:49 And because we built trust in the brand. And so yeah, the the sort of equation for how do we grow this business finally clicks. Basically your your You Figured out how to grow it without

1:04:01 any outside a whole lot of outside money. took you a l a while to get it. But but one of the things I think that also happens is that a a few celebrities start to t just organically tweet about it, like John Mayer, Stephen Fry, Because eventually celebrities, including Stephen Fry, would start to record

1:04:19 you know, stories and and motivation, things like that for the app. How did Was it seeing people like Stephen Fry tweet about it that let led to that idea? No, we'd actually been trying to get celebrities to narrate sleep stories for for And we were knocking on the door of Hollywood and trying to reach out to every connection we could, but no one

1:04:40 Wanted to do it. Calm was still too much under the radar. Unless you paid them big bucks. Well, even then I th think um well we didn't have the big bucks to pay them. Right. But um Yeah, even then I'm not sure people would have Done it. But as calm started to get a little more into the the zeitgeist and as you say, celebrities started to mention it. And Stephen Fry was one of the first. And I managed to track down his agent and asked if he'd he'd do it. And after a bit of negotiation, he agreed. And then the next big breakthrough that really took us.

1:05:13 I'm forward with uh Mackie McConahe. Wow. The the story has been one of our most popular ever since. How important were the celebrities in increasing your market share. I think it was it was really

1:05:25 important. Um not only did it lead to a lot of additional downloads, um, but it gave us press moments. We were able to talk about calm in new ways and people started to see calm as more than just a a meditation or a mindfulness app. We opened up the market. potential massively. When someone like LeBron James comes and says, you know, mental health is important, as important as physical health, that that that appeals to, you know, hundreds of of millions of people. So it was crucial. I think we did a better job than a lot of the other um apps in our space at connecting with the the celebrity talent. And uh yeah, it's been part of our secret source. Yeah.

1:06:08 Another big hit was Harry Styles. And uh you know he um opened up a completely new audience for us and the great thing about each Uh celebrity that we've worked with is we've always made sure, you know, we have this acronym ICE. Um I C E. So the I is for invest. We want the talent to have skin in the game. Do you want there to be investors in

1:06:33 in the business. Exactly. So all the key talent that we brought on board are on our cap table. So they really feel they're part of calm. That's important. Secondly, the sea is content. We want them to create something unique that uh They're not just saying go and download Calm. They've created something, whether it's a series like LeBron or Harry's Sleep Story. And then the E is engagement. We want to make sure they actually use the product that they have got value from it. And when those three things come together, it creates a really deep authentic connection between us and the talent. And then the talent as fans really connect with Calm. So um yeah, that it has been a a a a critical part of our success.

1:07:16 So you're kind of at this point off to the races. I mean, you're twenty eighteen that that series A values a business at two hundred and fifty million dollars. You guys raised twenty seven million dollars in that round. Yes, that was a big one. Big jump from our one and a half million that uh we'd done for the for the seed round. And during that negotiation, um, which was quite Tense. We uh we won app of the year. Uh so that definitely helped our negotiating position. I bet. Yeah. Apple called you the app of the year, so that certainly helps, yeah. Because

1:07:46 I mean I'm sure, you know, you guys Even though your experience certainly, Michael, you had a lot of experience with investors. You know, they have the leverage oftentimes. Right. And the terms can be difficult, but

1:07:58 You went app of the year. Changes the equation a little bit. Yes. But again, it's a long journey. I mean you launched this thing in 2012, so it wasn't like it was an overnight success story. I think that's the secret to most uh successes it actually takes a lot longer and it's more about persistence

1:08:17 And I think again time Time is some somewhat of an advantage. You know, you've put in so much work it's hard to replicate potentially. Um, you know, I think if we had raised tons of money very, very early, w we may have not had the scrappiness to say, do sleep stories. Yeah, we may have just kind of been

1:08:35 Drunk on you know, expensive, unprofitable user acquisition. So I think we kind of got the foundations Uh They were stronger, basically, I think. Hm. And and you guys have also done

1:08:47 uh some some partnerships and and acquisitions. I mean you you acquired uh A company called Ripple Health Group. Um, tell me about what what that means. I mean to does calm Wanna start like tapping into the healthcare system somehow?

1:09:02 Yeah, we want to bring calm to as many people as possible. We launched a a B to B division where companies pay for calm for their employees and that's been a a hugely successful part of the business, particularly uh the start of COVID and the next phase Is can we work uh in the healthcare system in in the US, could calm be provided to um insured patients to ensure that they live a more mindful life, that they get good sleep, that they're conscious of the the food they eat and the exercise they take, which the theory is downstream will prevent more physical health issues such as obesist obesity and diabetes and others. So um last uh this is why we acquired Ripple and and the team that have such deep healthcare experience. And last year we signed a a big deal with United Healthcare um to bring calm to to many of the

1:09:59 population. So this is a a a big part of um Calm's growth over the next few years. Which is B to B. Yes. Yeah. Yeah.

1:10:08 So all right, so twenty twenty two. What just Yeah, I mean you guys really this the business of scaling and scaling and scaling, I think By, you know, twenty twenty two, you've got I don't know. how many millions of users I mean um

1:10:24 Probably four million paid. users by that point. That year You guys step down as co CEOs and become, I guess, co executive chairman. Yes, yes. So the the company we acquired Ripple Um the CEO David Coe.

1:10:39 uh because of our push into healthcare and his deep experience in that world, we decided it it would make sense. um to step into a new role. And you know, that's tough for entrepreneurs. We've been building this business for for the best part of a a decade. So it was uh it was not a a decision we took. Lightly. But

1:10:59 Um The other challenge was that we had moved back to Europe and London and most of our employees, hundreds of the team were based uh in the US. So having a CEO in the same time zone in the same office as our team made uh a lot more sense. But we um You know, we're definitely not traditional chairmen. We love this business and this brand so much. You know, we often talk about how we can imagine being part of it for for All of our

1:11:27 Lives. So we created Calm Studios in London, where we're dreaming up Future ideas for Calm. And uh

1:11:36 thinking about the future of of mental health. So It's really energizing for us to get back to that zero to one phase, that creative, chaotic. Uh early phase. You know I I'm I know this has been brought up before, but

1:11:51 I like many adults. And children, but I think a lot of adults who are sort of Gen X and Oh, not just Gen X, but um Who who didn't grow up with smartphones. Um have found themselves at a certain point their lives.

1:12:07 addicted to their smartphones. So phones are You know. Phones are rewiring our brains. There's no question in my mind. There's a dopamine hit. I used to smoke cigarettes. I quit when I was, you know, my late twenties. Horrible. Awful addictive.

1:12:22 Honestly, one of the hardest things is quit smoking. It was so hard. And and and I found myself, you know Later in life. thinking, well, is my phone just kinda replace that, right? And yet here we are talking about something that's designed to make us more mindful, more

1:12:39 you know, in our s in our own bodies. But we have to go to the phone to use it. Right. And of course there's no other option. I mean it's a it's a it's a super convenient tool. But it's a

1:12:50 It's a contradiction in the sense, right? It's like on the one hand We should probably just throw these things away, but on the other hand, it's not practical, it's not realistic. But it's also these things are having a deleterious impact on our brains. It it's a really good, important question.

1:13:07 And one of the things Calm does is teach people to be more aware, sharpen their attention, make them more mindful, and so the idea is that you can use your phone in a more thought, mindful, productive way. rather than completely dispensing of it or using it uh eighteen hours a a day. Yeah, I think the other part of it is calm is primarily the the content we offer i isn't something you consume visually, you know, it's actually m mostly audio and so Yeah. Interacting with calm is like you you put on the thing you want and then you're not looking at the phone while you're listening to the content.

1:13:45 I mean we we do have more visual content now. We are trying to Yeah. make it certain elements more more accessible, but fundamentally it's it's kind of like having just a teacher speaking to you in the room or or someone telling you a bedtime story in the room. And

1:14:01 You've got to meet people where they're at, five billion smartphones. the the idea that we can get you know, we can reach so many people so easily i is a huge advantage. Um So Yeah, it it it is been a a contradiction that sort of people have raised over the years, but I I think um

1:14:17 You know, I think the world of smartphones um needs. Apps like com. When you guys Look back and

1:14:27 And and see where You know, this has landed and Yeah, you both had Successes. early in your career, but um

1:14:38 Now you've built this thing that is has real enduring value. I mean it's a company valued over, you know, several billion dollars now. When you think about Where you started and where you are now.

1:14:50 How much of it do you tribute to To luck and timing. And how much Do you think has to do with the the Just the grind that you put into it.

1:14:58 Yeah, that's a that's a tricky one. I I think Every business needs good. Timing. Um And as we've mentioned during our story, there are many kind of serendipitous moments along the way of luck where you know Alex and I met or how we connected with Tamara or how we we met the the celebrities that f fueled the sleep stories.

1:15:18 So Lots of luck along the way, but Also A lot of uh very hard work. Yeah.

1:15:25 When you're working on something that you truly believe in and you think needs to exist in the world. I think it It It gives you the Energy.

1:15:33 And the grit to persevere. In the absence of evidence that it's working or in Times of the you know, set back on stress.

1:15:42 And um Calm is by far the most important. meaningful thing I've worked on and Aside from Um

1:15:50 any of the sort of financial elements and and success of the business. Just having had a positive impact on millions of lives is is is reward. onto itself. And also working with You know, my best buddy. It's been uh it's been a a lot of fun. So uh That's Alex Two and Michael Acton Smith.

1:16:09 The co founders. Of calm. Alex, now that we are we know each other a little bit more, we spend a lot of time together. You could give us a little beatbox. Give me beat. All right. Alright, here we go. Let's go.

1:16:32 Wow, that's no joke! That is competitive level beatboxing! Well, I I gotta say I haven't done it for years and it's I'm very rusty. She just shook that rust off. Ha ha ha. Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show. And if you're interested in insights, ideas, and lessons from the world's greatest entrepreneurs, sign up for my newsletter at gyros.com or on Substack.

1:17:01 This episode was researched and produced by Catherine Seifer, with music composed by Ramteen Erablui. It was edited by Neva Grant. Our engineers were Patrick Murray and Robert Rodriguez. Our production staff also includes Alex Chung, Elaine. Coates, Casey Herman, JC Howard, John Isabella, Iman Maani, Chris Masini, Sam Paulson, and Carrie Thompson. I'm Guy Raz, and you've been listening.

1:17:24 to how I built this.

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