Breathe in, breathe out.
Clear your mind.
It's okay if you feel overwhelmed.
You still can't relax? Well, perhaps Harry Styles can help.
In these crazy times, mental wellbeing has become a multi-million-dollar market.
And one app revolutionized how we meditate.
Calm went from almost having no cash to a billion-dollar valuation in less than five years.
But, how did it do it? How did it get millions to pay a premium to wind down?
We'll tell you all about Calm in this episode of Forensics.
Calm's founders were anything but relaxed.
The two Calm co-founders rarely took a break. Michael Acton Smith created his first company
at just 24 when he and Tom Boardman formed Firebox.com, an online retailer, in 1998.
By 2004, FireBox was one of the fastest-growing private businesses in the UK.
But Acton Smith wasn't done. That year, he launched the game company Mind Candy.
His first idea was a global scavenger hunt to find a $100,000 treasure:
great idea, but poor execution.
He kept experimenting, and in 2007, Mind Candy launched Moshi Monsters. It revolved around
cute monsters with funny names. You could pick one, watch it grow, and explore a digital world.
Moshi Monsters seemed to aim at kids. But, in reality, it was
the parent's wallets they were after. The start was slow, but by 2011,
it netted more than 80 million registered users, with many paying the five-pound subscription fee.
But Mind Candy wasn't a happy place. Stress levels were high and
weekly, people came in, and others came out.
After Moshi Monsters became a huge success,
it stalled revenue-wise. Still, Acton Smith had plans to expand his gaming universe,
aiming towards families. But, he was running out of energy and money.
That's where Alex Tew comes in. He's not a household name,
but you might've heard of his work.
Back in 2005, he needed to finance his way through university. So, he came up with one of the most
random ideas in the internet's history. He sold pixels, one million of them, at a dollar each.
Why did he do this? He didn't want to be in debt. And, at least,
he was honest about it. In no time, his website reached number 3 on the Alexa rank.
At the end of the experiment, The Million Dollar HomePage earned $1,037,000. But that's before
taxes. So, Tew earned about $700,000. Ironically, by the time it had ended,
he had dropped out of university and experimented with other ideas, most of which failed.
Tew has been open about his experiences with meditation. During his teenage years,
he meditated to deal with anxiety and stress. Probably, that's what led him to create the
donothingfortwominutes website. The idea was self-explanatory, but it started something bigger.
Tew and Acton Smith were friends. And both were burnt-out,
overly creative entrepreneurs that needed to wind down.
The problem was that Acton Smith didn't think much about meditation.
So when a close friend recommended meditating for ten minutes,
he mocked the idea. Why, if he could send six emails in that span?
That's how obsessed with work he was. But, the idea lingered in his head. So,
he did some research and found that there was some truth behind meditation.
But, let's face it: they're both entrepreneurs. And they saw meditation with potential. The
world had reached levels of acceleration never before seen. We can't get rid of our devices and,
to many, that's a problem. Tew saw things differently.
"I don't think technology is the problem," he once told Forbes. "It's how we use it."
The best way to help people was to mend meditation and technology.
And that's how Calm was born. Their goal was to create guided meditation programs
for beginners and experts alike. But, they didn't feel the UK was the best place for this.
So, Tew moved to California, where a hectic lifestyle and a strive for health live
in a toxic balance. Meanwhile, Acton Smith stayed in the UK, handling Mind Candy.
All they needed now was money. But the start wasn't easy.
Money was hard to come by, and competition was tough. For example,
HeadSpace, another UK-based company, had already gained traction in Silicon Valley.
The co-founders had a handful of employees and no investments.
But, the competition fueled them. Acton Smith yielded his position as Mind Candy CEO and
joined Tew in California. The two friends split the company 50-50 and went all in.
With both of them onboard and a promising idea, still, investors weren't interested.
Why pay for meditation guides when they're available for free
on YouTube? And the nonbelievers had a point. But, things were about to change.
Calm seas turn profitable.
The co-founders have said that Calm was moments away from disappearing.
So, they did everything possible to reduce costs,
looking at all expenses with a magnifying glass. But that wasn't the most crucial move.
Let's look at the numbers. By 2017, Calm had raised $1.5 million in funding. Sounds like a lot,
right? Their main competition, HeadSpace, had raised more than $70 million in funding.
Acton Smith and Tew wanted to prove that Calm was profitable.
Plus, they needed the money. So, even with a flailing idea,
they raised the subscription prices. Talk about a courageous move. And, guess what? It worked.
Revenue went from $2 million in 2015 to $7 million in 2016. But,
once Calm increased the subscription fees, it went to $37 million in 2017.
They had proven that Calm could have revenue. So, now, investors that had once rejected the
idea showed interest. But, before we go on, there's another reason for Calm's success
that we must recognize. If you've used the app, you have heard her voice. It's Tamara Levitt.
Though she's not a founding partner, she became a mainstay in the company after
sending her resumé in 2014. Acton Smith and Tew met the next day and hired her.
She began narrating sessions and climbed up to become the Head of Mindfulness.
Users loved her hypnotic and magical voice. But, she was also a creative force,
launching the Daily Calm, one of the most popular features.
Coincidence or not, in the four years after she joined,
the app went from 2500 subscribers to one million.
By 2017, Calm had gone from 10 employees to 40, and revenue reached $80 million in 2018. But,
that was the beginning, as the world became more chaotic.
An anxious world is perfect for Calm.
We all need to relax. But, unfortunately, these hectic
times have reached unprecedented levels of stress and anxiety.
But we're busier than ever. One reason why audio content is so popular is that
we don't have to look at a screen. So, we don't take our eyes off our tasks. So,
relaxing and winding down through our phone seems illogical.
And, still, Calm isn't the only app out there. We've spoken about HeadSpace, but there's also
Buddhify, iMindfulness, Aura, and Breethe. All are somewhat unique. So, why was Calm so popular?
Some say that Levitt, her voice, and her creativity are essential. And others credit the
company's ability to understand their customers. For example, in 2016, their data showed that most
users logged into the app at the end of the day. They realized that people used it to fall asleep.
So, the company went one step above. They hired big names to help in telling stories
like Harry Styles, Stephen Fry, Eva Green, and many others. They narrated
soothing fiction and nonfiction alike. And people loved it.
In 2017, Calm earned "App of the Year" from Apple. Then,
it ranked 19th in the Inc. 5000, as well as earning fastest-growing company honors.
But, the competition didn't make much of it. In fact, the world of mindfulness and wellbeing is
pretty intense. HeadSpace criticized that neither co-founder had mental
health or meditation backgrounds. But, that was something its CEOs did have.
Still, in 2018, Calm had surpassed Headspace in revenue, according to an independent surveyor.
By 2019, Calm had 2 million paying subscribers. And, at around $70 a year, that's a decent chunk
of change. Plus, investors, including celebrities like Ashton Kutcher, were dishing out big bucks.
Funding went from $1 million in 2014 to $28 million in 2018 to $143 million in 2019.
That same year, Calm reached the famed $1 billion valuation. But, most of Calm's subscribers are
from the US. And, Acton Smith had plans to go global. And 2020 might have helped.
In 2020, our mental health took a toll. But YouTube has
thousands of meditation guides that don't cost $70
a year. So, why pay? Well, Calm's focus is on meditation. But it delivers it in a modern way.
Celebrities narrate stories. You have a new daily mediation
and even a kid's section, and it doesn't stop there.
The app offers breathing exercises, stretching routines, and personalized menus. In addition,
you can take classes on mental health, even dealing with success and determination.
Plus, of course, the app comes with personal metrics. So it encourages users to keep using it
to maintain streaks alive. At the end of it all, plain videos or audiobooks
don't provide that. And, people want all of these things unified.
So, to a degree, Calm has gamified meditation and
turned it into an interactive platform. And, at first, it might sound wrong to some people. But,
it's suitable for the chaotic times that we're living in.
And it's not only about individuals. More and more companies are looking
to improve mental health services for their employees. So, Calm now tends to corporate
sales, with 20 of its staff members dedicated exclusively to this market.
Then, 2020 happened. There was a global health crisis. The US held elections, and it seemed
like the world was going to end. That's a perfect recipe for anxiety and stress. Or, in Calm's eyes,
success. In February 2020, Calm downloads increased by 40% over the past month.
On Election, the company joined forces with CNN. As part of the alliance,
they launched an ad that had nothing but the sound of rain hitting leaves. It was a social
media success and had almost 10,000 mentions that day alone. Also, there are reports that
Calm seeks to reach a $2.2 billion valuation with the latest $150 million funding round.
But, the market is getting more and more competitive. So,
there's no shortage of apps. And, as chaos still rules in this world,
people want to wind down. So, meditation apps will continue to thrive now on a global scale.
So, the recipe is perfect for meditation apps. The question is, will Calm remain at the top?