The $2B Calm rocketship 🧘‍♀️

Published on

July 13th, 2022

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The storm before Calm ☔️

Alex Tew would occasionally tell Michael Acton Smith: “You need to try meditation.” Alex had been practicing meditation from his early teenage years.

“You need to try effing off.” Michael clapped back.

Michael Acton Smith to Alex Tew ca. 2010

Michael’s latest venture, Moshi Monsters had been struggling. Revenues were collapsing. He was stressed, tired, and struggling to sleep.

Michael was about to realize that the greatest businesses are perhaps born from the founders trying to scratch an itch they themselves faced, and understood.

Bit by the entrepreneurial bug early on, Michael’s first steps into this world were with an “obscure gifts” website called Firebox which sold such gems as the chessboard drinking game. Stepping away from Firebox, he started Mind Candy and created “Perplex City”, an alternate reality game - a commercial failure that eventually pivoted to Moshi Monsters, a game that allowed children to create, name, and nurture pet monsters.

Moshi Monsters was a big success until it wasn’t. In the summer of 2012, a platform shift from Desktop to Mobile that had been playing out over the previous five years came for these pet monsters, and revenues began to plummet.

Michael decided then to take a step back and zoom out. On a solo trip to the Austrian alps, he finally decided to take Alex’s advice and put it into action. It didn’t take long for the merits of meditation to become apparent to him, and the shrouds of incense and religion to fade away.

“I realized it was an ancient but valuable skill that could be relevant for everybody,” Michael Acton Smith

Meanwhile, freshly minted millionaire Alex Tew had just attained internet fame through The Million Dollar Homepage, where he sold a million pixels in advertising space for $1 each.

Alex had a superpower: he understood virality and what captured people’s attention. MDH was hardly his first viral creation. Alex had also been the brains behind “Sock and Awe,” or the “you can now throw a shoe at the President and score points” game, and PopJam - a twitter-meets-humor social website.

Returning from the alps, Michael met with Alex. Sensing an opportunity to take meditation and its merits into the mainstream, the duo bought the domain Calm.com for $140,000 (negotiating down from $1M) and set out to build what was to become the first mental health unicorn in history.

Calm’s suite of offerings today 🧘‍♀️

Today, Calm is valued at $2B on the back of their Series C round in late 2020 led by previous investor Lightspeed Venture Partners, with participation from Insight Partners, TPG, and Salesforce CEO Marc Benioff.

The Calm rocketship takes off 🚀

After raising seed money in early 2014, it took Calm 4 years to raise their Series A round. It took time - 4 years - to appeal to the large swathes of skeptics who dismissed them as the “fluffy little meditation app.” On the back of their Series A, with the discourse around mental health changing, the Calm rocketship started to gather momentum.

Their Annual Recurring Revenue (ARR) consistently multiplied 3x-4x YoY from 2015 to $80M in 2018, and as of the latest figures made public, around $150M in 2019.

Coming up against the incumbents in the space in Headspace, Calm went on to blow the competition out of the water, steamrolling to the status of the first mental health unicorn in history.

With north of 4 million paying users, and the titles of Apple’s 2017 App of the year and Google Play editor’s choice in 2018 in the bag, the Calm rocketship is a masterclass in product-led growth execution in an up-and-coming industry.

Let’s take a peek at those engines humming under the hood.

Herding purple cows 🐄

Calm’s meteoric growth was propelled along the way by a herd of what Seth Godin calls “purple cows.”

The idea is simple: if you spot a purple cow on a stroll, you’re going to take notice, remember it, go home, and tell your friends about it.

🐮 Purple cow #1: Calm’s origins can be traced back to the do nothing for two minutes. As far as Minimum Viable Products (MVPs) go, Alex’s brainchild is a shout-out for one of the greatest of all time. 🐐 The website urged you to take a breather, sit back, and do nothing for 2 minutes. That’s it.

But much like a monk engaged in deep vipassana meditation, there was a lot going on behind the facade of the MVP’s simplicity.

Crucially for Calm:

The website captured what Alex calls “sentiment-market fit.” The persona of visitors drawn to the page was adjacent and highly relevant for what would become Calm, a year later.
The website went viral on Twitter in early 2011. Even before they had a product, Alex had captured ~100k high intent e-mail addresses for Calm.

Calm’s purple cows were adjacent products/mini-apps with a sentiment-market fit and built-in elements of virality.

Here’s how Alex outlines the recipe for his purple cows:

It should tap into the zeitgeist
It shouldn’t take more than a day to build
Give it a great name, a simple design, and fit the idea into a tweet
The closer the viral product is to your core product, the better your conversion rates

🐮 Purple cow #2: Checky is an app that keeps track of how many times you check your phone in a day. The app achieved peak viral status when it was featured on the Steven Colbert show for 3 minutes one night.

With 650,000+ downloads on the app store, the adjacency in intent among users meant that a lot of these new users were primed for an introduction to Calm.

Checky → Calm cross promotions.

Checky landed ~50,000 downloads for Calm.

Pricing experiments 🧪

One of the crucial inflection points in Calm’s growth was when Michael and Alex decided to make adjustments to their pricing model.

“Probably the single number one thing we try to get our companies to do is to raise prices. Is your product any good if people won't pay more for it?" - Marc Andreessen

After raising their prices from $10 to $40 a year, Michael and Alex saw their revenue take off with almost no drop-off in new sign-ups. The duo realized that the services they offered were highly valuable to people, who were more than happy to pay the premium.

"They don't charge enough for their product to be able to afford the sales and marketing required to actually get anybody to buy it. And so they can't afford to hire the sales rep to go sell the product." continues Marc Andreessen

Calm got to 8 million downloads before spending a dime on marketing. The bump in revenue from the pricing experiment meant that they could now pour marketing gasoline on a fire that was now starting to rage. 🔥

Calm’s pricing model today 💳

10,000x hiring decisions 💼

Steve Jobs believed that an elite talent was 25 times more valuable than an average alternative. Mark Zuckerberg believed the real number was closer to 100x. For Bill Gates, the sweet spot was 10,000x. As with Jobs, Zuck, and Gates, hiring key talent early on was a major driver for Michael and Alex as well. The duo lobbied to fill seats on their rocketship with a few people they deemed crucial:

🧱 The foundations - Foraying into a sector that was mired in skepticism, and going head-to-head with an incumbent in Headspace, their primary competitor, it was important for Calm to differentiate early. User experience was paramount to achieving both. Ben Dowling, who previously worked on “do nothing for two minutes” with Alex joined as CTO in 2014 and built the foundations of the engineering wizardry that powers Calm’s bleeding-edge user experience today.
🎙 The voice - Tamara Levitt joined as “Senior Content Producer” around the same time and very quickly became the face and voice of the Calm experience. Previously an author and a mindfulness teacher, Tamara leads the creative development of content at Calm. Over 4 million people tune into her voice every day - a voice that has been described by some as “marvelous", "hypnotic", and "somehow magic." If she were to start recording commercials, says one user, they would "probably end up buying three insurance policies and a Snuggie before snapping out of it."
🤝 Acquisitions - Dun Wang joined Calm in 2016 and added afterburners to Calm’s user-acquisition engine. Facebook was one of the biggest levers of paid acquisition for Calm, and Dun knew the platform inside-out. With message-sequencing and retargeting campaigns, Calm followed users through their customer journeys with ads. After Dun left her function is led by Rohan Verma.

📰 Capturing the zeitgeist

Calm aspires to be the “Nike for the mind.” It makes sense that their marketing campaigns have taken a leaf out of the legendary sports brand’s playbooks. Monica Austin who is head of global marketing at Calm calls their secret sauce the 50-50 strategy: Planned half the time and tapping into the current conversation and zeitgeist the other 50% of the time.

Be it through donating the sum of Naomi Osaka’s fine to a Laureus Sport to amplify the “mental health is health” message, or through TV banners and ads placed next to the red and blue election graphics reminding us all to take a minute for ourselves amidst the high drama of these last US presidential elections, Calm has placed themselves on the ramparts of the global mental health conversation.

“This is one component of establishing Calm as a brand that doesn’t simply sell mental health, but is also invested in defending it,” Forrester vice president and principal analyst Dipanjan Chatterjee.“ The brand emerges as an advocate and well-wisher, and most importantly, a guide.”

Sleep stories 😴

Michael and Alex were quick to notice an odd trend occurring within their meditation app: there were large spikes in usage around 11:00 PM local time around the world. People were doing meditation all wrong. They were instead using Calm as an aid to fall asleep.

The co-CEOs were quick to pounce, and launched the Sleep Stories series featuring celebrities such as LeBron James, Eva Green, Matthew McConaughey, and others 👇

Pick a celebrity to fall asleep to 😴

“We do see bumps when stressful things are happening in the world. The biggest drivers for us are when we launch premium content.” - Michael Acton Smith

In July 2020, when Calm launched a 39-minute bedtime story called Dream With Me, read by Harry Styles, the instant demand temporarily crashed the app.

Refreshing premium content remains a big driver of growth for Calm to this date.

Virality hooks 🔂

Alex’s gifts for social engineering are built right into the app, exploring dynamics of virality using such features as

“Give the Gift of Calm” - gift someone a subscription
Habit building encouraged through streaks and the “Daily Calm” - a new session created only for that day
Social sharing of your stats, and your daily meditations

Partnerships 🤝

Calm has partnered with brands such as American Airlines, Sonos, Uber, XpresSpa, Apple, Fitbit and Oculus to emphasize the vital role of sleep, mindfulness and self-care through brand vehicles across industries and domains.

Through its partnership with Novotel hotels, Calm was introduced at 530 hotels across 60 countries as a mode to encourage self-care while travelling. Bumble partnered with Calm to re-emphasize the role of mindfulness in relationships. The list goes on - you get the idea.

Calm’s partnership offerings 🎁

Calm for business 👩🏻‍💻

In early 2019, Calm started building out a corporate arm “Calm for Business” to further boost revenue stability. The B2B offering is pitched to Human Resources departments at businesses, and offers people leaders the opportunity to spread awareness about mental well-being at workplaces around the globe.

The B2B arm is led by a ~25 member Sales team that sells Calm to Enterprise, Mid-Market, and Small Business accounts. The Sales GTM is supported by a team of ~10 similarly segmented CSMs.

What’s next for Calm?🔮

On February 2022, Calm announced their first acquisition - that of Ripple Health Group, a fast growing healthcare startup, indicating a broader expansion of their suite of products.

Ripple’s CEO David Ko took over the reins from Alex Tew as Co-CEO, while Alex stepped into his new role as “Executive Chairman”, focusing on highest impact projects for Calm.

The team announced that Calm Health will replace “Calm for Business” soon, and will span content, community, and coaching to drive outcomes across the full spectrum of mental healthcare.

Calm’s mission to “make the world happier and healthier.”

The good news for Calm?

The market for that is 8 billion people.

This story was originally published on Top of the Lyne

Comments (10)

David Tran @dtran320

Flow Club

Great post @ruchin_kulkarni! Knew some of the the Calm story like MDH and DoNothingFor2Minutes.com, but didn't know about Moshi and Checky! Brilliant! Thanks for this great summary!

Jul 16, 2022

David Oh @davidoh

Dun Wang is a woman, not a "he". Not a lot of true Growth experts out there, and very few well-known are women, so should probably correct this line: "After Dun left his function is led by Rohan Verma."

Jul 14, 2022

Oliver Page @oliver_page1

Awesome post, thanks for sharing! Personally I pay $100 a year for the waking up course by Sam Harris, i wonder how they are doing compared to Calm?

Jul 14, 2022

Satya @satya_mohapatra

Presbot

Great read, thanks for sharing!

Jul 18, 2022

Naomi Chao @naomichao

Gamma

Ok but Michael Acton Smith being the creator of Moshi Monsters AND cofounding Calm is not the crossover I expected. I'm sorry - this is a fantastic article - but that has blown my mind.

Jul 15, 2022