Calm: Alex Tew and Michael Acton Smith

As a young entrepreneur in the Wild West days of the internet, Alex Tew was drawn to meditation for its simple calming power. Together with fellow tech founder Michael Acton Smith–known for hits like Moshi Monsters–the two brainstormed ways to bring the ancient practice of meditation into the 21st century. In 2011, they bought the domain calm.com http://calm.com, built an app, and started producing meditations and Sleep Stories, narrated by celebrities like Matthew McConaughey and Idris Elba. Despite initial pushback from investors who insisted no one would want to meditate on their phone–let alone pay for it– the Calm app grew to a valuation of nearly $2 billion, with 180 million total downloads. This episode was researched and produced by Katherine Sypher with music composed by Ramtin Arablouei. It was edited by Neva Grant. Our engineers were Patrick Murray and Robert Rodriguez. You can follow HIBT on X https://twitter.com/HowIBuiltThis & Instagram https://www.instagram.com/howibuiltthis/, and email us at [email protected]. Sign up for Guy’s free newsletter at guyraz.com http://guyraz.com or on Substack. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Guy Raz?

  Our presenting sponsor today is Anthropic, the team behind Claude. Every founder on this show started with a hard question. Not the marketing plan, the 2 a.m. kind. Is this idea any good? Am I the one to build it? Should I quit my job? Anthropic got built the same way. A public benefit corporation founded on one hard question. How do we make sure AI goes well for people? So they asked over 100,000 people their hopes and their fears and are publishing what they find, even the uncomfortable parts. Me? I've got my own hard question about AI. Here it is. If everyone has access to something that can help them write the business plan,

• 0:46Guy Raz?

  build the prototype, analyze the market, maybe even come up with the idea, what separates the people who actually build something from everyone else? I don't have a clean answer yet, so I've been sitting with it with Claude. There's hope in hard questions. Ask yours at claude.ai/hibt. We get support from U.S. Bank. A question I love asking founders. What's the one decision you almost didn't make? The one that changed everything? Because it's never the obvious stuff. It's never, I decided to start a company. It's the small, boring, Tuesday afternoon decision you barely remember making until you realize it's the reason everything after it either worked or didn't.

• 1:32Guy Raz?

  Say you're 18 months in. Business is growing. You've got expenses coming from six directions. Gas for the van, office supplies, your phone bill, team lunches that are actually client meetings, and you're putting it all on whatever card you grabbed in year one. You're not thinking about it. Why would you? You've got bigger problems. But here's the thing. Path A, you keep going like that. End of the year, you're sorting through statements, trying to figure out what went where. You've left hundreds, maybe thousands, on the table in rewards you never earned, money that could have gone back into the business. Path B, you pause and get the US Bank Triple Cash Rewards Visa Business Card. Now, you're earning 3% cash back

• 2:16Guy Raz?

  on gas and EV charging, office supply stores, cellphone service, and restaurants. You pick up an extra $750 cash back as a bonus. And you've got a low APR on purchases and balance transfers for 12 months while you're scaling. Same business, same expenses, two completely different outcomes based on one small decision. Visit usbank.com/business to learn more. The creditor and issuer of this card is US Bank National Association, pursuant to a license from Visa USA, Inc. Some restrictions apply. If you travel often, you'll want to hear about this unprecedented offer. For the first time ever,

• 3:00Guy Raz?

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• 3:45Guy Raz?

  or bring a guest to the Delta Sky Club. Make every trip feel more rewarding with the car that upgrades your travel. Apply today at delta.com/cardsocial. Offer ends November 4, 2026. Minimum spending requirements and terms apply. Flights are fulfilled as flight certificates valid for Delta Comfort or Delta Maine to select domestic destinations. Book 21-plus days in advance. Up to $80 per person and taxes and fees apply. Other restrictions apply. When I pull up to a gas pump to fill my car, I'm not thinking about chemistry or engineering. I'm thinking about getting in, filling up, and getting on with my day. And it reminds me a little bit of the founders I talked to on this show, because the best

• 4:27Guy Raz?

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• 5:21Guy Raz?

  You launched a website, what you called "Do Nothing for Two Minutes." What was this thing?

• 5:27Speaker 01

  Yeah, it was really a fun exercise that came out of a late-night brainstorming session, just, you know, what would the world's simplest webpage be? Well, it would do nothing.

• 5:39Guy Raz?

  And you would go on it, and it would just have a countdown clock, and you'd do nothing. It wanted you to do nothing for two minutes.

• 5:46Speaker 01

  Yeah, picture of 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."

• 5:55Guy Raz?

  Wow.

• 5:56Speaker 01

  Only about 50% of people who went on the page could actually do nothing.

• 6:08Guy Raz?

  Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built.

• 6:19Guy Raz?

  I'm Guy Raz, 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 $2 billion.

• 6:39Guy Raz?

  Over the past 15 years, meditation, at least in the West, has gone from fringe to fortune. By 2024, 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, the story of Headspace's biggest competitor, Com. When Com launched in 2012, Headspace had already been around for two years. And coincidentally, independently of each other, both apps were started by British co-founders.

• 7:23Guy Raz?

  And just like the Headspace team, Com's founders, Michael Acton Smith and Alex Tu, had a hard time raising money early on. In 2012, a lot of investors just didn't believe people would pay to meditate, especially on their phones. But pay they did. By 2022, Com had more than 4 million paying subscribers. But what makes this story even more interesting is what Michael and Alex were doing before Com. 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 $1 billion.

• 8:06Guy Raz?

  And Michael, 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 Boardman, who would go on to become his very first business partner.

• 8:33Speaker 02

  I met Tom at Chess Club. We were both real rock and roll students. And yeah, we just became great friends. And the internet was just getting going. You know, 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 an extraordinary revolution taking shape. And so we had a lot of different ideas, but um yeah, we settled on e-commerce as the starting point.

• 9:15Guy Raz?

  Which is kind of amazing because even doing it in the US, and again, no shade to the UK. But like, the UK was behind the US, right? Or just in terms of the sort of the speed at which the revolution happened. But getting into e-commerce anywhere in the world in 1997 was like totally nuts. People like, what, credit card internet? Like, what are you, how you sell to the internet? It's a, it's a computer. How do you sell through that? But I guess you guys start talking about this idea. And at the time, and I remember this, and I might still be around. There was a shop in the UK called The Gadget Shop. In the US, I guess it would, it would be similar, like The Sharper Image, right?

• 9:56Speaker 02

  That was exactly it. That was our inspiration to get going. All sorts of quirky gadgets and games and, you know, chairs that would massage you as you watch TV. Cocktail shakers, Swiss Army knives. It just felt like selling these products online would be a really fun thing to do. But we had to solve a lot of early problems because Shopify was not around, Stripe was not around. We, Tom was obviously very, very good at engineering and was able to solve a lot of these early challenges. But it wasn't easy.

• 10:31Guy Raz?

  Yeah, it's amazing. I read about how you guys moved basically 1997 timeframe. You moved to his parents' house in Cardiff.

• 10:39Speaker 02

  Yes.

• 10:40Guy Raz?

  And you use like a spare room in the house to start putting together a website. 1997, 98, like this was 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. He knew how to do this?

• 11:01Speaker 02

  He figured it out. We'd been in this bookshop in Cardiff and we saw this book called Doing Business on the Internet. And it was massive. And we bought it. We clubbed our money together and we both just absolutely devoured it as if it was a holy script and then were able to to build the first version of the site. 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 we weren't too worried about scaling.

• 11:41Guy Raz?

  I mean, you have this website and you called it Hot Box. 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, what were you selling?

• 11:53Speaker 02

  Yeah, good. Good question. Well, we put photos of products on the site. And if anyone ordered one of them, we would then go and try and buy it. And wholesalers were not too impressed at selling one unit at a time to us. So often, we'd 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, and just seeing what products would resonate, whether we could actually make this work. And so it was very, very slow progress.

• 12:26Guy Raz?

  All right, you have a big break. Big break. It's a first break, which is you guys start to sell something called the shot glass chess set. So basically, I'm imagining it's a chess set, but each piece is a shot glass. And this is something you guys came up with. You created this product, right?

• 12:43Speaker 02

  Yes. Yeah, we were dreaming up all sorts of weird and wild ideas for new products. And we were in a bar one night in Cardiff and saw some tequilas lined up across the bar, tequila shots. 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 called it the thinking person's drinking game. And you could play with red wine against white wine, whiskey against vodka, if you're a little more hardcore. But every time you capture an opponent's piece, you have to drink their shot. And usually, you don't remember who wins by the end of the game.

• 13:24Guy Raz?

  It's actually a great idea. How did you get it made?

• 13:29Speaker 02

  Yeah, so it took quite a long time. It was quite expensive assembling all those pieces.

• 13:34Guy Raz?

  Lot of faxes.

• 13:35Speaker 02

  Yes, we eventually cobbled it all together. We tested the market by going to a shop that sold loads of magazines and scribbling down the names of the editors and the addresses of these magazines. And then sent out our press release. We took some photos of the chess set and we sent it off to these editors, personalized everyone. And the hit rate was incredible. You know, something like half of them came back saying, what a genius idea. And we want to feature this. And we were featured in all the men's magazines all around the world. It was amazing. So that was the sort of the tipping point, that the start where we thought, wow, you know, storytelling is so important. This wasn't

• 14:16Speaker 02

  just a chess set. We were telling these editors, we were two students building an internet company. And I think it really resonated.

• 14:26Guy Raz?

  I mean, and this is now, we're talking about 98, 99 here, getting a lot of attention for this shot glass chess set. And meantime, you're having some issues with your name, which is Hotbox. You guys owned hotbox.co.uk, but you did not own hotbox.com, which was a different website, I guess.

• 14:44Speaker 02

  Yes. Have you ever been to hotbox.com?

• 14:46Guy Raz?

  I have not, no. I promise. Everyone listening, I have not.

• 14:49Speaker 02

  No, I wouldn't, I wouldn't advise it, especially not at work. So we didn't think it mattered that we didn't own the dot com to our name. 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 that was a little awkward, especially when my mom, who was so proud of her son, finally doing something and building a business. She'd tell all her friends to check out her son's new business, Hotbox, and caused some very awkward moments.

• 15:24Guy Raz?

  So you had to change the name?

• 15:26Speaker 02

  We changed it to Firebox, which didn't have any negative connotations.

• 15:30Guy Raz?

  Firebox.com?

• 15:31Speaker 02

  Yep.

• 15:32Guy Raz?

  And this is, again, the late 90s, and you start to attract interest from investors. You guys moved to London, and I think you even raised a little bit of money, right, to expand Firebox out?

• 15:46Speaker 02

  Yeah, so we were building this internet company from this attic in Cardiff and no one was doing anything similar around then. The bank thought we were completely mad. But then we read an article in a newspaper talking about an event in London called First Tuesday, which gathered internet entrepreneurs with investors. And we both looked at each other and went, wow. And we literally decided to move to London almost the next day. We threw all our things in a van and let's get there before Tuesday. Pretty much. And the very first event we went to, we met an investor who liked the sound of what we were doing and he invited us into the office. And a couple of meetings

• 16:29Speaker 02

  later, we had a half a million dollars of investment and we just could not believe it.

• 16:36Guy Raz?

  So this starts, I mean, you start to really expand at half a million dollars. You probably, I mean, God, you're like 25, you know, years old, 24 years old. I mean, this just must have been mind blowing to imagine what we could do with this. Did it make any money?

• 16:52Speaker 02

  It did. Yeah, we were profitable from fairly early on. We got our own office and 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.

• 17:08Guy Raz?

  I know that you would eventually leave and start another business. And I want to come back to that in a sec because we're around 2003, 2004. But I want to turn to you, Alex, for a moment because you're about 10 years younger than Michael. You were, you also grew up in England.

• 17:27Speaker 02

  Yeah.

• 17:28Guy Raz?

  You have a very unusual interest as a, I shouldn't say unusual, it's just I've never, in the 700 interviews I've done on this show, I've never had somebody who was a, like a semi-professional beat boxer.

• 17:43Speaker 01

  Yeah, beatboxing. Beatboxing's a funny one because at the time when I started doing it, it was, it wasn't something that I knew anyone else did. It was just something that came naturally. And so from the age of maybe four, you know, I was running around the house just making rhythmic sounds and then took it a bit more seriously as I got older.

• 18:07Guy Raz?

  Yeah. Do you, when you get close to a microphone like you are now, is it hard to resist the urge?

• 18:13Speaker 01

  Come on, Alex. You know what? When we were setting up, my instinct is to just, just let it out.

• 18:19Speaker 02

  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?

• 18:34Speaker 01

  It's not, not bad.

• 18:36Guy Raz?

  I wouldn't be a competitive beatboxer.

• 18:37Speaker 01

  No.

• 18:39Guy Raz?

  Uh, I'm not going to make you do it. So, so.

• 18:40Speaker 01

  Okay.

• 18:41Guy Raz?

  But talk about this because your entree into the internet was setting up a beatboxing website for like a forum, beatboxing.co.uk. You started this, you were what, like 15 years old, 16?

• 18:56Speaker 01

  Yeah, I was 16, 17, something like that. It was actually my, my second website. So.

• 19:03Guy Raz?

  Okay.

• 19:04Speaker 01

  But it just became this natural idea to create a forum. And so use some software called V Bulletin, which was like the premier forum software back in the day. And, and then suddenly just all these beatboxes from around the world started logging on. It was like the first place. It turns out that there were tens of thousands of people also enjoying the same, you know, the same hobby, if you like. So it was super cool to like build that community. And actually learn better beatboxing techniques. We were all trading techniques on this website.

• 19:40Guy Raz?

  I love this so much because you weren't just doing it. You were like leading it. You were like organizing events. You organized, I guess, after you finished high school, what we call high school, you you decided not to go to university right away, but to organize the World Beatbox Convention in London.

• 20:00Speaker 01

  Yeah.

• 20:00Guy Raz?

  I mean, you're 18. That's pretty awesome. Who who came? How many people showed up?

• 20:05Speaker 01

  We had 300 beatboxers from all over the world come to London. And yeah, the event was amazing. We just sort of had this big showcase. I think we may have 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.

• 20:26Speaker 01

  It wasn't enough for me to move out of of home,

• 20:30Speaker 01

  living with my parents and decided, OK, I should probably take the traditional path that everyone is encouraging me to to take. I should go to university, get a job, maybe leave the beatboxing behind.

• 20:43Guy Raz?

  So you get to university in Nottingham. And one of the things that you you did while you were there was to set up a webpage. You you you bought a domain called milliondollarhomepage.com. And tell me what this idea was, because this would. 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?

• 21:07Speaker 01

  Yeah, the the idea was very simple. It was to try and make a million dollars

• 21:13Speaker 01

  with the silliest possible method, which is to sell a million pixels for $1 each on this one page website. Yeah, it was just one of those late night brainstorms that I thought, OK, that's that's quite funny. It's quirky enough that it might just get a bit of attention.

• 21:32Guy Raz?

  Just to describe this for people, it's so crazy. It's like, imagine a collage of just a million like logos. And basically, you would sell.

• 21:46Guy Raz?

  Pixels to anyone 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 where websites would just get attention like just a weird website would just get news coverage, right?

• 22:08Speaker 01

  Yeah, 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.

• 22:19Guy Raz?

  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.

• 22:32Speaker 01

  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 breakfast show. So this is like Good Morning America, right? But in the UK.

• 22:43Guy Raz?

  Yeah.

• 22:43Speaker 01

  And I'm sitting on the couch and they're like, you know, why is this? 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, it was because of the the attention gave it oxygen and and made me money.

• 22:58Guy Raz?

  You earned a million dollars within four months.

• 23:01Speaker 01

  Yeah, yeah, it was 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. And there'll just be like a $10,000 payment. And I'm just like, that's awesome.

• 23:17Guy Raz?

  Yeah. All right. This prompts you understandably to drop out of out of university because you're thinking, look, the internet is the way to go. I don't want to spend all this time getting a degree. Is that is that fair to say that you thought I just I need to just focus on on this world?

• 23:33Speaker 01

  Yeah, it just opened my eyes to what was possible. I felt a lot of agency, you know, I could I could go and build something and I, you know, I didn't really want to go to university in the first place. I was trying to be an entrepreneur. And so so dropped out and and moved to London. Similar story, I guess, to Michael where all roads lead to London in the UK.

• 23:54Guy Raz?

  I want to turn back to you, Michael, and jump back on on your timeline because, you know, you left work the job with Firebox and You decided to start something new, which was a video game company. And because of, I am assuming because of your reputation with Firebox and what you you guys managed to do, you managed to get some significant funding. Like you raised like $10 million to start this video game company called Mind Candy. Tell me about that.

• 24:21Speaker 02

  Yeah, it didn't happen immediately, but one of my loves is games. You know, we've talked about chess, but I love everything from poker to backgammon 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 people online. So I just thought the next big revolution would be to make fun multiplayer games. And so like the name Mind Candy, that was the starting point. And we created a game called Perplexity, inspired by a movie I'd seen, The Game by David Fincher.

• 25:01Guy Raz?

  Oh, it was Michael Douglas.

• 25:02Speaker 02

  Exactly, yeah. But 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 real life version of that? So that's what Perplexity was. And to cut a very, very long story short, we buried a treasure worth $200,000 somewhere in the world. And then we set about releasing clues across all sorts of different media.

• 25:25Guy Raz?

  Real cash, you buried it in a real place.

• 25:28Speaker 02

  Well, we buried, we created a story and all these characters. 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 $200,000. That was the idea behind this game.

• 25:43Guy Raz?

  Wow. Where was it buried?

• 25:45Speaker 02

  It was buried in a field about 120 miles north of London. And we put clues in the classified sections of newspapers around the world. We had helicopters at live events and there was

• 26:00Guy Raz?

  Wow.

• 26:00Speaker 02

  these cards that you could buy if you squeezed lemon juice on them or held them up to sunlight, passwords would appear.

• 26:06Guy Raz?

  And I guess the idea was to make money by I like by what selling what?

• 26:12Speaker 02

  The business model was 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, if you put all 256 together, would create this massive map of the world of perplexity where all the deeper clues were hidden. So yeah, the idea was to sell these packs for a few pounds each and it was very, very complex, probably the most creative thing I've ever worked on, but one of the most commercially disastrous things I've worked on. So I learned some lessons from that adventure.

• 26:46Guy Raz?

  This game was considered, I mean, I think it was widely like critically acclaimed. What was the problem? What happened?

• 26:54Speaker 02

  Well, as I say, it was it was extraordinary and incredibly creative and we had a very, very passionate audience of players, but unfortunately the game was just so complex that the audience was relatively small. It was a few thousand people. So you're right, we won awards, we had incredible publicity, but the commercial piece of it was not there.

• 27:16Guy Raz?

  So this is around around 2006. Your paths cross, Michael and Alex, you guys meet for the first time in London. Alex, you had come down, of course, to pursue the next thing, big thing of the internet. And Michael, you'd been there building Mind Candy and and you guys just met at like a random event or a party or what? How did you meet?

• 27:40Speaker 02

  Well, I I remember reading about the million dollar homepage and I wanted to connect and meet this genius that had created this. I just thought, wow. And I I tried to get in touch with Alex and no joy. In fact, I had some of my investors ping me saying, who is this guy? Let's find him and no luck. And then we met at a party, didn't we? A mutual friend.

• 28:06Speaker 01

  We did, yeah. And I had known about Firebox because I used to log on to Firebox when I was broke, looking at all the products that I wanted to buy but couldn't afford. And I think I may have even bought a few of them once the Million Dollar Homepage started working. So I was a fan of Michael's and then we just sort of hit it off from that moment.

• 28:25Speaker 02

  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 said to Alex, do you want to move in?

• 28:39Speaker 01

  Yep. And yeah, then we lived together for quite a few years in Soho.

• 28:44Speaker 02

  It was a great house, wasn't it? Very entrepreneurial. We'd sit playing FIFA on our Xbox in the evenings, talking about business and ideas and we'd throw great dinners and parties. Most of our friends were building tech companies, so it was a really, really exciting time.

• 29:02Guy Raz?

  So, all right, so you guys are in this house. And meantime, Alex, you start a business called Pixelotto, which I guess is inspired by this million dollar homepage where you're selling pixels of things. But from what I read, you didn't quite have the same traction with it. You weren't kind of, it wasn't taking off in the same way.

• 29:22Speaker 01

  No. Business is so much about storytelling and the Million Dollar Homepage had a great story. With Pixelotto, it was, yeah, it was not that at all. And I look back and I sort of, I squirm at the fact I did that as opposed to create something more meaningful. But I think it's just, it's part of learning, you know, what works, what's worth working on. And I think the reasons for doing Pixelotto weren't, they weren't the right reasons. I was just trying to create another version of the Million Dollar Homepage, which is not so exciting.

• 29:56Guy Raz?

  Meantime, Michael, you're still trying to get perplexity to gain some traction, but it's really not. I mean, I think you get to a point in 2007 where you have like less than a million dollars in the bank and you guys had raised 10. So you're, I mean, and you're not bringing in any significant revenue. So.

• 30:18Guy Raz?

  Tell me about that time. I mean, that that must have been quite stressful for you because that means like this thing is probably gonna die.

• 30:27Speaker 02

  Yeah, it was horrible, really, really difficult 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 just watching the bank balance dwindle. Board meetings were getting more stressful. And then eventually I thought we have to try something new, a Hail Mary. And within the world of perplexity, there was this legend that we had created called Puzzle Monsters. The world was all about puzzles and if kids didn't do their homework,

• 31:10Speaker 02

  the Puzzle Monsters would come and get them in the middle of the night. It was quite dark. But I love the name Puzzle Monsters and even though I'd never built anything in the kids space before, I thought maybe we could create a website for kids. And I'd loved the pet rock story. And then Tamagotchi came along and Neopets.

• 31:30Guy Raz?

  Oh, Tamagotchi were those like keychains, right? It was like a pet that you take care of.

• 31:35Speaker 02

  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 all ages love it. And so we thought, could we create a sort of digital pet, a little monster for kids to to look after and feed and dress up and go exploring this world?

• 31:57Guy Raz?

  Yeah.

• 31:57Speaker 02

  So I basically said, let's try this completely new idea. And to the board's credit, they were obviously 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 we we gave it a go. So with a little bit of cash left, we started trying to build this kids entertainment company.

• 32:22Guy Raz?

  Called Moshi or Moshi Monsters. Was it sort of inspired like that name? Sounds a little Japanese. Was it was inspired by that kind of Japanese aesthetic?

• 32:30Speaker 02

  Yeah, we explored lots of different names. We just quite liked the the alliteration of Moshi 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, even though it probably would have been simple to to start from a fresh sheet of paper.

• 32:51Guy Raz?

  And again, it was a website that where what kids would like, create a pet and then they would care for the pet. Like, just briefly explain how it worked.

• 33:00Speaker 02

  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 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 on online environment where they are in control was really exciting. And one of the key things we did in this world, 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 definitely not overnight, but after a lot of tweaking, iterating, we we

• 33:45Speaker 02

  got product market fit and it just took off like a rocket.

• 33:47Guy Raz?

  Hmm. So how was Moshi Monsters going to make money? Was parents would would pay a fee as a subscription model? How did it work?

• 33:56Speaker 02

  Well, we just made the decision, why don't we just make the game free and allow any, 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.

• 34:25Guy Raz?

  Six dollars a month, roughly, I think.

• 34:27Speaker 02

  It was about that, yeah. And again, very challenging because, you know, it was the parents that would pay, but 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, that they were happy to do so.

• 34:43Guy Raz?

  So this is 2008, 2009. And I mean, from what I gather, it was, it actually hit profitability pretty quickly. Like you guys were getting, you know, within two or three years, like 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 it? Was it just that the, I mean, it's 2008, 2009, the internet is still fairly new, that it was still easier to get attention for a website?

• 35:13Speaker 02

  Yeah, it, you know, if you create something incredible for kids that they love, there's, there are few things that spread faster in the playground. You know, you think of all the big hits from Pokemon to Cabbage Patch Dolls.

• 35:26Guy Raz?

  Paw Patrol.

• 35:27Speaker 02

  You name it. Yeah, exactly. All, all these worlds. And Moshi was 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.

• 35:40Guy Raz?

  When you say physical products, toys?

• 35:42Speaker 02

  Well, a whole range of things. So one of the first things we made was a magazine that featured content from the world. And then we did trading cards. And then we did books. In fact, the first deal was a book deal we did with Penguin, talking about all the different Moshi characters you could collect in the world. And, and then a music album that went to number four in the charts, and a movie with Universal. It was just-

• 36:05Guy Raz?

  A movie? Moshi Monsters, the Movie?

• 36:08Speaker 02

  Exactly. Yeah. And the, the magic of this was, we had two flywheels spinning. We had the digital world, and then we had the physical world. And so the two helped the world grow much, much quicker.

• 36:22Guy Raz?

  I read somewhere, and this makes a lot of sense to me, because I've had-

• 36:27Guy Raz?

  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, we're the next Disney. Like, this is just the start. Look how fast we're growing. And I think, I think those conversations were happening at Mind Candy around Moshi Monsters, right?

• 36:52Speaker 02

  Yes. Yeah, we did think we could be the next Disney, the future of entertainment. And I think we got a bit too big for our boots, or I certainly did. Disney came knocking, and we had some conversations. They'd bought one of our competitors called Club Penguin.

• 37:07Guy Raz?

  Oh, wow. But they came possibly looking to acquire you guys?

• 37:11Speaker 02

  Yes. Yeah, we never got to term sheet phase, but they were very, very interested. But I was just full of confidence and wanted to keep building and creating new worlds and universes. And to be honest, I was just having too much fun. But when you're an entrepreneur, you do need to think of all the stakeholders and investors and employees. Not selling was was probably a mistake in hindsight.

• 37:34Guy Raz?

  I mean, in hindsight, right? But, but I mean, you're on this rocket ship, right? From the time you launch it, you've got movie deals, licensing deals, merchandise. But from what I read between the lines, already by 2012, even with all of the acclaim and attention, you guys were running into problems. What happened?

• 37:55Speaker 02

  Well, we, we kind of, first of all, when this happens, 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, I didn't realize this because I'd never built a kids entertainment company before, but kids moved on.

• 38:12Guy Raz?

  They get bored.

• 38:13Speaker 02

  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 in our numbers. And there was, we did everything we could to try and turn it around, but, but we couldn't.

• 38:33Guy Raz?

  Yeah. But you still, you were the hottest tech company and one of the hottest tech companies in London.

• 38:39Speaker 02

  It's this horrible situation to be in where, you know, I was on billboards and posters around East London, I was being interviewed on TV shows, winning awards left, right and center, but knowing in the pit of my stomach and at 4 a.m. that this was unraveling and this was falling apart. This rocket ship suddenly started falling back to earth.

• 38:59Guy Raz?

  When we come back in just a moment, Michael leaves the frenetic world of Moshi Monsters to work with Alex on something completely different, an app called Calm. Stay with us. I'm Kai Raz and you're listening to How I Built This.

• 39:22Guy Raz?

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• 40:04Guy Raz?

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• 40:49Guy Raz?

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• 41:34Guy Raz?

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• 42:38Speaker 04

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• 43:04Guy Raz?

  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. 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.

• 43:34Speaker 01

  Even back when I was a teenager, I was a practitioner of meditation and relaxation techniques and self-hypnosis I was interested in.

• 43:41Guy Raz?

  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. What would you do?

• 43:52Speaker 01

  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. 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 Dr. Herbert Benson. And he was one of the first researchers into 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 would just sit and try and practice. And meditation I did find difficult. I think at that time it was,

• 44:34Speaker 01

  it was a bit too esoteric. I found it easier to memorize relaxation techniques. And, and then also started sourcing on, online, but also in quirky bookshops, CDs that would have on the whole incredibly cheesy recordings with panpipes and, you know, lots of reverb, with these relaxation things. And I just thought, a lot of this content that I'm consuming... It's really not designed for a mass audience. It's not very well presented, even though the technique's incredibly simple and powerful. And I even had that thought around meditation. You know, it's been around for thousands of years in various forms.

• 45:17Speaker 01

  But to the average person, it's unapproachable.

• 45:20Guy Raz?

  Yeah. And right around the same time, Alex, I think you launched kind of an experiment, a website, which you called Do Nothing for Two Minutes, which I've seen. And you can see this on the Internet Archive, the web archive. And this was literally a website. And you'd go on it and it would just have a countdown clock and you would do nothing. It wanted you to do nothing for two minutes. And then the clock just runs down and you're just looking at a sunset over the ocean. Was this just a gimmick? Was it, was this gonna be a business? Was, what was this thing?

• 45:55Speaker 01

  It was really a fun exercise that, again, similar to the Million Dollar Homepage, came out of a late night brainstorming session. Just, you know, what would the world's simplest webpage be? Well, it would do nothing. And came up with this idea of this webpage. It would have a picture of a sunset, sounds of waves crashing on a beach, countdown from two minutes, which would start as soon as you hit the page. And 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, a guy called Ben Dowling, we just, we built it one afternoon and tweeted about it. And it just went viral.

• 46:38Speaker 01

  And within a week, had about 2 million visitors.

• 46:41Guy Raz?

  Wow.

• 46:41Speaker 01

  And funnily enough, only about 50% of people who went on the page could actually do nothing, like not touch their mouse or keyboard.

• 46:50Guy Raz?

  All right. So something else, I think, happens around this time, Alex, which is that you leave London and you move to the US to take a job, like I think at a tech incubator in San Francisco. So I mean, I mean, this was a big change for you, right? I mean, this, this is a major move.

• 47:08Speaker 01

  Yeah. So that was my first, in a way, my first job, apart from working in a supermarket when I was very young.

• 47:16Guy Raz?

  Right.

• 47:17Speaker 01

  That was my first sort of, first proper job, if you like.

• 47:20Guy Raz?

  Yeah. I'm just, just curious. I mean, from the time you started Million Dollar Homepage, right? You made a million dollars, literally. Obviously, a third of that or more went to tax, but you, you made a million bucks from that. By 2011, when you left for San Francisco, it sounds like you had not really made any significant money after that.

• 47:41Speaker 01

  No, no, I hadn't really invested it well. I had spent a lot, you know, I really needed to, you know, find a way to make money and take the pressure off. So I think that was part of it.

• 47:54Guy Raz?

  Yeah.

• 47:55Speaker 01

  You know, and I think it was an important moment. Moved to San Francisco, learn a lot from the Silicon Valley culture and meet lots of interesting people, which I did.

• 48:04Guy Raz?

  And you and Michael are, of course, staying in touch because you're friends and you're collaborators. And at a certain point, you buy this domain site, this is, I think, in 2011, called calm.com, calm, C A L M dot com. And we're going to get to what this, initially, what this idea was. But from what I understand, you'd been wanting to buy this domain for like, two years already. You'd been negotiating with the guy who owned the domain name to buy it from him.

• 48:37Speaker 01

  Yeah. Michael and I would always riff on business ideas. And I think I had shared my passion around meditation, relaxation. And we talked generally about this bigger idea, this simple idea. And so we had discovered that this domain name calm.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 amount relative to what we could afford. And so it wasn't the right time. But then, at some point, and I think it was the summer of 2011, he was like, yeah, I actually, I actually want to sell it. And thankfully, Michael, Michael had enough money to buy it.

• 49:21Guy Raz?

  I think $140,000 about he sold it for.

• 49:25Speaker 01

  About that, yeah. I'd earmarked that money for a deposit for a house. But so my parents were a little surprised.

• 49:33Guy Raz?

  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 bet.

• 49:39Speaker 01

  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.

• 49:54Speaker 02

  In so many ways. So yeah, we thought it was a bet worth making.

• 49:57Speaker 01

  Yeah, at the high level, the world needs more calm. And I felt like I was probably more representative of the average person who wanted to find a way to relax, really, and calm the mind for 10 or 20 minutes. They're not looking for some spiritual awakening. They're actually looking to manage stress. I think that was part of the appeal of building Calm. Like, could we build a product that we wish existed?

• 50:25Guy Raz?

  Right. Okay, so Alex, you're in San Francisco. Michael, you are still in London. And you've got this domain name now, calm.com. And I guess around 2012, you decide to build a website around this domain name, which is just, I guess initially it just had sounds, right? Like the ocean and birds and like a bubbling brook. You could just kind of like sit and chill out and listen to these sounds?

• 50:54Speaker 01

  Yeah. Yeah. So that was really the first thing we put up. And it was just something we could get out quickly. We knew that 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 going to be these full screen visuals.

• 51:15Guy Raz?

  Yeah.

• 51:16Speaker 01

  At the time, there weren't many websites you could go to and just suddenly would have a full screen video playing. So it looked quite dramatic. You had these beautiful scenes of nature with really high quality audio, but there was only 10 scenes or something.

• 51:29Guy Raz?

  Where were you getting that video from? Did you have it made for you?

• 51:33Speaker 01

  Yeah, the first ones were actually made. I hired someone on, you know, it was maybe Craigslist or something, videographer who went out and filmed some beach scenes in the Bay Area 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 served a Uh, need, albeit not millions of users, but there was definitely an audience for it.

• 51:56Guy Raz?

  When you had that website, do nothing for two minutes.com. At the end of it, if you got through it without moving your mouse, it would ask for your email address. And I guess you guys ended up collecting like tens of thousands of email addresses that way.

• 52:12Speaker 01

  Yeah, yeah, I think even maybe a hundred thousand emails. And so that hundred thousand emails, when we launched calm.com with the sort of nature scenes, those people turned out, you know, they really loved calm.com because it was a much better version of do nothing for two minutes.

• 52:27Guy Raz?

  They got an email.

• 52:28Speaker 01

  They got an email. And so that was sort of our initial audience.

• 52:32Guy Raz?

  Basically, it starts as this webpage, but this is already now 2012. The iPhone is out, the App Store is open. It's clear that you guys were going to 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 in 2012 or not yet?

• 52:57Speaker 01

  At, at some point in 2012, like, 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 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.

• 53:15Guy Raz?

  And it was free. There was no business model, right? Yet.

• 53:19Speaker 01

  There was no business, no. We were very serious about making it a, a company. We just started in a very, very simple way.

• 53:26Guy Raz?

  And when you say we, was it, I mean, are you talking about you and Michael? Michael's in the UK, you're in San Francisco. Did you have anybody else working on it with you?

• 53:33Speaker 01

  No, when I say we, yeah, Michael and I, so it, it's, um, even though Michael was still in the UK, you know, we would, we would talk. 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, you know, my, my first sort of job really was to try and raise some money, you know, to actually build up a mobile app, build a small team. And, uh, that was kind of the next step.

• 53:57Guy Raz?

  All right. So you had launched in May of 2012, but you now 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.

• 54:15Speaker 01

  Yeah, it was actually much harder than we had anticipated. So it actually ended up taking a good six months, well over a hundred meetings. I think in the end, we raised from about 12, 12 people and they were all individual angels. The biggest concern people had was how is this going to be a business? You know, you're going to build a business around calm. You're going to bring meditation. Like, are people going to pay for that? They just, most investors just thought it was an admirable mission and a terrible business idea. But nonetheless, we persisted and cobbled together just over $400,000.

• 54:59Speaker 01

  And that was enough to kind of get, get to the next phase.

• 55:03Guy Raz?

  So you've got some cash to start this up. And also that month, February of 2013, you debut a mobile app. Did you build the app yourself or did you hire, with the money that you raised, did you hire some people?

• 55:18Speaker 01

  Hired one iOS person and I did the design. And then we had a few contractors helping with audio, the meditation recordings. So it was, yeah, it was basically me and one engineer building the app.

• 55:31Guy Raz?

  And what could you get, what did you get on it?

• 55:33Speaker 01

  Yeah, so there was, I think there was maybe 12, 12 audio recordings in it, literally plus a bunch, maybe 12 scenes. So there was a course called the seven days of calm. And it was 10 minutes a day for seven days and it taught you the basics of meditation. We actually didn't use the word meditation. At that time, we thought we're going to 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 called it the seven days of calm. And there was like a couple of audio recordings for free and then you would pay $5 to unlock the full app. There was no subscription. In fact, at the time, Apple hadn't embraced subscriptions at all.

• 56:18Speaker 01

  But it was encouraging because 10% of people who downloaded.

• 56:21Speaker 02

  The Calm app were paying the $5 and that was right out of the gate. So that was a great signal that people would pay for this. It was small numbers and small money, but they were paying.

• 56:31Guy Raz?

  All right, so let's get back to you, Michael. You are still in the UK. Calm has debuted. You're kind of spinning out of running Moshi Monsters. And 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. The business was, you could see it slipping away. And you decide that you need, this is the summer of 2014, you need a break. And I guess you just got like a room in a hotel in the mountains of Austria. And you just brought some books and you just like got away from it all. But this was kind of an important turning point.

• 57:16Guy Raz?

  What, what happened there?

• 57:18Speaker 02

  I was just, yeah, really struggling with the business and burnout and lack of sleep. And I think sometimes as entrepreneurs, you've just got to step away from that coalface. You've just got to get perspective and realize you are not your business and get into nature and fresh air and just kind of calm your nervous system. So that was 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 as you mentioned, I was reading books and research papers and just so fascinated by what we were doing with Calm. And it really was the really bright light bulb moment going, what am I doing? I need to be, I need to be working on this full time with Alex.

• 58:00Speaker 02

  I've got to find a way to make this, this can change the world. I just realized that it was, 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 that 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 people.

• 58:30Guy Raz?

  Okay, so you, so you decide that you're going to move to San Francisco.

• 58:37Guy Raz?

  And you're gonna throw yourself into this full time.

• 58:40Speaker 02

  Yep, and I think we both realized that Silicon Valley was the place to build this business. You know, there was more investors who were open 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 very, very skeptical of meditation and mindfulness and talking about mental health. It was really not, not the hot, 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 seen, you know, firsthand how to build

• 59:24Speaker 02

  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, you know, the, the most

• 59:35Guy Raz?

  Yeah.

• 59:36Speaker 02

  extreme place to, to build a business and, and wanted to see if we could, uh, cut our teeth there.

• 59:42Guy Raz?

  So, so Alex, you are, um, you're kind of manning the, the store in San Francisco. And you launched the app, um, in 2014. You raised another 500, almost $600,000 in, in angel funding. So, you know, in 2014, the book 10% Happier came out, which I've read, Dan Harris's book. I know Dan. It was a very accessible book. It was, it was talking about all of these people who brought Eastern mindfulness ideas and, and, and to the West. And how he, Dan Harris, kind of went on this journey to learn about it. And I wonder if that book was kind of a turning point, just in mainstreaming meditation, in your view?

• 1:00:28Speaker 02

  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 was kind of exploding.

• 1:00:37Guy Raz?

  Yeah.

• 1:00:37Speaker 02

  So that had been this sort of.

• 1:00:39Speaker 01

  Growing wave, this growing swell of interest in meditation 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 huge wave. And I do also credit Andy Pudakum and Rich Pearson from Headspace. You know, they, they were, I think, maybe a year, year ahead of us in terms of getting an app out. And I think they were also part of that, that story.

• 1:01:10Guy Raz?

  But Headspace was, 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. Or are you worried 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?

• 1:01:28Speaker 02

  Well, a lot of investors pushed back and said, yeah, Headspace are the winners. This market is sewn up. And but we, we believed so strongly in what we were doing that 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 were meditating. It was pretty much anyone with a mind. So we felt there were going to be multiple winners, not a winner takes all market, but a winner takes most.

• 1:02:03Guy Raz?

  When we come back in just a moment, how Calm gets a major boost for people like Stephen Frye, Matthew McConaughey, and LeBron James. Stay with us. I'm Guy Raz and you're listening to How I Built This.

• 1:02:31Guy Raz?

  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.

• 1:02:47Speaker 02

  One of the key turning points was around this time 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, which was going to be a unique meditation every day.

• 1:03:05Speaker 01

  And crucially, one of the most important people in the early days was Tamara Levitt, who was the initial and early voice of Calm.

• 1:03:14Guy Raz?

  She's the one that you would hear, you'd hear Calm.

• 1:03:17Speaker 01

  Yes.

• 1:03:18Guy Raz?

  That voice, right? Like, Calm. And that voice is so, it's like Andy Putty comes voice. But she was somebody who contacted you guys, right? She was, she got in touch with you in 2014 to say, hey, you need a community manager, right? Like, well, tell me the story, because she would become a turning point for you.

• 1:03:38Speaker 02

  Yeah, she, she applied for our community manager role and Alex and I got on a, I think it was a Skype call with her and 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. And we felt her voice and her experience as a meditation teacher was going to be much more valuable than than joining on the community team. And Tamara 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 even though it was a huge amount of work to create all this unique content, it was a step change for the business.

• 1:04:23Guy Raz?

  I think you were doing about at least three or four million dollars by 2016.

• 1:04:28Speaker 01

  Something like that. Yeah, I think the revenue may have even been close to seven million for, for 2016. Millions of downloads now. We thought, now surely people must get it. We must be able 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 VC community was still not ready or did not see this as a VC scale business.

• 1:04:50Speaker 02

  Yeah, we went up and down Sand Hill Road and struck out. And it was really frustrating, wasn't it? Because we felt we had something special.

• 1:04:58Guy Raz?

  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. What was the pushback that you were getting? Because I mean, these guys are smart. You know, they're going to make mistakes, obviously, but. They're experienced and they have pretty good perspective.

• 1:05:17Speaker 02

  I think we had a fair bit of different feedback. I think a lot of people dismissed it as a 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 that, you know, it's a little more intangible and it's hard to believe that that could have become so valuable. But so we just kept our heads down, kept the costs very low.

• 1:05:50Speaker 01

  Yeah, we didn't over hire. We could use equity as a big part of compensation over cash.

• 1:05:59Speaker 01

  We had a one bedroom apartment rather than some fancy office. You know, well, even before that, we were in just a little co-working space with like a hundred other startups. So it's just that traditional arc of, you know, being very, very scrappy. And I think we thought, well, we might not ever

• 1:06:17Speaker 01

  be able to raise VC money. So we're just going to have to make this business super profitable.

• 1:06:22Guy Raz?

  I mean, I understand that you had to make it profitable, but I want to just dig into this for a moment. In order to grow, you needed money, right? You are now getting some revenue coming in. And it's probably certainly help very helpful. But you're still small. 2016, you've got fewer than 10 people. You're working a personally really long hours. I mean, were 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.

• 1:06:54Speaker 01

  Yeah, it was. I do remember 2016 being somewhat 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 amazing word of mouth. The market really wants it. We've had some good press. You know, we've got millions of users that have all come effectively, organically. We've tried paid user acquisition, but we haven't quite cracked it. And, you know, there may have been some sense that, well, this business is not, it's a nice, small business, but it's not going to, they're not going to be able to scale it.

• 1:07:30Guy Raz?

  Well, I think one of the things that happened that year and it might, may or may not have been a turning point, but you launched Sleep Stories and I mean, lots of people, including my, one of my children, they fall asleep to boring stories every night. And I will come into his bedroom at like 11 at night and turn the story off because it's like four hours long, you know, I was like hit stop on his, his iPhone. And, um, but this is something you guys started offering on the app in 2016. What did you notice about how the app was being used?

• 1:08:10Guy Raz?

  Like, or how did you come to this, this realization that this was something that was worth trying?

• 1:08:17Speaker 02

  Yeah, it was around 2015 where we started to, um, think about it. 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 the narrator would just tell boring, long stories.

• 1:08:34Guy Raz?

  Still there, still, still around?

• 1:08:36Speaker 02

  Still going.

• 1:08:36Guy Raz?

  Yeah.

• 1:08:37Speaker 02

  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 brilliant person we'd hired called Dunn, who, um, 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 11 o'clock at night. So they were using her voice to help them drift off.

• 1:08:59Guy Raz?

  You could see that data. You could see how people were using the app.

• 1:09:03Speaker 02

  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, what, 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 falling asleep. And so this was such an absolutely key turning point in the growth of the company.

• 1:09:45Guy Raz?

  All right, so now we're in, well into, we're now into 2017. 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 it's just growing organically? Or are you, are you spending money on, on, on customer acquisition?

• 1:10:06Speaker 01

  Now, now we are, yeah. So at the end of 2016, Michael mentioned Dun, Dun Wang, who came on board as our first product manager, but actually ended up doing so much more than just product management. She helped do our first successful user acquisition. And it was in, I think, January 2017, we had our first million dollar month. And it's because we had cracked the UA code.

• 1:10:31Guy Raz?

  How'd you do that?

• 1:10:32Speaker 01

  Well, the, the fun story is that we, um, we sort of reached back to the past and took the idea of do nothing for two minutes. And we made an advert, you know, out of it. And it was do nothing for 30 seconds. And it was a video advert, which was a pretty new format time, primarily on Facebook, where we 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 30 seconds. And it just looked very, very different to other ads for, for, for mobile apps. And the ads were so successful and so, so profitable for us that we were able to scale that channel up massively.

• 1:11:17Speaker 02

  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 really key moment for us because that meant we could put a dollar into our marketing and get, you know, 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 21 million to 80 million. It, it was, it was extraordinary.

• 1:11:43Guy Raz?

  Well, one of the things you guys also did was, I think you did it the year previously, was you raised the price, which meant that you had fewer people paying for it. Because it was a freemium, it was free too, there's a free version. But the paid version, you raised the price, which meant that you had fewer subscribers initially, but more money coming in because the price was higher.

• 1:12:02Speaker 01

  Yeah, yeah. So, you know, the very first subscription we had was $10 a year. And then, I think in 2015, we made it 40, then it was 50, and then 60. And each time, the conversion rate would be lower, but the net of it would be that we would make more money. You would have more money to spend on user acquisition, would have a higher lifetime value. And it worked partly because, you know, people were willing to pay more for their personal wellbeing, but also because the app got better and because we built trust in the brand. And so, yeah, the sort of equation for how do we grow this business finally clicked.

• 1:12:38Guy Raz?

  Basically, you figured out how to grow it without any outside, a whole lot of outside money, took you a while to get it. But one of the things I think that also happens is that a few celebrities start to just organically tweet about it, like John Mayer, Stephen Fry. Because eventually, celebrities, including Stephen Fry, would start to record, you know, stories and motivation, things like that, for the app. How did, was it seeing people like Stephen Fry tweet about it that led to that idea?

• 1:13:10Speaker 02

  No, we'd actually been trying to get celebrities to narrate sleep stories for quite a while before that. And we were knocking on the door of Hollywood and trying to reach out to every connection we could, but no one wanted to do it. Calm was still too much under the radar.

• 1:13:25Guy Raz?

  Unless you paid them big bucks.

• 1:13:27Speaker 02

  Well, even then, I think, well, we didn't have the big bucks to pay them.

• 1:13:31Guy Raz?

  Right.

• 1:13:31Speaker 02

  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 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 do it. And after a bit of negotiation, he agreed. And then the next big breakthrough that really took us... Forward was Mackie McConaughey.

• 1:13:56Guy Raz?

  Wow.

• 1:13:57Speaker 02

  The the story has been one of our most popular ever since.

• 1:14:01Guy Raz?

  How important were the celebrities in increasing your market share?

• 1:14:05Speaker 02

  I think it was it was really important. Not only did it lead to a lot of additional downloads, 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 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 millions of people. So it was crucial. I think we did a better job than a lot of the other apps in our space at connecting with the the celebrity talent. And yeah, it's been part of our secret sauce.

• 1:14:49Guy Raz?

  Yeah.

• 1:14:50Speaker 02

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

• 1:15:13Guy Raz?

  Do you want there to be investors in in the business?

• 1:15:16Speaker 02

  Exactly. So all the key talent we brought on board are on our cap table. So they really feel they're part of Calm. That's important. Secondly, the C is content. We want them to create something unique that 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's fans really connect with Calm. So, um, yeah, it has been a a critical part of our success.

• 1:15:58Guy Raz?

  So you're kind of at this point off to the races. I mean, you're 2018, that that Series A values of business at $250 million. You guys raised $27 million in that round.

• 1:16:09Speaker 02

  Yes, that was a big one. Big jump from our one and a half million that we'd done for the for the seed round. And during that negotiation, which was quite tense, we we won app of the year. So that definitely helped our negotiating position.

• 1:16:24Guy Raz?

  I bet. Apple called you the app of the year. So that certainly helps. Yeah. Because, 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 you win app of the year, changes the equation a little bit.

• 1:16:43Speaker 02

  Yes.

• 1:16:44Guy Raz?

  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.

• 1:16:51Speaker 01

  I think that's the secret to most successes. It actually takes a lot longer, and it's more about persistence. And I think, again, time, time is somewhat of an advantage. It means that, you know, you've put in so much work, it's hard to replicate potentially. You know, I think if we had raised tons of money very, very early, we may have not had the scrappiness to, say, do sleep stories. You know, we may have just kind of been drunk on, you know, expensive, unprofitable user acquisition. So I think we kind of got the foundations. They were stronger, basically, I think.

• 1:17:26Guy Raz?

  Hmm. And you guys have also done some partnerships and acquisitions. I mean, you acquired a company called Ripple Health Group. Tell me about what that means. I mean, does Calm want to start like tapping into the healthcare system somehow?

• 1:17:44Speaker 02

  Yeah, we want to bring Calm to as many people as possible. We launched a B to B division where companies pay for Calm for their employees. And that's been a hugely successful part of the business, particularly the start of COVID. And the next phase is can we work in the healthcare system in the US? Could Calm be provided to? Ensured 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 obesity,

• 1:18:24Speaker 02

  obesity and diabetes and others. So last, this is why we acquired Ripple and and the team that have such deep healthcare experience. And last year, we signed a big deal with United Healthcare to bring Calm to to many of their populations. So this is a a big part of Calm's growth over the next few years.

• 1:18:46Guy Raz?

  Which is B to B?

• 1:18:47Speaker 02

  Yes. Yeah.

• 1:18:49Guy Raz?

  Yeah. So, all right. So 2022, I mean, you guys really, this, the business is scaling and scaling and scaling. I think by, you know, 2022, you've got, I don't know how many millions of users. I mean, probably about four million paid users by that point. That year, you guys stepped down as co-CEOs and become, I guess, co-executive chairman?

• 1:19:14Speaker 02

  Yes. Yeah. So the the company we acquired Ripple, the CEO David Ko, because of our push into healthcare and his deep experience in that world, we decided it would make sense to step into a new role. And, you know, that's tough for entrepreneurs. We've been building this business for for best part of a decade. So it was, it was not a decision we took lightly. But the other challenge was that we had moved back to Europe and London, and most of our employees, hundreds of the team, were based in the US. So having a CEO in the same time zone,

• 1:19:54Speaker 02

  in the same office as our team made a lot more sense. But we, you know, we're definitely not traditional chairman. 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 lives. So we created Calm Studios in London, where we're dreaming up future ideas for Calm and 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, early phase.

• 1:20:29Guy Raz?

  You know, I know this has been brought up before, but I, like many adults and children, but I think a lot of adults who are sort of Gen X and not just Gen X, but who didn't grow up with smartphones have found themselves at a certain point in their lives 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. Honestly, one of the hardest things was quit smoking. It was so hard. And I found myself, you know, later in life, thinking, well, is my phone just kind of

• 1:21:12Guy Raz?

  replace that, right? And yet here we are talking about something that's designed to make us more mindful, more, you know, 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 super convenient tool, but it's a, I don't know, it's a bit of, it's a contradiction in a 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.

• 1:21:45Speaker 02

  It's a really good, important question. 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 thoughtful, mindful, productive way, rather than completely dispensing of it or using it 18 hours a day.

• 1:22:09Speaker 01

  Yeah, I think the other part of it is Calm is primarily the content we offer isn't something you consume visually, you know, it's actually mostly audio. And so interacting with Calm is like, you put on the thing you want and then you're not looking at the phone while you're listening to the content. I mean, we do have more visual content now. We are trying to, you know, 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 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. It is a huge advantage.

• 1:22:52Speaker 01

  So, yeah, it it is been a contradiction that sort of people have raised over the years, but I think, you know, I think the world of smartphones needs apps like Calm.

• 1:23:07Guy Raz?

  When you guys look back and and see where, you know, this has landed and, you know, you both had successes early in your career, but 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, how much of it do you attribute to to luck and timing? And how much do you think has to do with the just the grind that you put into it?

• 1:23:39Speaker 02

  Yeah, that's a that's a tricky one. I think every business needs good timing. 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 celebrities that fueled the sleep stories. So lots of luck along the way, but also a lot of very hard work.

• 1:24:06Speaker 01

  Yeah. 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 and the grit to persevere in the absence of evidence that it's working or in times of, you know, setback and stress. And Calm is by far the most important meaningful thing I've worked on. And aside from any of the sort of financial elements and success of the business, just having had a positive impact on millions of lives is is is reward unto itself. And also working with, you know, my best buddy, it's been it's been a lot of fun. So.

• 1:24:48Guy Raz?

  That's Alex Tu and Michael Acton Smith, the co-founders of Comm. Alex, now that we are, we know each other a little bit more. We spent a lot of time together. You can give us a little beatbox. Come on, give me a beat.

• 1:25:02Speaker 01

  All right.

• 1:25:02Guy Raz?

  All right, here we go. Let's go.

• 1:25:14Guy Raz?

  Wow, that's no joke. That is competitive level beatboxing.

• 1:25:19Speaker 01

  Well, I gotta say, I haven't done it for years and it's, I'm very rusty.

• 1:25:22Guy Raz?

  You just shook that rust off.

• 1:25:26Guy Raz?

  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 guyraz.com or on Substack. This episode was researched and produced by Catherine Cypher with music composed by Ramtin Arablouei. It was edited by Neva Grant. Our engineers were Patrick Murray and Robert Rodriguez. Our production staff also includes Alex Chung, Elaine Coats, Casey Herman, J.C. Howard, John Isabella, Iman Maani, Chris Messini, Sam Paulson, and Kerry Thompson. I'm Guy Raz, and you've been listening to How I Built This.