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Calm Is the First $1B Meditation App
By: Inc.
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There's something ironic about Calm's path to becoming a billion-dollar mindfulness business.


For starters, there's the name "Calm," which very much does not reflect the arc of its existence. Three years ago, the meditation and relaxation app publisher was all but scrounging for quarters in the couch. Fast-forward to 2018 and Calm is raising $25 million on a $250 million valuation. Skip ahead again, a mere nine months this time, and they've just joined the three-comma club with $88 million from TPG Growth and other investors


It's the kind of shot-out-of-a-cannon startup story that left Calm's co-founder, Michael Acton Smith, feeling chronically "dopamine frazzled" after the launch of his previous company, which made a hit kids' video game called Moshi Monsters. Suffering from headaches, insomnia and "the whirring mind of an entrepreneur," he sought out meditation as a way to find some mental equilibrium.


It's a good thing he did. His experience with Calm has been less a ride on a rocket gliding into the stratosphere that it is one white-knuckled through on a rickety rollercoaster. 


In 2015, Acton Smith and his partner, Alex Tew, nearly ran out of money, even though they only had a few employees to support. They survived by stringing together a few licensing deals while hoping to secure a longer term cushion by raising a round of Series A venture capital. But when they pitched Calm to investors in 2016, they "struck out completely," Acton Smith says. 


Desperation bred invention. "We had no choice but to make the business profitable," he says. With their backs against the wall, Acton Smith and Tew launched two products that have driven most of Calm's heady growth since then -- which took them from $7 million in revenues in 2016 to $23 million in 2017 to its current run rate of $150 million -- which landed the company at No. 19 on the Inc. 5000

 

The first was the Daily Calm, a guided meditation that changes every day and is only available on the day of its release. The second was Sleep Stories, bedtime tales for grownups, narrated in a soporific manner designed to lull the listener into dozing off. 


Sleep Stories, in particular, helped differentiate Calm from its primary competitor, Headspace. Long a bigger name than Calm, Headspace has, as of yesterday's billion-dollar news for Calm, fallen behind. It has raised nearly $80 million, to a valuation of $320 million, but its last new funding came in 2017, right after a spate of layoffs


"People laughed at us when we said we were going to create bedtime stories for adults," says Acton Smith. But if the idea of using Matthew McConaghey's philosophical ramblings as a sleep aid is inherently a little funny, there's nothing laughable about the strategy behind it. Mindfulness meditation, Acton Smith knew, is the ultimate open-source technology. Calm needed something it could own, and that something was original content. "We're taking a leaf out of the Netflix strategy book," he says.



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