2 friends spent years getting turned down for their ‘terrible’ startup idea—now it’s worth $2 billion: How they built their ‘extraordinary success’
Published Thu, Jan 16 202511:25 AM ESTUpdated Thu, Jan 16 202511:35 AM EST
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How we built a $2 billion mindfulness company
After years at the helm of several businesses, Michael Acton Smith was burnt out. But even as his mental health suffered, he believed mindfulness and meditation were just “woo woo” buzz words.
It wasn’t until his close friend, Alex Tew, recommended meditation that Acton Smith actually gave it a chance. He learned then how truly impactful it could be.
“I read a lot of books and looked at research papers, and I realized [mindfulness] is actually neuroscience. It’s a way of rewiring the human brain,” Acton Smith tells CNBC Make It.
The pair came to believe that mindfulness was a mix of “techniques that are actually incredibly valuable, simple at their essence and can make a big impact,” Tew says. They wanted to help others see its significance and embrace it, too, and realized there weren’t “great vehicles for teaching it to a mainstream audience.”
Back then, mobile devices were growing in popularity, and the two thought it was the perfect time to distribute techniques like deep breathing and visualization, straight to people’s phones. Together, Acton Smith and Tew founded Calm, an app that offers mental health resources like guided meditations, sleep stories and mindful movement exercises.
Today, the app has a valuation of $2 billion.
Subscriptions to Calm range in price from $14.99 a month to $69.99 a year or a one-time payment of $399.99 that grants access to the app’s premium offerings forever. There is also a free version available, with limited content.
Acton Smith and Tew, who are also Co-Executive Chairmen of Calm, both had several successful business ventures before starting the app, but it wasn’t easy to make mindfulness mainstream. Investors were not at all interested in a product centered around mental health, and this made the Calm app a hard sell.
“When you’re building a business, you’re going to fail more than you’ll succeed,” Acton Smith says.
Here’s how the friends and business partners turned Calm into the go-to meditation app that’s been downloaded more than 150 million times.
‘The Nike of the mind’
Acton Smith and Tew, both living in Soho, London at the time, came up with the concept for Calm during one of their usual hangouts. The two would typically play video games and brainstorm business ideas.
“I was quite into meditation personally, and had been sort of dreaming of something like Calm for a little while,” Tew says.
“The kind of lightning bolt moment was: could we take this and make it simpler, more accessible, more relatable to people?” Acton Smith says. “Could we use the smartphone as a form of distribution and change the world? Could we build the Nike of the mind?”
In 2020, Calm launched a meditation series with LeBron James.
Courtesy of Jacob Harrell for CNBC Make It.
Similar to Nike’s approach to fitness, Acton Smith and Tew wanted to develop a brand centered on “mental fitness.”
The pair thought Calm would be better received in California, so they moved to Silicon Valley to market the company — but investors in the tech hub were skeptical.
“If you think back like a decade, it’s hard to imagine now, but no one really was talking about mental health back then. Meditation and mindfulness were these very strange concepts,” Acton Smith says.
“People would back away from us at parties. Or they’d assume we were building a nonprofit if we talked about it.”
If you think back like a decade, it’s hard to imagine now, but no one really was talking about mental health.
Michael Acton Smith
Co-founder and Co-Executive Chairman of Calm
Initially, they struggled to receive funding because “there didn’t seem, on the surface, to be a business in a mobile application that would teach meditation,” Tew says. Some thought it was a “terrible idea.”
It took nearly six months and meeting with over 100 people before Calm secured its first angel investors. Even then, “we didn’t raise a ton of money,” Tew says. They raised $1.5 million between 2012 and 2014.
“We only raised significant capital much later in the journey when we’d really scaled up quite nicely.”
It was also difficult to get people to pay for a subscription to Calm when there were other free relaxation apps on the market. To differentiate their brand from rivals like Headspace, they focused on making Calm’s approach to mindfulness more playful and less serious.
The founders of Calm thought the app would be better received in California, so they moved the operation to Silicon Valley.
Courtesy of Calm.
The founders focused on promoting the app in unique ways. “We kept costs as tight as we could, and we just grew by word of mouth,” Acton Smith says. “I think we did get to about eight million downloads” before spending any money on marketing.
To draw people in, they designed Calm’s website in a way that would induce relaxation, maximized the “bit of press” they were able to get and aimed to make the app enjoyable, with the hope that users who had a good experience would tell their friends.
‘To build successful companies, you have to do things differently’
A new feature called “Daily Calm” is really what gave the app a boost. “We worked with our brilliant meditation teacher, Tamara Levitt, and she created a unique 10-minute meditation every day with a new quote at the end,” Acton Smith says. “And people really looked forward to it.”
Levitt’s voice and storytelling really resonated with users of the app. A fast follow-up to the popular Daily Calm was “Sleep Stories” — bedtime stories for adults with playfulness, great sound design, and celebrity storytellers.
“I think to build successful companies, you have to go to the edges, you have to do things differently and think differently,” Acton Smith says.
“So, if you are always trying to conform and fit in, you’re rarely going to create that breakout product or company and have that extraordinary success.”
In 2018, Matthew McConaughey joined Calm as an investor and narrator of one of their Sleep Stories. After that successful partnership, other celebrity endorsements followed.
That same year, LeBron James shared on a popular podcast that he used the Calm app’s “rain on leaves” soundscape to fall asleep at night. Pop star Harry Styles believed in the app enough to invest in it as well. Both voiced Sleep Stories of their own, which helped broaden Calm’s reach to new demographics.
Pop star Harry Styles believed in the app enough to invest in it. Styles voiced a Sleep Story of his own for Calm.
Courtesy of Jacob Harrell for CNBC Make It.
“Harry Styles’ Sleep Story broke the app,” Acton Smith says. The company raised a series A of $27 million in 2018.
Calm’s success and popularity has continued to grow. In 2019, to help address workplace wellness, Calm started offering the premium version of the app as a perk for employees at other organizations.
“The mission of Calm is really very simple. It’s to make the world happier and healthier,” Tew says. “We’ve started by teaching meditation and then we’ve helped people with sleep and now the company is evolving into healthcare, and we see ourselves as a mental healthcare company today.”
Thirteen years later, Calm’s mission “remains exactly the same,” Acton Smith says.
“We believe Calm is a superpower. It improves our sleep. It improves our relationships. It makes us better leaders and better parents. And we’re very passionate about the life-changing power of Calm.”
