How Keeping Calm Became A Billion Dollar Business

Startups, particularly in retail, often run into difficulty when in search of an innovative entrance point to the marketplace they come up with a solution to a problem that no one actually has. Sometimes, with very good marketing, a business can sell the consumer on the problem and then the solution — but usually such endeavors just fail to ignite, according to Lightspeed Ventures Partner Nicole Quinn.

It is what drove Lightspeed to invest in a then six-year-old meditation app called Calm — one of many entrants into the world of startups hoping to help consumers capture a piece of digitally-driven mindfulness. Headspace is the best known digital meditation app, and probably the best known other than Calm as it comes backed by actor Jared Leto. But there are also apps like like Enso, Happier, YogaGlow and Insight Time that have large followings and aim to help consumers bring meditative practices into their lives.

But Calm stands out from the rest of the market in a few notable ways. It also has a celebrity-backed pedigree — Ashton Kutcher was an early investor and among the things that have pushed the app into the spotlight are its many celebrity-assisted sleep routines. More on that in a second.

Calm also stands out in terms of its business styling — which rather uniquely in the field has avoided what Co- Founder Michael Acton Smith calls the New Age “woo woo” that usually comes with the territory but felt rather foreign to him as a English transplant to Southern California.

“[We’ve] done well at understanding the brand and taking the crunchiness and health and wellness from California and not leaning into it; instead making it more western, more mainstream — and in a way, more British and cynical,” Acton Smith said in an interview with CNBC.

Outside of the aesthetic differences, however, Calm also has a different monetization model than other players in the space — favoring a subscription model over an ad-supported model that tends to be more common. The roughly $60 a year subscription includes access to a suite of meditation and mindfulness connected services including guided daily 10-minute meditations, half-hour bedtime stories to aid sleep and access to wellness master classes.

More than 30 million people have downloaded the app, and the firm has been profitable for over a year.

Those bedtime stories, as mentioned earlier, are unique in the types of voices listeners are offered the opportunity to drift off to. Matthew McConaughey talking about the nature of the cosmos is one option, and John McEnroe explaining the rules of tennis is another. Because nothing says time to sleep like the dulcet tones of John McEnroe.

Launched about a year ago, Sleep Stories have turned into killer content offering for Calm — and has skyrocketed membership. Calm’s subscription revenue quadrupled revenue in 2018, and time in app also skyrocketed (though Calm offers no specific figures on by how much). Calm has also since achieved unicorn status as of its last funding round earlier this year — and, capitalizing on its recent burst of funds and swell of consumer interest, the firm has announced that it plans to roll out more celebrity content tie-ins later this summer.

The expansion into sleep services, Acton Smith noted, was a natural expansion for the firm, given inherent connection between mindfulness and being rested. It also offered more customers a more natural entry point into the app, he said. Not every customer necessarily sees the benefits of adding meditation to their lives, but almost no one needs the benefits of a good night’s sleep sold to them.

The goal for Calm going forward, however, is to take the growing success of its core product and build that out into a full-scale wellness enterprise, online and offline.

“I can see retail outlets, to clothing, to publishing, to hotels. Ultimately, we’d like to buy an island and have a Calm island run as a profitable resort,” he said.

Say what you will about a development plan that involves a private island, no one can’t accuse Calm’s leadership team of thinking too small.

And given Calm is the first business of its kind to hit a valuation north of $1 billion, it seems hard to argue that thinking big has served it poorly to this point.