Calm: Alex Tew and Michael Acton Smith

Summary

How I Built This with Guy Raz – Episode Summary: Calm: Alex Tew and Michael Acton Smith

Release Date: May 26, 2025

In this compelling episode of How I Built This, host Guy Raz delves into the entrepreneurial journey of Alex Tew and Michael Acton Smith, the co-founders behind the renowned meditation app Calm. Their story is one of innovation, resilience, and a steadfast commitment to improving mental well-being through technology.

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1. Early Entrepreneurial Ventures

Hotbox to Firebox: Laying the Foundation

Before embarking on the mission to create Calm, Alex and Michael were no strangers to entrepreneurship. They initially launched an online store named Hotbox in the late 1990s, inspired by quirky gadgets and unique products. Facing significant challenges such as limited internet accessibility and lack of e-commerce infrastructure, they persevered by manually processing orders and gradually scaling their operations.

• Michael Acton Smith recalls:
  "[07:30]... selling one unit at a time was taxing, but it was all about testing what resonated with customers."

Their persistence paid off when they rebranded Hotbox to Firebox to avoid negative connotations and successfully secured a half a million dollars in investment, allowing them to expand their team and operations.

• Alex Tew shares:
  "[12:57]... changing the name to Firebox was crucial to avoid awkward situations and set a positive brand image."

2. Struggles and Pivots in Early Ventures

From Perplex City to Moshi Monsters: Navigating Challenges

Michael ventured into the gaming industry with Mind Candy, creating the innovative game Perplex City, which involved burying a $200,000 treasure and releasing clues across various media. Despite critical acclaim, the game's complexity limited its commercial success.

Meanwhile, Alex explored his passion for meditation through projects like Beatboxing.co.uk and the viral site Do Nothing for Two Minutes, which challenged users to remain inactive for two minutes, garnering over two million visitors rapidly.

• Alex Tew reflects:
  "[09:14]... building Perplex City taught me valuable lessons despite its commercial shortcomings."

Their paths converged in 2014 when Michael, grappling with burnout from Moshi Monsters—a wildly successful but ultimately unsustainable children's game—decided to explore new horizons, leading to the inception of Calm.

3. Birth of Calm: Combining Technology and Mindfulness

Identifying the Need for Accessible Meditation

Drawing from their diverse experiences, Alex and Michael recognized the growing need for accessible meditation tools. Influenced by the increasing scientific research on mindfulness and personal struggles with stress, they envisioned Calm as a platform to make meditation approachable for the masses.

• Alex Tew explains:
  "[41:15]... meditation was too esoteric and unapproachable for the average person—we wanted to change that."

Securing the premium domain calm.com was a pivotal moment. Despite the high acquisition cost of $140,000, they believed in the brand's potential to revolutionize mental wellness.

• Michael Acton Smith notes:
  "[46:55]... investing in calm.com was a huge risk, but we believed it was worth it."

4. Overcoming Funding Hurdles and Building the App

From Concept to Reality

Launching Calm in 2012, the duo faced significant challenges in securing funding. Many investors were skeptical about monetizing a meditation app, viewing it more as a mission-driven project than a scalable business.

• Tamara Levitt, early community manager, shares:
  "[52:37]... raising funds was tougher than anticipated, with over 100 meetings and just $400,000 raised."

Despite these hurdles, they persisted, launching the initial app with limited features. User feedback and the discovery of a demand for sleep-focused content led to innovative features like Sleep Stories, which became a cornerstone of Calm's offerings.

• Alex Tew describes:
  "[67:38]... observing user behavior inspired us to create sleep stories tailored to help people drift off."

5. Strategic Growth and Market Penetration

Leveraging Unique Content and Celebrity Endorsements

Calm's exponential growth can be attributed to several strategic decisions:

• Content Diversification: Introducing daily unique meditations and sleep stories kept users engaged and returning daily.

• Effective Marketing: Innovative advertising campaigns, such as the "Do Nothing for 30 Seconds" video ad, achieved high user acquisition rates by standing out in crowded social media feeds.

• Celebrity Collaborations: Partnerships with notable figures like Stephen Fry, Matthew McConaughey, and LeBron James not only boosted downloads but also lent credibility and expanded Calm's reach to diverse audiences.

• Tamara Levitt emphasizes:
  "[73:09]... collaborating with celebrities created authentic connections and significantly increased our market share."

By 2016, Calm was generating upwards of $7 million in revenue, validating their business model despite initial investor doubts.

6. Scaling and Expanding Impact

From Subscription Models to B2B Partnerships

As Calm continued to grow, the founders focused on optimizing their revenue streams and expanding their impact:

• Subscription Enhancements: Gradually increasing subscription prices while simultaneously enhancing app features led to higher lifetime value from users.

• B2B Expansion: Partnering with corporations to provide Calm as a wellness tool for employees opened new revenue channels and underscored the app's role in workplace mental health.

• Healthcare Integration: Acquiring Ripple Health Group facilitated Calm's integration into healthcare systems, allowing collaborations with insurers like United Healthcare to offer Calm to insured patients for improved mental and physical health outcomes.

• Tamara Levitt reflects:
  "[77:53]... expanding into B2B and healthcare was instrumental in Calm's sustained growth and societal impact."

7. Leadership Transition and Future Vision

Stepping Back to Innovate Further

After a decade of relentless growth, Alex and Michael transitioned from co-CEOs to executive chairpersons, allowing specialized leadership to steer day-to-day operations. This move enabled them to focus on Calm Studios in London, where they continue to innovate and explore future possibilities for mental health and mindfulness.

• Alex Tew shares:
  "[82:43]... persistence and belief in our mission were key, combined with luck and timely opportunities."

8. Reflections and Lessons Learned

The Intersection of Timing, Hard Work, and Purpose

Alex and Michael attribute Calm's success to a harmonious blend of timing, hard work, and an unwavering commitment to their mission. They emphasize the importance of adaptability, recognizing user needs, and the courage to pivot when necessary.

• Tamara Levitt concludes:
  "[83:10]... while luck played a role, our dedication and strategic decisions were paramount in building a company that positively impacts millions."

Their journey underscores that enduring success often stems from resilience, innovative thinking, and a deep-seated passion for solving real-world problems.

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Notable Quotes:

• "Meditation was too esoteric and unapproachable for the average person—we wanted to change that."
  Alex Tew [41:15]

• "Changing the name to Firebox was crucial to avoid awkward situations and set a positive brand image."
  Tamara Levitt [12:57]

• "Collaborating with celebrities created authentic connections and significantly increased our market share."
  Tamara Levitt [73:09]

• "Persistence and belief in our mission were key, combined with luck and timely opportunities."
  Alex Tew [82:43]

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This episode offers invaluable insights into the intricacies of building a successful tech-driven wellness company. Alex and Michael's story is a testament to the power of innovation, strategic pivots, and a clear vision in navigating the entrepreneurial landscape.

Transcript

[Guy Raz]

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[Michael Acton Smith]

And of course I'm talking about Amazon Prime.

[Guy Raz]

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[Michael Acton Smith]

In hours or just a couple of.

[Guy Raz]

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[Michael Acton Smith]

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[Guy Raz]

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[Michael Acton Smith]

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[Guy Raz]

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[Michael Acton Smith]

You launched a website which you called do nothing for two minutes. What was this thing?

[Alex Tew]

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.

[Michael Acton Smith]

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.

[Alex Tew]

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.

[Michael Acton Smith]

Wow.

[Alex Tew]

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

[Michael Acton Smith]

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

[Guy Raz]

Of that driven by meditation apps.

[Michael Acton Smith]

And a few years ago, we told the story of one of those apps, Headspace.

[Guy Raz]

Haven't heard it.

[Michael Acton Smith]

It's worth looking up because there are obvious parallels with today's story, the story of Headspace's biggest competitor, Comm. 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. And just like the Headspace team, Com's founders, Michael Acton Smith and Alex Tew, 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.

[Guy Raz]

But what makes this story even more.

[Michael Acton Smith]

Interesting is what Michael and Alex were doing. Before Calm, 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 a million dollars. 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.

[Tamara Levitt]

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 Art 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 yeah, we settled on E commerce as the starting point, which is kind.

[Michael Acton Smith]

Of amazing because even doing it in the US and again, no shade to the uk, but like the UK was a, was, was behind the us, Right. 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 talking, how you sell to the Internet? It's a, it's, 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, I might still be around. There was a shop in the UK called the Gadget Shop in the us. I guess it would be similar, like the Sharper Image. Right.

[Tamara Levitt]

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. Problems. Because Shopify was not around, Stripe was not around. Tom was obviously very, very good at engineering and was able to solve a lot of these early challenges, but it wasn't easy.

[Michael Acton Smith]

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

[Tamara Levitt]

Yes.

[Michael Acton Smith]

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.

[Tamara Levitt]

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 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, so we weren't too worried about scaling.

[Michael Acton Smith]

I mean, you have this website and you called it Hotbox. 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 it from a catalog. Like, what were you selling?

[Tamara Levitt]

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 just buy it from some other location we could 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.

[Michael Acton Smith]

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?

[Tamara Levitt]

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. 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.

[Michael Acton Smith]

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

[Tamara Levitt]

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

[Michael Acton Smith]

Lot of faxes.

[Tamara Levitt]

Yes. We eventually cobbled it all together. We tested the market by going to a shop that sold loads of. 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, 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, the start where we thought, wow, storytelling is. This wasn't just a chess set. We were telling these editors we were two students building an Internet company. And I think it really resonated.

[Michael Acton Smith]

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.

[Tamara Levitt]

Yes. Have you ever been to hotbox.com?

[Michael Acton Smith]

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

[Tamara Levitt]

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.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 mum, 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 cause some very awkward moments.

[Michael Acton Smith]

So you had to change the name?

[Tamara Levitt]

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

[Michael Acton Smith]

Firebox.com Yep. 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.

[Tamara Levitt]

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. We literally decided to move to London almost the next day. Threw all our things in a van.

[Michael Acton Smith]

And let's get there before Tuesday.

[Tamara Levitt]

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

[Michael Acton Smith]

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

[Tamara Levitt]

It did, yeah. We. 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.

[Michael Acton Smith]

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 also grew up in England.

[Alex Tew]

Yeah.

[Michael Acton Smith]

You have a very unusual interest. As a. I shouldn't say unusual, just I've Never, in these 700 interviews I've done on this show. Show, I've never had somebody who was a. Like a semi professional beatboxer.

[Alex Tew]

Yeah, beatboxing. Beatboxing is 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.

[Michael Acton Smith]

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

[Tamara Levitt]

Come on, Alex.

[Alex Tew]

Do you know what? When we were setting up, my instinct is to just lay it out.

[Tamara Levitt]

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 this be a first?

[Michael Acton Smith]

That's me.

[Alex Tew]

Not bad.

[Michael Acton Smith]

I wouldn't. Won't be a competitive beatboxer.

[Alex Tew]

No, not bad.

[Michael Acton Smith]

I'm not gonna make you do up. So. So. 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.

[Alex Tew]

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

[Michael Acton Smith]

Okay.

[Alex Tew]

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 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.

[Michael Acton Smith]

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 decided not to go to university right away, but to organize the World Beatbox Convention in London.

[Alex Tew]

Yeah.

[Michael Acton Smith]

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

[Alex Tew]

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. It wasn't enough for me to move out of home, living with my parents, and decided, okay, I should probably take the traditional path that everyone is encouraging me to take. I should go to university, get a job, maybe leave the beatboxing behind.

[Michael Acton Smith]

So you get to university in Nottingham and one of the things that you did while you were there was to set up a webpage. 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 was going to get some attention. But what was the idea for Million Dollar homepage?

[Alex Tew]

Yeah, the idea was very simple. It was to try and make a million dollars 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, okay, that's quite funny. It's quirky enough that it might just get a bit of attention to.

[Michael Acton Smith]

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 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 start to get attention. I mean, again, this is, I think people should remember this is like early Internet days when websites would just get attention. Like just a weird website would just get news coverage, right?

[Alex Tew]

Yeah, but people were getting something 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.

[Michael Acton Smith]

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 it's like, oh, here's this poor college student trying to raise money, but he's come up with this cool ide.

[Alex Tew]

Yeah. 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.

[Michael Acton Smith]

Yeah.

[Alex Tew]

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 made me money.

[Michael Acton Smith]

You earned a million dollars within four months.

[Alex Tew]

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.

[Michael Acton Smith]

Yeah.

[Guy Raz]

All right.

[Michael Acton Smith]

This prompts you understandably, to drop 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 fair to say that you thought, I need to just focus on this world?

[Alex Tew]

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

[Michael Acton Smith]

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

[Tamara Levitt]

Yeah, 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 our fun multiplayer games. And so like the name Mind Candy, that was the starting point. And we created a game called Perplex City inspired by a movie. I'd seen the game by David Fincher.

[Michael Acton Smith]

Oh, with Michael Douglas.

[Tamara Levitt]

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 Perplex City 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.

[Michael Acton Smith]

Real cash. You buried it in a real place.

[Tamara Levitt]

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.

[Michael Acton Smith]

Wow. Where was it buried?

[Tamara Levitt]

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

[Michael Acton Smith]

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

[Tamara Levitt]

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 Perplex City 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 commercially disastrous things I've worked on. So I learned some lessons from that adventure.

[Michael Acton Smith]

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

[Tamara Levitt]

Well, as I say, 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 publish, but the commercial piece of it was not there.

[Michael Acton Smith]

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 in the Internet. And Michael, you'd been there building mind candy. And you guys just met at like a random event or a party or what. How did you meet?

[Tamara Levitt]

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 pinging 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.

[Alex Tew]

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 millennial homepage started working. So I was a fan of Michael's, and then we just sort of hit it off from that moment, definitely.

[Tamara Levitt]

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. Do you want to move in?

[Alex Tew]

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

[Tamara Levitt]

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.

[Michael Acton Smith]

So, all right, so you guys are in this house and meantime, Alex, you start a business called pixelato, 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. No, it wasn't taking off in the same way.

[Alex Tew]

No business is so much about storytelling. And the millions of dollar homepage had had a great story with pixelotto. 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 part of learning, you know, what works, what's worth working on. And I think the reasons for doing Pixel Auto weren't. They weren't the right reasons. I was just trying to create Another version of the Millions of homepage, which is not so exciting.

[Michael Acton Smith]

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 have raised 10, so you're. I mean, and you're not bringing in any significant revenue. So tell me about that time. I mean, that must have been quite stressful for you because that means, like, this thing is probably gonna die.

[Tamara Levitt]

Yeah, it was horrible. Really, really difficult and stressful. I would wake up every Single night at 4am 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 Perplex City, there was this legend that we had created called Puzzle Monsters. And the world was all about puzzles. And if kids didn't do their homework, 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. Thought maybe we could create a website for kids. And I'd loved the pet rock story. And then Tamagotchi came along and Neopets.

[Michael Acton Smith]

Oh, Tamagotchi. Were those, like, keychains? Right. It was like a pet you take care of.

[Tamara Levitt]

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 little monster for kids to look after and feed and dress up and go exploring this world?

[Michael Acton Smith]

Yeah.

[Tamara Levitt]

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 gave it a go. So with a little bit of cash left, we started trying to build this.

[Michael Acton Smith]

This kids entertainment company called Moshi or Moshi Monsters. Was it sort of inspired? Like that name sounds a little Japanese. Was it inspired by that kind of Japanese aesthetic.

[Tamara Levitt]

Yeah, we explored lots of different names. We just quite liked the alliteration of Moshi Monsters. 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 start from a fresh sheet of paper.

[Michael Acton Smith]

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.

[Tamara Levitt]

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 world. They're told, you know, what to eat and when to go to school. And so to have their own space, their own 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 and iterating, we got product market fit and it just took off like a rocket.

[Alex Tew]

It.

[Michael Acton Smith]

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

[Tamara Levitt]

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 was going to make money. So we just grew the audience and kept improving the product and then we added a subscription.

[Michael Acton Smith]

$6 a month, roughly.

[Tamara Levitt]

I think 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.

[Michael Acton Smith]

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 $80 million 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.

[Tamara Levitt]

Yeah. If you create something incredible for kids that they love, there are few things that spread faster in the playground. You know, think of all the big hits from Pokemon to Cabbage Patch Dolls, Paw Patrol, you name it. Yeah, exactly. All these worlds. And Moshi was at the right moment in time. And one of the. Really, one of the key turning points in the growth of the business was when we decided to do physical products.

[Michael Acton Smith]

When you say physical products, Toys.

[Tamara Levitt]

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 machling characters you could collect in the world. And then, then a music album that went to number four in the charts. And a movie with Universal.

[Michael Acton Smith]

It was just a movie. Moshi Monsters, the movie.

[Tamara Levitt]

Exactly. Yeah. And 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.

[Michael Acton Smith]

I read somewhere, and it makes a lot of sense to me because I've had. 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. This is just the start. Look how fast we're growing. And I think those conversations were happening at Mind Candy around Moshi Monsters. Right?

[Tamara Levitt]

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.

[Michael Acton Smith]

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

[Tamara Levitt]

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 universe. And to be honest, I was just having. Having too much fun. When you're an entrepreneur, you do need to think of all the stakeholders and investors and employees. Not selling was probably a mistake in hindsight.

[Michael Acton Smith]

I mean, in hindsight. Right. But I mean, you're on this rocket ship right from the time you launch it. You 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?

[Tamara Levitt]

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.

[Michael Acton Smith]

They get bored.

[Tamara Levitt]

Yeah. They become obsessed. And then the new phenomenon comes along. And so as soon as, 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 round, but we couldn't.

[Michael Acton Smith]

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

[Tamara Levitt]

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 4am that this was unraveling and this was falling apart, this rocket ship suddenly started falling back to Earth.

[Michael Acton Smith]

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 Com. Stay with us. I'm Kai Raz and you're listening to How I built this.

[Guy Raz]

When I travel, I almost always stay at an Airbnb. Why? Because I can feel at home instantly wherever I am around the world. Find out how much your place is [e-mail] host and now a quick vital break. A little more from our sponsor, Vital Proteins. Have you heard of vital Proteins? Collagen peptides. It's a supplement that has four benefits all in 1. Helping support healthy hair, skin, nails, bones and joints. Because of aging, after 30, our body's natural collagen production can start to decline by 1% a year, which may lead to the appearance of fine lines, saggy skin, and your bones and joints not moving like they used to. By taking collagen peptides daily, you can help support your hair, skin, nail, bone and joint health. Consistency is key. Take a serving of collagen peptides daily to help look, feel and move your best. Get 20% off by going to www.vitalproteins.com and entering promo code BILT at checkout. These statements have not been evaluated by the Food and Drug Administration. This product is not intended to diagnose, treat, cure or prevent any disease. If you're pregnant, nursing or have a medical condition, consult your physician before use at How I Built this we meet the people behind the businesses we admire and hear firsthand how they got where they are today. Because every small choice, connection and transaction can mean much more. Our sponsor Mercury, understands just that, that it's more than a deposit into your bank account. It's landing your first fundraise. It's more than an invoice to a customer. It's your hard work becoming revenue. It's more than a wire. It's payroll for your crew. That's why Mercury offers banking that does more than hold money, so businesses of all stages and industries can do more. Businesses like Alma, a legal tech startup, use Mercury to simplify their financial work. Co founder Aizata Marat, a Kyrgyzstan born and Harvard educated attorney, founded Alma after receiving dubious immigration advice that put the brakes on her career. Now her team streamlines immigration for skilled professionals while empowering businesses to recruit and scale seamlessly with global talent. They use Mercury to create and send invoices right from their bank account or bogeybros, the E Commerce apparel brand for the golfer who doesn't take themselves too seriously. While Bogeybros are known for their sense of humor, co founder Ryan Rizzos doesn't joke about the company's finances. He chose Mercury to set up multiple checking accounts to implement the profit first method of accounting from day one and now uses Mercury's working capital as a cushion for big inventory purchases ahead of sales like Black Friday and Throne, who built a first of its kind device that monitors your gut health from your toilet. Co founder Scott Hickel raised two rounds of funding to bring Throne's vision to life. Now by investing their capital with Mercury Treasury, Scott can then invest more into engineering to get Throne just right. Visit mercury.com to see how Mercury brings together all the ways you use money into a single product. That feels extraordinary to use Mercury Banking that does more. Mercury is a financial technology company, not a bank. Banking services provided through Choice Financial Group Column NA and Evolve bank and Trust Members FDIC Mercury treasury is offered by Mercury Advisory llc, an SEC registered investment advisor and wholly owned subsidiary of Mercury Technologies. Important information and [e-mail] Treasury.

[Alex Tew]

Foreign.

[Michael Acton Smith]

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.

[Guy Raz]

Meanwhile, the whole time he's been building.

[Michael Acton Smith]

That franchise, his housemate Alex has been trying to launch his own new ideas. But nothing is jealous. Still, there's one idea Alex just can't shake and it's sort of out of left field.

[Alex Tew]

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

[Michael Acton Smith]

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.

[Guy Raz]

What would you do?

[Alex Tew]

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 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 a bit too esoteric. I found it easier to memorize relaxation techniques and then also started sourcing 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 is really not designed for a mass audience. It's not very well presented, even though the techniques are 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, but to the average person, it's unapproachable.

[Michael Acton Smith]

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. And then the clock just runs down and you're just looking at a sunset over the ocean. Was this just a gimmick? Was this going to be a business? What was this thing?

[Alex Tew]

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 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 built it one afternoon and tweeted about it, and it just went viral. And within a week had about 2 million visitors.

[Michael Acton Smith]

Wow.

[Alex Tew]

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

[Michael Acton Smith]

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 this was a big change for you, right? I mean, this was a major move.

[Alex Tew]

Yeah, so that was my first, in a way, my first job apart from working in a supermarket when I was very young. That was my first sort of first proper job, if you like.

[Michael Acton Smith]

Yeah. I'm 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 made a million bucks from that. That by 2011, when you left for San Francisco, it sounds like you had not really made any significant money after that.

[Alex Tew]

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

[Michael Acton Smith]

Yeah.

[Alex Tew]

You know, and. 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.

[Michael Acton Smith]

And you and Michael are, of course, staying in touch because you're friends and your 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.com and we're going to get to what this is 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.

[Alex Tew]

Yeah, Michael and I would always riff on Business ideas. And I think I'd shared my passion around meditation and relaxation. And we talked generally about this bigger idea, this simple idea. And so we 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 in, I think it was the summer of 2011, he was like, yeah, I actually. I actually want to sell it. And thankfully, Michael had enough money to.

[Michael Acton Smith]

Buy it, I think $140,000 about. He sold it for him.

[Tamara Levitt]

About that. Yeah. I earmarked that money for a deposit for a house, but so my parents were a little surprised.

[Michael Acton Smith]

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.

[Tamara Levitt]

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

[Alex Tew]

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, relax 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?

[Michael Acton Smith]

Right. Okay. So Alex, you're in San Francisco. Michael, you are still in London, and you've got this domain name now, com dot com. And. 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 that you could just kind of like sit and chill out and listen to these sounds.

[Alex Tew]

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.

[Michael Acton Smith]

Yeah.

[Alex Tew]

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 were certainly 10 scenes or something.

[Michael Acton Smith]

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

[Alex Tew]

Yeah, the first ones were actually made. I hired someone on, you know, it was maybe Craigslist or something, a 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 need, albeit not millions of users. But there was definitely an audience for it.

[Michael Acton Smith]

When you had that website, do nothing for 2minutes.com, @ 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.

[Alex Tew]

Yeah, yeah, I think even maybe 100,000 emails. And so that hundred thousand emails, when we launched Khan.com with the sort of nature scenes, those people turned out. They really loved calm.com, because it was a much better version of Do Nothing for two Minutes.

[Michael Acton Smith]

They got an email.

[Alex Tew]

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

[Michael Acton Smith]

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. You have this, this webpage with some. Were there guided meditations yet in 2012 or not yet.

[Alex Tew]

At some point in 2012, 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 that there was interest.

[Michael Acton Smith]

And it was free. There was no business model. Right yet.

[Alex Tew]

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

[Michael Acton Smith]

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?

[Alex Tew]

No. When I say we. Yeah, Michael and I. So it. It's. Even though Michael was still in the uk, yeah, we would.

[Tamara Levitt]

We would talk all the time.

[Alex Tew]

I was super excited to work with Michael and I was just waiting for him to move to San Francisco. And my first sort of job really was to try and raise some money to Actually build up the mobile app, build a small team, and that was kind of the next step.

[Michael Acton Smith]

All right, so you had launched in May of 2012, but 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?

[Alex Tew]

Yeah, it was actually much harder than we had anticipated. So it actually ended up taking a good six months, well over 100 meetings. I think in the end, we raised from about 12 people, and they were all individual angels. The biggest concern people had was, how is this going to be a business? You had 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, we, we persisted and cobbled together just over $400,000, and that was enough to kind of get. Get to the next phase.

[Michael Acton Smith]

So you've got some cash to start this up. And also that month, February of 2013, you debut a mobile app.

[Guy Raz]

Did you build the app yourself or.

[Michael Acton Smith]

Did you hire with the money that you raised, did you hire some people?

[Alex Tew]

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.

[Michael Acton Smith]

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

[Alex Tew]

Yeah, so there was. I think there was maybe 12. 12 audio recordings in it, literally, plus upon 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 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. But it was encouraging because 10% of people who downloaded the car map 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.

[Michael Acton Smith]

All right, so let's get back to you, Michael. You are still in the uk. Comm 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 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. What happened there?

[Tamara Levitt]

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 cold face. 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. 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. 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 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.

[Michael Acton Smith]

Okay, so you. So you decide that you're going to move to San Francisco and you're to going to throw yourself into this full time.

[Tamara Levitt]

Yeah. 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 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 others who had seen firsthand how to build and scale companies rapidly. We didn't have as much as that in London. And then finally, I think we both just wanted to prove ourselves in the cauldron of the valley, the most extreme place to build a business, and wanted to see if we could cut our teeth there.

[Michael Acton Smith]

So, Alex, you're kind of manning the store in San Francisco, and you launched the app in 2014. You raised another 500 and almost $600,000 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 talking about all of these people who brought Eastern mindfulness ideas into 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.

[Alex Tew]

I think that book was definitely part of it. I think there were other things going on. I think the body of scientific research was kind of exploding. So there had been this sort of growing wave, this growing swell of interest in meditation and 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 Puddicombe and Rich Pearson from Headspace. They were, I think, maybe a year ahead of us in terms of getting an app out, and I think they were also part of that story.

[Michael Acton Smith]

But Headspace was, as you say, had been out a year longer. Andy had done a very popular TED Talk. He was getting more attention. Were 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 be fine?

[Tamara Levitt]

Well, a lot of investors pushed back and said, yeah, Headspace are the winners this market has sewn up. But we believe 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. And to your point, the market, we did feel was absolutely enormous. It wasn't just 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.

[Michael Acton Smith]

When we come back in just a moment, how calm gets a major boost from people like Stephen Fry, Matthew McConaughey, and LeBron James. Stay with us. I'm Guy Raz, and you're listening to.

[Guy Raz]

How I Built This I've stayed at some amazing airbnbs. Someone's cabin in the middle of a vineyard in California, in a 17th century stone barn on an olive farm in Tuscany, and in an apartment in Paris where I watched people dance in the streets below. So whether you could use a little extra money to cover some bills or for something a little more fun, your home or spare room might be worth more than you think. Find out how [e-mail] host One of the hardest parts about B2B marketing is reaching the right audience. For example, I get sent endless marketing emails from sales reps trying to get me to use their CRM platform. And to be perfectly clear, this is not in my wheelhouse, guys. So when you want to reach the right professionals, use LinkedIn ads. LinkedIn has grown to a network of over 1 billion professionals and that's where it stands apart from other ad buys. You can target your buyers by job title, industry, company role, seniority, skills, company revenue, all the professionals you need to reach in one place. Stop wasting budget on the wrong audience and start targeting the right professionals only on LinkedIn ads. LinkedIn will even give you a $100 credit on your next campaign. So you can try it yourself. Just go to LinkedIn.com builtthis that's LinkedIn.com builtthis Terms and conditions apply only on LinkedIn AD.

[Michael Acton Smith]

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.

[Tamara Levitt]

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 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.

[Alex Tew]

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

[Michael Acton Smith]

She's the one that you would hear. You would hear calm?

[Alex Tew]

Yes, that voice, right?

[Michael Acton Smith]

Like calm. And that voice is so it's like Andy Puddicombs voice. But she was somebody who contacted you guys, right? She got in touch with you in 2014 to say hey, you need a community manager.

[Tamara Levitt]

Right?

[Michael Acton Smith]

Like well tell me the story. Cause she would become a turning point for you.

[Tamara Levitt]

Yeah, 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 gonna be much more valuable 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 of the. And even though it was a huge amount of work to create all this unique content, it was a step change for the business.

[Michael Acton Smith]

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

[Alex Tew]

2016, something like that. Yeah, I think the revenue may have even been close to 7 million for 2016. Millions of downloads. Now we thought, now surely people must get it, we must be able to 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.

[Tamara Levitt]

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

[Guy Raz]

What would they say?

[Michael Acton Smith]

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.

[Tamara Levitt]

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 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.

[Alex Tew]

Yeah, we didn't over hire. We could use equity as a big part of compensation over cash. 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 startups. So it's just that traditional arc of being very, very scrappy. And I think we thought, well, we might not ever be able to raise VC money, so we're just going to have to make this business, super profitable.

[Michael Acton Smith]

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. You are now getting some revenue coming in, and it's probably certainly very helpful. But you're still small. 2016, you've got fewer than 10 people. You're working, presumably 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?

[Guy Raz]

It doesn't make sense.

[Alex Tew]

Yeah. 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. 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 there may have been some sense that, well, this business, it's a nice, this small business, but they're not going to be able to scale it.

[Michael Acton Smith]

Well, I think one of the things that happened that year and may or may not have been a turning point, but you launch Sleep Stories, and I mean, lots of people, including 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 iPhone. But this is something you guys started offering on the app in 2016. What did you notice about how the app was being used or how did you come to this realization that this was something that was worth trying?

[Tamara Levitt]

Yeah, it was around 2015 where we started to 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.

[Michael Acton Smith]

Still there. Still. Still around.

[Tamara Levitt]

Still going.

[Michael Acton Smith]

Yeah.

[Tamara Levitt]

And Alex and I just chatted about it and we thought, well, could this be an opportunity for us? And we'd also looked at the data. We had a brilliant person we'd hired called Dunn, who 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.

[Michael Acton Smith]

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

[Tamara Levitt]

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 you, yeah, why don't we create a new type of content? We hacked it together very quickly in weeks and created a few of these 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. Every night. So many people struggle falling asleep. And so this was such a absolutely key turning point in the growth of the company.

[Michael Acton Smith]

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 spending money on customer acquisition now?

[Alex Tew]

We are, yeah. So at the end of 2016, Michael mentioned 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.

[Michael Acton Smith]

How'd you do that? That?

[Alex Tew]

Well, the, the fun story is that we. 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 is 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 mobile apps. And the ads were so successful and so profitable for us that we were able to scale that channel up massively.

[Tamara Levitt]

People shared the ad. It's unusual for people to send an advert to their friends, but they did it in droves. And so that was a really key moment for us because. Because that meant we could put a dollar into our marketing and get a big multiple of that out. And so we just scaled that up very, very, very rapidly. So our revenue went from 7 million to 21 million to 80 million. It was extraordinary.

[Michael Acton Smith]

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.

[Alex Tew]

Yeah, yeah. So 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, we'd have a higher lifetime value. And it worked partly because people were willing to pay more for their personal well being, 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.

[Michael Acton Smith]

Basically, you figured out how to grow it without any outside. Whole lot of outside money. Took you a while to get it. But one of the things I think that also happens is that. 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 stories and motivation, things like that for the app. Was it seeing people like Stephen Fry tweet about it that led to that idea?

[Tamara Levitt]

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.

[Michael Acton Smith]

Radar unless you paid them big bucks.

[Tamara Levitt]

Well, even then, I think, well, we didn't have the big bucks to pay them, but, 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, and Stephen Fry was one of the first, and I managed to track down his agent and asked if he'd he'd do it. And after a bit of negotiation, he agreed. And then the next big breakthrough that really took us forward was Matthew McConaughey.

[Michael Acton Smith]

Wow.

[Tamara Levitt]

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

[Michael Acton Smith]

How important were the celebrities in increasing your market share?

[Tamara Levitt]

I think 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.

[Michael Acton Smith]

Yeah.

[Tamara Levitt]

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. Ice. So the I is for invest. We want the talent to have skin in the game.

[Michael Acton Smith]

Do you want them to be investors in the business?

[Tamara Levitt]

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 as fans really connect with calm. So, yeah, it has been a critical part of our success.

[Michael Acton Smith]

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

[Tamara Levitt]

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

[Michael Acton Smith]

I bet. Yeah. 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 you're experienced, 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. It.

[Tamara Levitt]

Yes.

[Michael Acton Smith]

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.

[Alex Tew]

I think that's the secret to most success is it actually takes a lot longer, and it's more about persistence. And I think, again, time. Time is some 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. We may have just kind of been drunk on expensive, unprofitable user acquisitions. So I think we kind of got the foundations. They were stronger, basically, I think.

[Michael Acton Smith]

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

[Tamara Levitt]

Yeah, we want to bring calm to as many people as possible. We launched a B2B division where companies pay for calm for their employees. And that's been a hugely successful part of the business, particularly at the start of COVID And the next phase is, can we work in the healthcare system in the US Could CALM be provided to insured patients to ensure that they live a more mindful life, that they get good sleep, that they're conscious of the food they eat and the exercise they take, which the theory is downstream, will prevent more physical health issues such as obesity and diabetes and others. So last, this is why we, we acquired Ripple and the team that have such deep healthcare experience. And last year we signed a big deal with United Healthcare to bring calm to many of their populations. So this is a big part of CALM's growth over the next few years, which is B2B. Yes.

[Michael Acton Smith]

Yeah, yeah. So, all right, so 2022, I mean, you guys really, the business is scaling and scaling and scaling. I think, I think by 2022, you've got, I don't know how many millions of users. I mean, probably about 4 million paid users by that point.

[Guy Raz]

That year.

[Michael Acton Smith]

You guys stepped down as co CEOs and become, I guess, co executive chairman.

[Tamara Levitt]

Yes. Yeah. So the company we acquired, Ripple, the CEO David Koh, 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 best part of a decade. So 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, 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 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 mental health. So it's really energizing for us to get back to that zero to one phase, that creative, chaotic early phase.

[Michael Acton Smith]

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, phones 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 20s. 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 replace that? Right. And yet here we are talking about something that's designed to make us more mindful, more, you know, in our, 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, it's a, it's a super convenient tool, but it's a. I don't know, it's a bit of a. It's a contradiction sense.

[Tamara Levitt]

Right.

[Michael Acton Smith]

It's a. 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.

[Tamara Levitt]

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.

[Alex Tew]

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, yeah, 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 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 someone telling you a bedtime story in the room, and you've got to meet people where they're at. Five billion smartphones, the idea that we can get, you know, we can reach so many people so easily is a huge advantage. So, yeah, it has 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.

[Michael Acton Smith]

When you guys look back 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 has real enduring value. I mean, it's a company valued over several billion dollars. Now, when you think about where you started and where you are now, how much of it do you attribute to luck and timing? And how much do you think has to do with just the grind that you put into it?

[Tamara Levitt]

Yeah, 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.

[Alex Tew]

Yeah. When you're working on something that you truly believe in and you think needs to exist in the world, I think it gives you the energy and the grit to persevere in the absence of evidence that it's working or in times of setback and stress. And calm is by far the most important, meaningful thing I've worked on. And aside from any of the financial elements and success of the business, just having had had a positive impact on millions of lives is reward unto itself. And also working with my best buddy, it's been a lot of fun.

[Michael Acton Smith]

That's Alex Tew and Michael Acton Smith, the co founders of Com. Alex, now that we know each other a little bit more, we spend a lot of time together. You can give us a little beatbox.

[Tamara Levitt]

Give me a beat.

[Michael Acton Smith]

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

[Guy Raz]

That's no joke.

[Michael Acton Smith]

That is competitive level beatboxing.

[Alex Tew]

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

[Michael Acton Smith]

You just shook that rust off. 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 [e-mail] or on substack. This episode was researched and produced by Kathryn Seifer, 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 Coates, Casey Herman, J.C. howard, John Isabella, Iman Maani, Chris Massini, Sam Paulson, and Kerry Thompson. I'm Guy Raz and you've been listening to How I Built this.

[Guy Raz]

If you like How I Built this, you can listen early and ad free right now by joining Wondery plus in the Wondery app or on Apple Podcasts. Prime members can listen ad free on Amazon Music. Before you go, tell us about yourself by filling out a short [e-mail] survey.

[Tamara Levitt]

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