Words Michael Acton Smith
September 11th 2023 / 10 min read
Michael Acton Smith likes the surfing metaphor of starting a company.
“Always keep a careful eye out for those huge waves that are forming on the horizon, and timing is everything. You need to be poised and ready to catch the big wave when it rolls in. If you’re too early you’ll be waiting in the freezing cold water for too long. If you’re too late, the big wave will have passed you by and it’ll be super crowded and competitive. Catch the big wave at the right time and then hold on for dear life”.
When he first hatched the idea to build meditation platform Calm with co-founder Alex Tew, conversation around mental health was in its infancy, nowhere near the position it occupies on the agenda today. Meditation and mindfulness even less so.
Fast forward eleven years and mental health is on the tip of everyone’s tongues—with Calm firmly at the centre of the ecosystem. Over a decade they’ve built one of the most popular meditation and mindfulness apps in the world. Around 100 million people have downloaded the app, with over 4 million paying users and 10 million accessing the platform as a mental health benefit. In a 2020 funding round, the business was valued at $2 billion.
Michael’s a seasoned hand in the startup world. Firebox, the business Michael founded out of university, was one of the UK’s fastest growing private companies at the time. Moshi Monsters, at the time, was one of the most popular children’s entertainment companies, with a range of toys, books, magazines, an online world, even a feature film to its name, before growth stalled and restructuring began.
From the highs of unicorn valuations to shutting down businesses, Michael’s gone through the rollercoaster of being a founder. In a recent fireside chat at our biannual Founder Day, Michael shared some of the most important lessons he’s learned along the way, including:
Beware of getting caught up in your own hype
The secret to hiring is good storytelling
Place lots of bets across your business
Talent partnerships should be about more than just signing a contract
Consider if you’re a ‘vitamin’ or a ‘painkiller’
Accelerating in healthcare requires deep domain expertise
The excitement around Moshi Monsters was unprecedented: I felt I’d been launched into the stratosphere of startup success, being showered with positive press coverage, even winning a BAFTA in 2013. At one stage, we thought we might become the UK’s answer to Disney.
But this taught me a valuable lesson—not to get caught up in your own hype. Positive press coverage doesn’t build a moat around your business, and can often distract you from more important decision making.
It’s hard to pin down the failure of Moshi Monsters to one thing. One big mistake we made was mismanaging the platform transition from web to mobile, meaning we failed to keep up with where our audience’s attention was being pulled.
We also failed to establish a successful second IP after Moshi. Businesses like Disney are successful because they have multiple divisions and different IP for a wide span of audiences.
So enjoy positive press and general excitement—but make sure you also follow your gut instinct, listen to your advisors, and keep watchful of macro trends that are going on outside of your business.
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The success of Calm seems obvious now, but at the time we launched, we were building in a deeply stigmatised space. We knew there was strong science showing many benefits of mediation and mindfulness, but when we mentioned the idea to people they thought we were crazy.
So how did we get tens of millions of people to download and use the app?
One great analogy I like to think about is this—are you a ‘vitamin’ or are you a ‘painkiller’? Are you a ‘nice to have’, or are you a necessity? ‘Vitamins’, people may be willing to try out, they know they should do it but aren’t necessarily willing to pay for it or change their habits around it. Conversely, people will absolutely pay again and again for ‘painkillers’.
So as a product, we had to think about what our ‘painkiller’ was. Because meditation, while it interested people, it was hard to get people to come back and do it every day. It was still a fringe activity. But what we realised was closely linked to mindfulness and mental wellbeing was quality of sleep. 8 billion people sleep every night, that’s a pretty huge TAM: so if we could build something that could help improve your sleep, we’d be creating an incredibly popular painkiller.
We had a pretty huge challenge ahead to bring mindfulness and meditation into the mainstream, and to do so, we needed to hire a great team. We chose back then to base ourselves in Silicon Valley, which at the time had the density of top talent that we needed to build and grow the business.
The flipside of this, though, is competition for that talent is much higher. We were competing with huge established tech companies, who could pay double or triple what we were paying.
This really tested our storytelling skills. We had to convincingly sell the vision of what we wanted to do with Calm, to persuade the people we were speaking to that they should come work for us over the likes of Google and Facebook. Fortunately, we were not only convinced that we were building a trailblazer for mental health, but we were good at painting that vision and telling our story. Those early hires have been instrumental in our success. They bought into the bold vision and were as passionate as we were about making the world a happier and healthier place.
Healthcare is an extraordinarily large market and is a very fulfilling space to work within. For these reasons, it can be a particularly attractive proposition to founders. But equally, it can be an incredibly hard market to find success. It’s highly regulated and often slow moving. Connections and long-term relationships matter.
Many healthtech founders make the mistake of building a product and charging headlong into the market, without realising whether the buyers want it in the first place. Rather, you should look to partner with healthcare providers early on, find out what they want, bring people onto your team to help you understand that world, and forge deeper connections from an early stage.
This thinking was instrumental in our acquisition of Ripple Health, a San Francisco-based healthtech startup. Their CEO David Ko had a deep sector expertise in the healthcare industry, and really understands the market well. We knew his perspective would be invaluable as we built out our Calm Health division (he is now CEO of Calm).
It can be hard to predict which experiments work for your business. So rather than put all your eggs in one basket, we like to place little bets across multiple areas, following them closely to see what comes off. This is especially true at an early stage with a small team, where you want to test and prove as much as you can, as fast as you can.
There were several of these that really paid off for us in the early days of Calm.
One example was our Daily Calm exercise. Previously, it had been difficult to encourage people to incorporate meditation into their lives. Lots of people want to try it, but it's actually difficult to keep up and practice. So we launched the Daily Calm, a unique 10 minute meditation that featured in the app every day. People love variety, and there was obviously something about a new story, a new quote, a new motivation each day that was resonating with people.
Same goes for our Sleep Stories. As previously mentioned, we quickly realised sleep could be a huge opportunity for us to go after, but what was a creative and engaging way to get people hooked? This was where we hatched the idea of a series of sleep stories, read by a number of popular celebrities who each had their own take on a bedtime story (more on this later).
There were many bets that didn’t pay off. But what’s important is to have a fast metabolism, to test quickly and ditch the things that don’t do well, and double down on the bets that are working. Move fast to find the signal amidst all the noise.
Our Sleep Stories are the best illustration of our approach to partnerships. The first version came about fortuitously. We’d hatched the idea, but were struggling to get any bite from any of the famous people we’d approached. Ashton Kutcher was one of our early investors, and in passing, told us that Matthew McConnaughey was not just a user but a huge fan of Calm. As iconic voices go, who better to be one of our first Sleep Story readers?
This taught us a very valuable lesson about what to look for in a partnership with talent. It can be easy just to sign a contract, give them a cheque, and have them fulfil their obligation for a handful of social media posts —but this doesn’t always give you what you want. Instead, we operate on the ICE principle:
I is for Investment—for big partnerships, we don’t just want to just give the talent cash, we want them to have skin in the game. We either give them the option to put their own money up for shares, or we give them some equity to get them on our cap table
C is for Content—we always want them create something that is unique, that you couldn’t get elsewhere
E is for Engagement—we want them to actually use the product, to be a real advocate for what they are promoting
All these things are ingredients for a strong talent partnership. It also shows that, if you see someone with a public profile who is a vocal user of your product (talks about it on social media, etc), that is a golden signal. This person will be so much more valuable to you than someone you’ve just signed a contract with. Find these people and explore the best, more creative ways to work with them.
Michael Acton Smith is the co-founder & Executive Chairman of Calm, which he co-founded with Alex Tew in 2012. Prior to this, he founded Firebox, an ecommerce store for gifts and gadgets, and Mind Candy, the entertainment business behind Moshi Monsters. In 2014, he received an OBE for services to the creative industry.
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