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Michael Acton Smith built an empire on the back of a stressed-out society.
Okay, that sentence sounded better in my head, and upon looking at it in print, it‘s pretty imposing — not exactly in keeping with the spirit of Acton Smith’s meditation and mindfulness app, Calm.
Still, it‘s true (even if it’s not totally on-brand).
Since its inception in 2012, Calm has gone on to amass over 4.5M paid subscribers, tally over 100M downloads, and be valued at over $2B in its latest funding round. But how did Acton Smith get there? And what lessons can you pull from his story?
Well, valued reader, you can get the answers to those questions and more below.
How Calm's CEO Created a Multimillion-Dollar Brand
1. Finding Inspiration in His Background
Calm wasn‘t Acton Smith’s first business. His foray into entrepreneurship started with a toy and gadget company in the late 1990s, called HotBox. According to him, he and colleagues “saw this thing called the internet bubbling up, and [thought] there was gonna be an opportunity to revolutionize commerce.”
HotBox sold what he describes as “quirky gadgets, toys, and games” online — and that came with a host of challenges. Predating ecommerce staples like Shopify and Stripe, Acton Smith and his employees had to “hack everything together [themselves].”
He also hit a hitch over the company name. Unfortunately, Hotbox.com was one of the world‘s largest porn sites at the time, prompting him to change the name to Firebox. He didn’t like how his mom would tell her friends to check out his company's website and have them land … elsewhere.
Over two decades later, Firebox is still operational. At its peak, the company was at $70 million in revenue — but as he learned, the world of kids' entertainment moves fast.
According to him, “You can literally be super hot one minute and not the next … It's a hits-driven business and so that was challenging. We had to let a lot of people go; we had to restructure the business, and revenues dropped dramatically. That was a period where I was super stressed and wasn't sleeping well. And I had constant headaches.”
Troubling as that stretch was for him, it was ultimately productive. That's when “the light bulb went on around Calm and meditation.”
2. Pinning Down the “Why” Behind His Business and Learning to Articulate It
In 2012, Acton Smith founded Calm with co-founder Alex Tew — marking a welcome transition from a hits-driven, entertainment-oriented business to one rooted in “a fundamental human need to reduce stress, be calmer, and understand our own minds.”
As he puts it, “The world is not getting any less stressful. I think people will always need to sleep. I think this is a huge, huge area to lean into. And I think those are always the most exciting businesses.”
Despite its needs-driven basis, the first year at Calm was tough for Acton Smith. Raising money was difficult because “people didn't really understand what [it] was” — so he had to self-finance the venture initially.
As the business got its legs, Tew was what Acton Smith describes as “the first person on the ground, building the business,” while both chatted to investors. But they ran into trouble with meditation's reputation at the time.
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3. Thinking “Like Nike”
According to Acton Smith, “People didn't really understand what meditation and mindfulness were. It comes with so much baggage. From people thinking it's religious, or woo woo, or a bit weird.” Investors were skeptical, thinking the concept might be too niche or fad-y.
But meditation eventually became en vogue, and demand caught up with Calm. Acton Smith likens its rise to Nike‘s five decades ago. According to him, ’Physical fitness wasn't really a thing [back then]. Going running was weird.“ Meditation had a similar trajectory, and he hit the point he describes as being ”so exciting for an entrepreneur."
He says, “What I think the best entrepreneurs do is they spot these inflection points in society where public opinion shifts. And when it shifts, it often doesn't happen gradually. It happens really quickly. And if you're surfing that wave when that shift is happening.”
Acton Smith says, “It took years and years before [Calm] hit a tipping point.” In 2014, the company made about $340k. By 2015, three years in, it made $2.3m. Things really took off in 2016, when the company did $7 million in revenue — and in 2018 it did $80 million.
4. Leaning Into Word of Mouth
Calm didn‘t owe much of its initial success to paid marketing. It didn’t need to invest too much on that front as the business found its footing — the company reached 8M downloads almost strictly on word of mouth.
As Acton Smith puts it, "The earlier doctors were getting into meditation and mindfulness, before it kind of tipped in society. So people, when they discover mediation, they become very evangelical about it. And that was fueling our growth. And then we started testing into Facebook and paid marketing — and it took a little while, but we got that working very efficiently."
Acton Smith, Tew, and Calm's marketing team led a successful, more novel campaign to generate immediate interest.
He recalls, “[Alex Tew] created a website that was basically just some waves lapping on the beach, and it was called donothingfortwominutes.com [where] you literally had to just stare at these waves for two minutes and not move your mouse or tap on the keyboard, and not many people could do it. It was surprisingly challenging, but if you got to the end of it, it would ask for your email address. And we collected about 100k email addresses in two weeks.”
5. Cultivating a Distinct Brand Identity
Succeeding in any industry is, in large part, a function of how well you can distinguish yourself. So naturally, Calm's branding strategy was decidedly different from its competition.
While meditation apps weren't necessarily a crowded space, Calm did (and still does) share it with Headspace — a prominent outlet that promoted itself via larger branding campaigns and tried to disrupt the image of “lotus leaves and hippies” that meditation had traditionally been associated with.
As Acton Smith puts it, “We took a slightly different approach [than Headspace]. I love this idea that Calm is based more around nature and the natural world. And I think that gives us a bit more accessibility. And even the name Calm can work on a chain of hotels, or clothing, or a whole host of other products and services.”
6. Staying Nimble
Calm also distinguished itself from Headspace with what Action describes as his company's “startup DNA” and emphasis on organizational efficiency.
He says, “I think the reason why Calm has a different kind of profile to Headspace, is Alex and I have run many businesses before. And I think we have startup DNA. And the whole idea of being incredibly efficient with capital.” He saw a lot of value in cultivating a “very nimble, very test-driven culture.”
According to him, "I made some mistakes in the previous businesses where I hired too many people, got too bloated … It‘s almost like a badge of honor a lot of entrepreneurs talk about, how many people in your business. And to me, now, it’s a badge of honor how few people we‘ve got. Because when you hire a small number of people, who are all like 10x level — oh my God, it’s insane what you can do. And yeah, I love that.
“[Revenue-per-employee] is a great metric. And when you hire those kinds of people, when you don't bloat, everyone wears multiple hats, everyone is pushing really hard. It just creates an amazing culture.”
7. Leveraging Fundraising as a Brand Awareness Builder
Calm also wanted to generate brand awareness on an organizational level — looking to develop a reputation that would help the business attract top talent. Acton Smith says he was able to get there, in part, via fundraising.
In 2018, Calm raised $27M in its series A round, but Acton Smith says the company didn‘t actually touch most of it for a while. That wasn’t why he sought investors. According to him, “Bringing in great new investors is valuable but one of the primary reasons we did our series A round last year was to raise awareness of the business.”
Calm had to keep finding angles to establish its foothold in the market, and that included bolstering its profile as a business — not just a product.
He continues, "[Before the series A] it was still quite challenging to hire people, and we just wanted to make a big noise in the market. And suddenly people were like, ‘Wow. This business is worth $250m, there’s something going on here.'"
Know yourself.
If there‘s one underlying theme to Acton-Smith’s journey, it‘s that there’s tremendous value in understanding yourself and your business. That's where his ability to identify an emerging market, create a compelling value proposition, and ultimately stand out stemmed from.
Corny as it sounds, you have to know what makes you you.
Don't underestimate the business value of learning from life experience. Know the ins and outs of your industry and what makes you uniquely positioned to serve it, and ultimately, have a pulse on why people should buy your offering.
Free Business Plan Template
The essential document for starting a business -- custom built for your needs.
- Outline your idea.
- Pitch to investors.
- Secure funding.
- Get to work!
Download Free
All fields are required.