In 2019, the prospect of achieving Zen never seemed more attainable. Thanks to a growing list of apps, a soothing voice or guided meditation was never far away.
Which is to say, the business of peace of mind has never been more competitive. Headspace was the first to market in 2010 and became the de facto meditation app leader. Today the app has more than a million paying users and has raised about $75 million in venture funding. While plenty of rivals followed, including Insight Timer and 10% Happier, one managed to fight its way to the top.
That title belongs to San Francisco-based Calm, which this year hit two million in paying subscribers, raised $115 million in venture capital, and became the world's first mental health startup with a $1 billion valuation. Slated to surpass $100 million in revenue in 2019, Calm, which its co-founders say is profitable, also landed in the running for Inc.'s Company of the Year. Not bad for a company that nearly flamed out just a few years after launching.
The meditation app wars are far from over--indeed, major rivals have begun to adopt their own versions of Calm's most popular products, such as sleep-inducing bedtime stories. So Calm has launched its next plan of attack: doubling down on building an exclusive library of content voiced by celebrities, and striking new kinds of partnerships to bring this content to millions more consumers in the offline world.
Starting up and catching up
In the startup's early days, Calm survived through equal parts savvy and scrappiness. Three years after co-founders Michael Acton Smith and Alex Tew launched their meditation app, the $1.5 million in funding they had raised was running out, and they were having trouble raising more. Meanwhile, Headspace--Calm's biggest competitor--had $30 million in its coffers. Acton Smith and Tew did what many other companies without millions in VC funding do: They focused on making money--fast.
They focused on more premium content to entice more people to subscribe. In 2016, the company introduced the Daily Calm, a short daily meditation designed to bring people back to the app each day, and Sleep Stories, tales designed to lull people to sleep.
Calm's timing was perfect: Its new products happened to launch right around the time Americans began looking for help to chill out. In 2017, more than a third of Americans reported feeling more stressed and anxious than the year before, according to data from the American Psychiatric Association. At the same time, the number of American adults practicing meditation more than tripled between 2012 and 2017, according to a report from the CDC's National Center for Health Statistics.
Calm's revenue ballooned from $7 million in 2016 to about $22 million by the end of 2017, according to figures provided by the company.
"The world is not getting any less stressful," says Acton Smith, who shares the CEO title with co-founder Tew. "The number of screens surrounding us is increasing. The number of digital pings and notifications we get every day is growing, and people are stepping back now and saying, 'Enough is enough.'"
The underdog becomes the unicorn
The next big break for Calm came when celebrities started recommending it to their fans, some of them unprompted. In 2017, singer John Mayer tweeted about the app to his nearly one million followers at the time. Actor Stephen Fry, who has recorded a couple of Sleep Stories for the app, also promoted it. That year, Apple named Calm the App of the Year.
"We are using and leveraging the power of celebrities and the ability of film, TV, and music to amplify a message," says Acton Smith.
With the app's newfound momentum, Acton Smith and Tew turned back to investors. In the summer of 2018, Calm raised $27 million from a group that included singer Harry Styles and actor Ashton Kutcher. It also partnered with actor Matthew McConaughey for its Sleep Stories series and snatched the top spot in terms of app downloads from Headspace, which had six times more staff than Calm's then-40-person company.
Then, in February, Calm closed an $88 million Series B round at a $1 billion valuation and became the world's first mental health unicorn startup. The round was led by private equity firm TPG Capital, with participation from the Creative Artists Agency (CAA) and other existing investors. In July, Calm raised an additional $27 million bringing its funding to date to more than $140 million.
Keeping calm and staying on top
While Calm may have twice as many paying subscribers as its closest rival, competition in the space is fierce. Headspace, for instance, launched its own version of Calm's popular Sleep Stories, dubbed Sleepcasts, in 2018. Another competitor, Insight Timer, offers more than 30,000 free guided meditations, far more than what Calm offers on its free version. Full access to Calm's content costs $70 per year or $400 for a lifetime subscription, whereas Insight Timer charges $60 for its annual subscription or $10 per month. Headspace runs $70 for a full year or $13 per month.
To set itself apart, Calm is using its newly raised funding to double its bet on celebrity content. The company is adding to its streaming music feature, which offers relaxing tunes from Moby, Sigur Rós, and Sabrina Carpenter. In December, Calm signed an exclusive three-year deal with basketball superstar LeBron James, who will be featured in an upcoming series of 10-minute "inspirational wisdom sessions" on topics including managing emotions and maintaining balance, according to the company.
In the past 12 months, Calm has also focused on finding new revenue streams and broadening its reach. Last year, the company struck a partnership and acquired a minority stake in XpresSpa, a spa lounge with 52 locations across 25 airports, giving Calm subscribers a free 10-minute massage and a place to buy Calm-branded merchandise. Starting in January 2020, Calm's content will be available inside more than 530 Novotel hotel locations across 60 countries, and you can already stream it on American Airlines flights. More recently, Calm has sold 300 corporate subscriptions to date to companies such as global law firm Winston & Strawn to offer content as a benefit to employees.
"Generally, the partnerships we do have very large reach," says Tew, noting the company receives "hundreds" of partnership requests every month. "We only do a handful. We are fortunate to be in a position to choose to represent the biggest brands with the biggest reach."
Downloading a meditation app that offers breathing exercises and meditation guidance is a simple and affordable way for people to care for themselves, says Katie Williams, mobile insights strategist at Sensor Tower, a market research firm. "This is really why the self-care movement has been born. Meditation apps are here to stay." The ones that can offer the most original features and content on a regular basis to keep users engaged are the apps most likely to thrive, she notes.
While Calm appears to have a promising strategy on that front, it's going to be an expensive ongoing endeavor--and one that rivals could easily replicate. Despite the challenges ahead, Calm's co-founders seem to be pretty Zen.
"We might create all the brand extensions that we're passionate about doing when the time is right," says Acton Smith, describing a future in which Calm subscriber perks might include spa retreats and retail discounts.
"When it was just meditation, it was a $1 billion opportunity. But we're playing in the health and wellness space," he adds. "And that is a $4.2 trillion market."