Company Profile

COMPANY:Calm.com

2018 INC. 5000 RANK: 19

HEADQUARTERS: San Francisco, CA

YEAR FOUNDED: 2012

2017 REVENUE: $22.3 Million

3-YEAR GROWTH: 10,549%

More Consumer Products & Services Companies
  • #684Emerald Pools and Spas
  • #4102CHHJ Franchising
  • #1319MagMod
  • #32Skinny Dipped
  • #4942Green Lawn Fertilizing
  • There's something ironic about Calm's path to becoming a billion-dollar mindfulness business.

    For starters, there's the name Calm, which very much does not reflect the arc of its existence. Three years ago, the meditation and relaxation app publisher was all but scrounging for quarters in the couch. Fast-forward to 2018 and Calm is raising $25 million on a $250 million valuation. Skip ahead again, a mere nine months this time, and it has just joined the three-comma club with $88 million from TPG Growth and other investors

    It's the kind of shot-out-of-a-cannon startup story that left Calm's co-founder, Michael Acton Smith, feeling chronically "dopamine frazzled" after the launch of his previous company, which made a hit kids' video game called Moshi Monsters. Suffering from headaches, insomnia, and "the whirring mind of an entrepreneur," he sought out meditation as a way to find some mental equilibrium.

    It's a good thing he did. His experience with Calm has been less a ride on a rocket gliding into the stratosphere than one white-knuckled through on a rickety rollercoaster. 

    In 2015, Acton Smith and his partner, Alex Tew, nearly ran out of money, even though they had only a few employees to support. They survived by stringing together a few licensing deals while hoping to secure a longer-term cushion by raising a round of Series A venture capital. But when they pitched Calm to investors in 2016, they "struck out completely," Acton Smith says. 

    Desperation bred invention. "We had no choice but to make the business profitable," he says. With their backs against the wall, Acton Smith and Tew launched two products that have driven most of Calm's heady growth since then -- which took them from $7 million in revenue in 2016 to $23 million in 2017 to its current run rate of $150 million. This put the company at No. 19 on the 2018 Inc. 5000

    The first was the Daily Calm, a guided meditation that changes every day and is available only on the day of its release. The second was Sleep Stories, bedtime tales for grownups, narrated in a soporific manner designed to lull the listener into dozing off. 

    Sleep Stories, in particular, helped differentiate Calm from its primary competitor, Headspace. Long a bigger name than Calm, Headspace has, as of yesterday's billion-dollar news for Calm, fallen behind. It has raised nearly $80 million, to a valuation of $320 million, but its last new funding came in 2017, right after a spate of layoffs

    "People laughed at us when we said we were going to create bedtime stories for adults," says Acton Smith. But if the idea of using Matthew McConaghey's philosophical ramblings as a sleep aid is inherently a little funny, there's nothing laughable about the strategy behind it. Mindfulness meditation, Acton Smith knew, is the ultimate open-source technology. Calm needed something it could own, and that something was original content. "We're taking a leaf out of the Netflix strategy book," he says.

    In addition to Sleep Stories and the Daily Calm, it now offers what it calls Masterclasses, which are expert-led lessons on topics related to mental and physical well-being, and Calm Body, which consists of gentle guided movement sessions. For content like this, more than a million subscribers pay $5 a month. (Headspace also has more than a million subscribers.) "We want to be the app for all of your mental fitness," says Acton Smith.

    But none of this is what's truly ironic about Calm. That would be the fact that its primary delivery vehicle, the smartphone, is, for most of us, a big reason we're all feeling so dopamine-frazzled in the first place, even those of us who don't have a startup founder's fears to keep us staring at the ceiling all night long. 

    The last few years have brought a dawning awareness that omnipresent digital devices and incessant notifications, whatever their other merits and faults, are antithetical to the states of mind that make for both focused thinking and deep relaxation. Silicon Valley has seized on sleep, in particular, as an area where widespread problems offer opportunities for new products--so much so that CES, the industry's biggest tradeshow, added an area devoted to sleep tech two years ago. 

    A lot of people clearly find Sleep Stories help them fall asleep faster. But most sleep experts would counsel those people to leave their phones outside the bedroom. (I started doing that a while back and can report it makes a big difference.) "These devices, they're not the problem," Acton Smith says. "It's the way we use them that matters."

    Maybe so. But it's also how much we use them. Calm may now be the most successful mindfulness app, but the most mindful thing you can do with your phone will always be turning it off. 

    Published on: Feb 7, 2019