20VC Calm Founder Alex Tew on What It Takes To Build Viral Products Today, The Current State of Customer Acquisition Costs, What Makes The Best Brands

In this engaging episode of the "20 Minutes VC" podcast, host Harry Debbings interviews Alex Chu, co-founder and co-CEO of Calm, a leading meditation and sleep app. Chu reflects on his entrepreneurial journey, starting from his childhood ventures to his internet fame with the Million Dollar Homepage. He shares insights into Calm's origins, discussing how late-night FIFA sessions with co-founder Michael Acton Smith led to a brand focused on bringing calm to a stressed world. Chu emphasizes the importance of having a clear, long-term vision while being flexible in execution. He also touches on the nuances of customer acquisition, the balance between paid and organic growth, and the significance of building a strong brand. Throughout the conversation, Chu highlights the value of creativity, patience, and assembling a great team for long-term success.

• Alex Chu is the co-founder and co-CEO of Calm, the number one app for meditation and sleep.
• Calm has raised over $140 million in financing from notable investors.
• Prior to Calm, Alex founded several startups, including the Million Dollar Homepage.
• Michael Acton Smith, Alex's co-founder, contributed questions and suggestions for the show.

"So I'm thrilled to welcome Alex Chu, co-founder and co-CEO, at the number one app for meditation and sleep, allowing you to find your calm, sleep more, stress less, and live better."

The quote introduces Alex Chu as a distinguished guest who has successfully co-founded the leading app in the meditation and sleep sector.

• Carter simplifies equity management for startups and investors.
• Lattice is a highly-rated people management platform for developing engaged and high-performing teams.
• OurCrowd offers investment opportunities in early-stage companies for accredited investors.

"But I love Carter. Carter simplifies how startups and investors manage equity, track cap tables and get valuations."

This quote highlights the usefulness of Carter's services in simplifying equity management for startups and investors.

• Alex Chu started his entrepreneurial ventures at the age of seven by selling comics at school.
• He learned HTML and Javascript in school during the mid-90s and began building websites.
• Alex met Michael Acton Smith on a houseboat in London, leading to a lasting friendship and business partnership.
• The idea for Calm was conceived while playing FIFA and discussing business ideas with Michael.

"Michael and I, we've known each other for about 15 years or so, and I had just done the million dollar homepage and met Michael on a houseboat in London."

This quote explains the beginning of Alex Chu's partnership with Michael Acton Smith, which eventually led to the creation of Calm.

• The Million Dollar Homepage was a significant early success for Alex, bringing him fame and financial gain.
• Following the success, Alex felt pressure to outdo his previous achievements, which he found counterproductive to creativity.
• The experience with the Million Dollar Homepage helped Alex refocus on creating value rather than chasing success.
• Meeting Michael Acton Smith was a direct result of the Million Dollar Homepage's success.

"The subsequent years from after the millennial homepage, I really was trying to find my purpose and find something meaningful to work on."

The quote reflects on the period after the Million Dollar Homepage, where Alex Chu was searching for purpose and a meaningful project to dedicate himself to.

• Alex Chu believes in having a clear vision of the problem a company aims to solve.
• He emphasizes the importance of identifying long-term truths that will remain relevant.
• Flexibility in achieving the vision is crucial, as specifics can change over time.
• Calm's vision is based on the belief that stress and anxiety will persist, necessitating mind care.

"I think having a clear vision of what you're trying to do in the world, what problem you're trying to solve, is important."

This quote emphasizes the importance of having a clear vision for one's company and the problem it aims to address in the market.

• Calm started with the idea of reinventing bedtime stories, which proved to be effective for sleep.
• Being open to surprises and flexible with the business model is crucial for long-term potential.
• The future of Calm is seen as continuing to address mental health needs.

"But that is something that's turned out to be great. And so being flexible and experimenting, I think, is a key part of achieving the long term potential of an idea."

This quote highlights the importance of flexibility and experimentation in the success and evolution of Calm's business model, particularly with their unexpected success in reinventing bedtime stories.

• A clear purpose and reason for existence are essential for the best brands.
• Brands should deliver on the promise they make to customers.
• Companies often overlook brand development, focusing instead on product experience.
• Calm focused on brand principles from the outset, contributing to its success.
• Brand consistency, like that of Apple, Coca-Cola, or Nike, is rooted in values and principles.
• Silicon Valley tends to dismiss brand importance, similar to company culture.
• Brands are symbols that simplify the complex world for consumers.
• Intentional branding is crucial as companies grow.

"And when we were thinking about calm in the early days, we were really excited by this really singular clarity and purpose that we had for what calm could be."

This quote emphasizes the strategic focus on brand clarity and purpose that Calm had from its inception, which is a key factor in building a successful brand identity.

• Founder brands are becoming influential due to social media and democratized distribution channels.
• The uniqueness of the founder's message is key to building a strong personal brand.
• Founder brands can sometimes drive company brands.
• The ability to manage social media presence effectively is variable among founders.

"Yeah, I think it's a reflection on the power of social media and the democratization of these distribution channels so that people can now be the primary product."

Alex Tew explains that the rise of founder brands is largely due to the influence of social media, which allows individuals to become the primary product or brand themselves.

• Customer acquisition must be connected to brand and user experience.
• The current environment for customer acquisition is competitive and expensive.
• Virality depends on the strength of the idea, not just the distribution channels.
• Calm experienced changes in cost as it scaled, highlighting the dynamic nature of customer acquisition costs.
• A mix of paid and organic acquisition strategies is ideal, but the ratio depends on the business.
• Efficient and profitable paid acquisition with a reasonable payback period is crucial.
• Viral products often capture the zeitgeist or reflect a moment in time.
• Experimentation and intuition are important for achieving virality.
• Immediate response is usually indicative of viral potential.

"And if you have a powerful enough idea, people will find ways to share it. It doesn't kind of necessarily matter that the channels have changed or the distribution mechanisms have been tweaked over time."

Alex Tew suggests that the core of virality lies in the idea itself, asserting that if the idea is compelling enough, it will spread regardless of the specific distribution channels or changes in the market.

• Payback periods are business-specific and depend on various factors like cash position and churn rates.
• A payback period of one to two years can be good, but shorter is better.
• High churn rates can be problematic and affect the desirable payback period.
• Predictability of revenue streams becomes more manageable as a business matures.

"Obviously, the shorter the better. I think one to two years is fantastic in terms of getting that full payback, but if you can get it shorter, then that's wonderful."

The quote underlines that while a one to two-year payback period can be acceptable, shorter periods are preferable, and this varies depending on the business's financial health and customer retention rates.

• Importance of details in making an idea go viral.
• The speed at which ideas can be tested and go viral, especially with social media.
• The possibility of rapid success today as compared to the past.

"Right. And within a couple of days, I think otherwise, you need to kind of go back to the drawing board, and it may be that you've got one or two ingredients wrong, because every detail matters."

This quote emphasizes the significance of attention to detail when trying to make an idea go viral and the ability to quickly assess if an idea is working or if it needs reevaluation.

• The challenge of finding time for creative projects amidst responsibilities.
• The need to deliberately set aside time for creativity as one becomes busier.
• The idea that pressure can inhibit creativity and sometimes the best ideas come unexpectedly, such as during vacations.

"I think you kind of need to make time as you become busier."

This quote suggests that as responsibilities grow, one must consciously make time for creative thinking, despite the challenge of a busy schedule.

• The process of bouncing off ideas and getting feedback without succumbing to consensus.
• The importance of conviction in one's ideas when seeking feedback.
• The role of intuition in pursuing ideas despite opposition.

"If you have a lot of belief, the idea itself, and you reflected off a couple of people to see how they respond, but you still have a lot of conviction, then you then go for it."

The relevance of this quote lies in the importance of maintaining belief in one's ideas while considering feedback, and the necessity of conviction to proceed with an idea.

• Ignoring short-term criticism and focusing on long-term conviction.
• The significance of having a core premise with "deep roots" to withstand criticism.

"Ignore anything short term and ignore the critics and the folks who will tell you that the idea is not a good one and really follow your own conviction."

This quote advises founders to focus on their long-term vision and ignore short-term negativity, highlighting the importance of self-belief in entrepreneurial success.

• The balance between focusing on one's own company and being aware of the competition.
• The pitfalls of obsessing over competitors rather than innovating oneself.
• The value of being the originator of strategies rather than a follower.

"You can't really replicate what's going on internally. You have an idea of what they might be doing internally, but you can't replicate their DNA."

This quote underscores the futility of trying to copy competitors' external outputs without understanding their internal dynamics and the importance of focusing on one's own unique strengths and strategies.

• Transition from solo work to the importance of building a team.
• The art of recruiting and not compromising on team quality.
• The balance between patience for long-term success and impatience for immediate action on details.

"So one of the things that I've learned over the years is the importance of building a team and hiring brilliant people."

The quote reflects the speaker's growth as a leader, recognizing the critical role of assembling a strong team in building a successful company.

• The need for a meaningful and impactful mission to attract top talent.
• Being competitive in compensation and culture.
• The shift to remote work opening up global talent pools.

"You have to have something meaningful and important because the folks who are going to come and join you on the journey are going to be spending the majority of their waking life working on the business with you."

This quote emphasizes that the mission and impact of a company are fundamental in attracting the best talent, as it is a significant investment of their time and energy.

• The strategy of delegating as much as possible to focus on core decisions.
• The distinction between tasks that can be replicated and those that are fundamental to leadership.

"Basically try and delegate everything, and then the things you can't delegate, that only you can do, are the things you're left with."

This quote highlights the importance of delegation in leadership, allowing leaders to concentrate on the most critical aspects of the company that require their unique input.

• The value of board members asking good questions to challenge assumptions.
• The role of a board member in providing a fresh perspective to the management team.

"The most important thing, I think, for board members, at least in my experience, is to ask good questions."

The quote suggests that the ability of board members to ask insightful questions is crucial in supporting and guiding the founders and management team effectively.

• The criteria for choosing investors during fundraising.
• The shift in the fundraising landscape as a company grows and gains traction.

"In the early days, calm fo"

Unfortunately, the transcript cuts off at this point, so the full context or conclusion of the speaker's thoughts on investor selection is not available.

• Early fundraising difficulties due to lack of investor understanding.
• Importance of business fundamentals despite fundraising challenges.
• Series A round with Insight Venture Partners after six years of founding.
• The significance of being profitable and having a high revenue run rate during Series A.
• The critical role of the right investment partners and their alignment with the company's vision.
• Emphasis on investor-company fit and the personal relationship with investors.

"We were not particularly attractive to investors, I think, because people didn't really understand what we were trying to do, even though the sort of business fundamentals were pretty good."

This quote highlights the initial fundraising difficulties faced by the company due to a lack of understanding from investors, despite having strong business fundamentals.

"So it wasn't until 2018 that we did our series a first institutional capital we've raised from insight venture partners, and that was six years after founding."

This quote underlines the extended period before securing Series A funding and the eventual partnership with Insight Venture Partners.

"I think it really boiled down to not only having a good fund, who had a lot of great experience to bring to bear, but really it boils down to the partner or the partners that you fundamentally work with on a regular basis."

The quote emphasizes the importance of choosing the right investment partners who understand and support the company's vision and can contribute positively to its growth.

• Favorite book: "Escher back" by Douglas Hofstadder, exploring consciousness.
• Mental fitness as crucial as physical fitness due to the universal need for mental care.
• Richard Branson seen as a symbol of success, especially in the UK.
• Preference for beer over cocktails and a fondness for pubs.
• Michael Acton Smith as a mentor and co-founder, teaching business and the importance of adventure and fun.
• Balancing mentorship and equal partnership in decision-making.
• Desire for more technology focused on internal well-being, particularly mental health.
• The importance of imagination and creating space for free thought and creativity.
• Future ambitions for Calm, including reaching hundreds of millions of members and potential public offering.
• Profitability and growth as concurrent goals, maintaining control over the company's destiny.

"Probably the book Escher back. It was the first book that of blew my mind."

The quote reveals Alex's favorite book and suggests an interest in profound questions about human consciousness.

"Yeah, because everybody has a mind and we need to take care of it."

This quote explains why mental fitness is as important as physical fitness, highlighting the universal need for mental well-being.

"Probably Richard Brenson, childhood hero in many ways and one of the very few examples of publicly successful entrepreneurs in the UK."

Richard Branson is mentioned as an embodiment of success, especially as a prominent entrepreneur in the UK.

"Probably Michael Acton Smith, my co founder at Calm. He's taught me so much about every aspect of business, really, and not least to do it with a sense of adventure and fun."

Alex credits his co-founder, Michael Acton Smith, as a significant mentor and influence on his approach to business and life.

"A lot of technology is really focused on the external world, if you like, improving the efficiency of the world that is out there, as opposed to focusing on the world within, particularly our mind and the emotional states that we're in."

The quote reflects Alex's desire to see more technology solutions addressing internal well-being and mental health.

"I don't think it necessarily has to be a choice. I think you can do both at the same time."

Alex advocates for the possibility of achieving both profitability and growth simultaneously, emphasizing the benefit of having control over the company's future.

• Ambitions to become one of the most meaningful and valuable companies worldwide.
• The goal to be a household brand and utility product essential to everyone.
• Commitment to helping people manage the stresses of modern life.
• Aspirations to reach a vast scale while maintaining profitability and building for the long term.
• Openness to the idea of becoming a public company as part of the growth journey.
• The need to address the pain in the world through the company's offerings.

"We want to build one of the most meaningful and valuable companies in the world, one of the most loved brands, and we're well on our way to doing that."

This quote outlines the grand vision for Calm, aiming to be a globally recognized and impactful brand.

"We want to help many, many millions more people out there with the tools that we've created, and we have millions of members today, but we would love to have hundreds of millions of members in the years to come."

Alex expresses the desire to expand Calm's reach and help an increasing number of people with their mental well-being.

• The belief that profitability and growth are not mutually exclusive.
• The advantage of being slightly above break-even for autonomy and control.
• The preference for self-sustaining business over reliance on continuous external funding.
• The importance of sensible expenditure alongside growth efforts.

"I don't think it necessarily has to be a choice. I think you can do both at the same time."

The quote suggests that a company can pursue growth while being mindful of profitability, thus maintaining independence and control over its future.

• Appreciation for the conversation and mutual congratulations on success.
• Acknowledgment of the persistence in establishing the interview.

"Oh, thank you, Harris. It's been fun and congrats on all your success too."

Alex expresses gratitude for the interview and acknowledges the host's success as well.

• Praise for the interview and the business built by Alex and Michael.
• Mention of future episodes and encouragement to follow on social media.
• Endorsement of various business services like Carter, Lattice, and OurCrowd.

"I so enjoyed that. Not only great to have another Brit on the show, but what an incredible business Alex and Michael have built with calm."

The host expresses enjoyment of the conversation and admiration for the business achievements of Alex and Michael.