Video about Calm
Quick Overview
Website
Product
Mobile app for improved sleep, meditation and relaxation
Rating on Glassdoor
4.5/5
Total funds raised
$218M
Last round
Dec 2020. Valuation $2B
Famous investors
Insight Partners, Lightspeed Venture Partners, TPG, Goldman Sachs Asset Management, Marc Benioff (Salesforce CEO), Matt Mullenweg (co-founder of WordPress and CEO of Automattic), Sound Ventures (by Ashton Kutcher)
Why Invest in Calm
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Calm is #1 health and fitness app in the world. In 2020 Calm boasts more than 100 million downloads worldwide. 100,000 new users download the app every day.
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Rapid increase in stress and mental disorders. Nearly 800 million people worldwide, or 11% of the global population, live with a mental health condition (Deloitte).
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The pandemic and geopolitical instability fuel depression and anxiety. Searches for yoga and meditation apps increased by 65% y-o-y between 2019 and 2020. The number of American users who have meditated at least once increased 3x between 2012 and 2022.
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Big vision. Health and wellness is a $4T industry and there is a big opportunity to build the leading company in the fast-growing and important space.
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M&A activity. Calm is interested in pursuing deals with new talent and continuing its international expansion. The company has recently acquired Ripple technologies to access new market verticals. Calm plans to continue its growth through M&As.
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Significant upside potential in enterprise value. Given the average estimates of the market size and growth, the expected revenue of Calm app is to reach $770M by 2027. The recent IPOs in the digital healthcare and technology space (Babylon Health and Doximity) were valued at 15x annual sales on average. Applying this estimate, the valuation of Calm app could reach $11.5B within the next 5 years.
Business Growth Phase
Product
Calm is driven by a mission to make the world happier and healthier. The company was founded in 2012 in San Francisco and has developed an app that enhances mental fitness and alleviates some of the most important mental health issues including anxiety, depression, insomnia, and stress.
The app offers masterclasses, breathing exercises, varying lengths (3-25 min) of guided meditation sessions to help consumers squeeze into their day. Users can track their daily progress which encourages them to form a healthy habit. When data indicated that usage spiked before bed, Calm launched Sleep Stories, narrated by famous voices such as Matthew McConaughey and Harry Styles.
Calm is ranked #1 among meditation apps by global downloads during H1 2021. This shows that consumers are prioritizing not only their physical health, but also their mental health especially as the effects of the pandemic linger on.
The app is available in English, German, French, Spanish, Korean, Portuguese and has recently added Japanese, its seventh language. Calm was named by Apple as the 2017 iPhone App of the Year and an Apple Best of 2018 award winner, and Google Play Editor's Choice 2018. The Center for Humane Technology named it “the world's happiest app.”
Evolution
In 7 years since its inception, Calm grew from a startup to a billion valuation company, becoming the World’s First Mental Health Unicorn. In 2020, Calm has registered over 100 million downloads worldwide, solidifying its position as the world’s most downloaded meditation app. It is 150% up from 40 million downloads reported in February 2019. Over the same period, the number of paying users grew from 2.5 million to 4 million. According to the company, an average of 100,000 new users are added daily.
According to co-founder and co-CEO Michael Acton Smith, Calm is interested in acquisitions of other businesses and growing through M&A, pursuing deals with new talent and continuing its international expansion.
In February 2022, Calm acquired Ripple, a San Francisco-based healthcare technology company, that has just launched two products aimed at alleviating the burden of caregiving for both professional and non-professional caregivers. Ripple team will continue to work on these products. The company will join Calm to focus on building Calm Health, which will replace existing B2B offering for enterprise employees, Calm for Business. Calm Health is expected to launch soon, with the aim of supporting mental health across the care spectrum.
Calm made its first foray into physical activity and video content with the launch of its new Daily Move feature. It guides users through simple exercises to get them moving. Calm sees the new feature as an entry point into mindful content for people who find traditional meditation a difficult place to start.
Here’s what co-founder and co-CEO Michael Acton Smith say about their vision:
“We started as a meditation app, but have grown far beyond that. Our vision is to build one of the most valuable and meaningful brands of the 21st century. Health and wellness is a $4T industry and we believe there is a big opportunity to build the leading company in this fast-growing and important space.”
Market Opportunities
Acumen Research and Consulting predicts that global spending on mobile mental health applications will reach $3.7B by 2027 and estimates this market will grow at 24.2% annual rate from 2022 to 2027.
The demand for mindfulness apps has risen steadily over the last eight years. Typically, they are easy to access and integrate into daily habits, require little effort to use and provide an enjoyable experience. Mindfulness apps are also more resistant to disruption than traditional therapies, though they are not a replacement for professional mental health treatment.
Nearly 800 million people worldwide, or 11% of the global population, live with a mental health disorder. The COVID-19 pandemic exacerbated anxiety and triggered a decline in well-being, resulting in a dramatic increase in the prevalence of depression and stress.
In general, the mindfulness space is quite consolidated, with Calm and Headspace holding around 70% of the market. According to Sensor Tower, the world's top 10 English-language mental health apps were downloaded 10 million times in April 2020, compared to 8 million downloads in January 2020, the last month of life without COVID.
The pandemic has helped people talk openly about their mental health and made seeking treatment more socially acceptable. Mental health apps can both help meet mental health support needs and make that support more affordable, than professional mental health services, such as talk therapy.
Team
Co-founders and co-CEOs Michael Acton Smith and Alex Tew are both successful serial entrepreneurs. Alex Tew founded news aggregator Pop Jam, while Michel Acton Smith previously founded the gaming company behind Moshi Monsters. He presided over its meteoric success, only for it to fade from popularity as children turned to smartphones and tablets.
Michael felt the pressure of being a successful entrepreneur, which caused bouts of insomnia, exhaustion, headaches. He followed his passion for mindfulness and neuroscience. Together with Alex, who was trying to prove the beneficial effects of meditation, they created Calm, positioning it as “Nike for the mind.”
Financials
In December 2020, Calm raised $75M in Series C funding, pushing the company’s valuation to $2B. The previous round, which brought the company’s valuation to $1B, was held in February 2019. Calm investors include Insight Partners, Lightspeed Venture Partners, TPG, Marc Benioff (Salesforce CEO), and others.
Calm monetizes through in-app subscriptions, and sells the service for $69.99 per year or a lifetime subscription for $399.99. Also, the company recently introduced a new “Premium Family” plan that includes up to six accounts and costs $99.99 per year. In addition, Calm has more than 300 paying business clients and is actively developing offerings for corporate clients. The company’s top markets by spend include the US, UK, Brazil, Canada, and India.
According to Crunchbase, Calm has been profitable since 2016. At that time its revenue comprised $7M. In 2019, it was on track to reach $150M ARR.
Given the average estimates of the market size and growth, the expected revenue of Calm app is to reach $770M by 2027. The recent IPOs in the digital healthcare and technology space (e.g. Babylon Health and Doximity) were valued at 15x annual sales on average. Applying this estimate, the valuation of Calm app could reach $11.5B within the next 5 years.
Investments Rounds and Share Price
Investors and Their Most Famous Exits
Insight Partners – Shopify, monday.com, New Relic.
Lightspeed Venture Partners – Affirm, Zscaler, Snap.
TPG – Spotify, NIO, Lenovo.
Marc Benioff (CEO of Salesforce) – Upstart, Astra, Zuora.
Sound Ventures (co-founded by Ashton Kutcher) – GitLab, Zenefits and Bird.
Risks Related to Calm
High competition
The latest data from Deloitte indicates that there are up to 20,000 apps for mental health in the market, and new players are entering this space every day. Even though the market is quite consolidated up to now, its growth potential attracts startups, which increases the overall competition.
Low entry barriers for new players
Entry barriers are low for the app development business. New players are theoretically able to create a mental health app at a low cost within a short time.
Market overestimation
Mental health market has been extremely “hot” during the last few years, with VC investors funneling unprecedented funds into mental health apps. Since the beginning of the pandemic, they have poured $3.1B into mental health ventures, a third of all digital health funding for 2021. That is more than 7 times the amount of funding placed in such ventures in 2015. If mental health companies will not meet these high expectations, the valuation of the market can decrease considerably.
Sources
Calm PitchBook Report, Mar 2022
Calm Crunchbase Profile, Mar 2022
Mental health market trends, Deloitte, Dec 2021
Mental Health App Market projections, Acumen Research and Consulting, Mar 2021
Calm Hits $2 Billion Value With Lightspeed, Goldman, TPG Backing, Bloomberg, Dec 2020
Calm raises $75M more at $2B valuation, TechCrunch, Dec 2020
Top Meditation App Statistics to Know in 2022, Appinventiv, Mar 2022
Calm Revenue and Usage Statistics (2022), Business of Apps, Jan 2022
Offering
Deal structure
Dizraptor Fund 1010 LLC is formed for the purpose of acquiring Common shares of Calm. The interests in the fund are offered to accredited investors who after signing a subscription agreement become its members.
View SPV's documents
Limited Liability Company Agreement
Confidential Private Placement Memorandum
Subscription Agreement & Investor Questionnaire
Investment Management Agreement
Fees
Fee on management – 5%, paid on top of the investment amount.
Carried interest – 10% of net profit, charged at the closing of investment, after the rest of the commissions are paid.