“To build a very successful company, it cannot be done in two years, probably a decade if not more.” - Allen Lau
Allen Lau is a visionary serial entrepreneur, a leader in Canada’s tech community, and a sought-after speaker and authoritative voice on entrepreneurship, the innovation economy, and the benefits of a diverse workforce.
Allen is the co-founder of Wattpad, the global multi-platform entertainment company for original stories and leading social storytelling platform. In his previous role as CEO, Allen led an international team with the inspiring vision to leverage groundbreaking technology to disrupt the entertainment industry while empowering diverse voices.
After raising USD $120 million from VCs in Silicon Valley, New York, Canada, and Asia, in 2021 Wattpad was acquired by South Korean internet conglomerate Naver, in a deal valued at more than USD $600 million.
Today, as Executive Advisor to WEBTOON and Wattpad, Allen’s strategic counsel and world-renowned expertise is shaping the future of webnovels and new fiction formats.
Under Allen’s leadership, Wattpad grew into a community of nearly 100 million people with more than a billion uploads on the platform. Thousands of Wattpad stories have been adapted for other platforms and gone on to become blockbuster movies and #1 Netflix hits, Emmy-nominated television series, and bestselling books around the world.
Allen is a board member of the Toronto International Film Festival (TIFF), a cultural organization with a mission to transform the way people see the world through film. Allen also sits on the board for MaRS Discovery District, North America’s largest urban innovation hub. As a board member, Allen joins MaRS in supporting high-growth startups and scale-ups to drive breakthrough discoveries, grow the economy, and make an impact by solving real problems for real people.
A leader in Canada’s technology sector Allen is a member of the Canadian Council of Innovators, a lobby group that advances the interests of Canadian technology companies at all levels of government. He is also the co-founder of Two Small Fish Ventures, a fund that invests in early-stage internet companies with strong network effects.
Allen received his Bachelor and Master degrees from the University of Toronto’s Electrical Engineering program.
In 2020, he was inducted into the Engineering Alumni Hall of Distinction of the University of Toronto. He was twice named one of the Top 50 Most Influential People by Toronto Life.
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Allen Lau is a visionary serial entrepreneur, a leader in Canada's tech community, and a sought-after speaker and authoritative voice on entrepreneurship, the innovation economy, and the benefits of a diverse workforce. Allen is the co-founder of Toronto-based Wattpad, the global multi-platform entertainment company for original stories and leading social storytelling platform.
In his previous role as CEO. Allen led an international team with an inspiring vision to leverage groundbreaking technology to fundamentally disrupt the entertainment industry while empowering diverse voices. After raising $120 million from top VCs in Silicon Valley, New York, Canada, and Asia in 2021 Wattpad was acquired by south Korean internet conglomerate Naver in a deal valued at more than 600 million US dollars. Today as Executive Advisor to WEBTOON and Wattpad. Allen's strategic counsel and world-renowned expertise is shaping the future of web novels and new fiction formats. Under Allen's leadership, Wattpad grew into a community of nearly 100 million people who have written more than a billion uploads on the platform.
Thousands of Wattpad stories have been adapted for other platforms and gone on to become blockbuster movies and number-one, Netflix hits, Emmy-nominated television series, and best-selling books around the world. Allen is a board member of the Toronto International Film Festival a cultural organization with a mission to transform the way people see the world through film. Allen sits on the board of directors for MaRS Discovery District. North America's largest urban innovation hub. As a board member, Allen joined MaRS in supportive high-growth startups and scale-ups to drive breakthrough discoveries, grow the economy and make an impact by solving real problems for real people.
A leader in Canada's technology sector and startup ecosystem. Allen is a member of the Canadian Council of Innovators, a lobby group that advances the interests of Canadian technology companies at all levels of government.
He's also the co-founder of Two Small Fish Ventures a fund that invests in early-stage internet companies with strong network efforts.
Allen received his Bachelor's and Master's degrees from the University of Toronto's electrical engineering program.
In 2020, he was inducted into the engineering Alumni Hall of Distinction of the University of Toronto. He was twice named one of the Top 50 Most Influential People By Toronto Life.
Welcome to the Deep Wealth podcast, and wow, do I have an incredible guest lined up for you today. You already heard the official introduction, but with us today with our guest, we have a fellow business owner, a visionary, and like all of us, took his vision, took his passion, put it to the test, solve some painful problems, had an absolutely incredible exit.
Allen, welcome to the Deep Wealth Podcast. Such a pleasure to have you with us and Allen, there's always a story behind the story. What's your story, Allen? What got you to where you are today?
[00:05:11] Allen Lau: Well, I would say there are so many things I can touch on. I can spend hours and hours talking about this, but I would say it's not one thing, it's not even five things. There are so many steps along my journey and each step became the foundation of the next step. And that in turn became the foundation of the step following and so on and so forth.
Sometimes you just don't know where life would take you. But you still need to have a vision, but you also have to execute on it and step by step and you get to where you wanna be. You know It sounds very philosophical, but that's a good starting point.
[00:05:51] Jeffrey Feldberg: Why don't we do this, Allen, for some of our listeners who aren't familiar with the company that you started, Wattpad, take us back to the beginning because looking back, they were very different times in where we are today and I know you and I, we've had a number of offline conversations and you've shared this fascinating journey of how it started and, where it went to.
So why don't we start with that? So you had this idea for Wattpad so firstly for our listeners who don't know what Wattpad is and what it does, what is that exactly?
[00:06:21] Allen Lau: Yeah, Wattpad is an app that lets people discover and share stories from science fiction to romance and everything in between. We focus on fiction reading and writing, and the app is very global. We have close to a hundred million monthly users around the world, of which about 5 million writers.
And they share a million new chapters of content on Wattpad in 50 languages every day. And accumulatively, we have over a billion chapter uploads. And one thing very interesting is they don't just share the content, the stories people can comment and inline comment on the stories.
For example, I would know which paragraph would be the most commented and why people are excited, why people are engaging, why people are so, so, so in love with the main character. We know all that. And based on all the insight and data we take the best stories and turn them into TV shows, movies, and print books.
Number one on Netflix, Emmy nominated, bestselling books, New York Times Bestseller, you name it. We have them all. And at this moment in time, we have about a hundred projects, TV shows, movies, print books that we are working on. That's going through the adaptation process.
So like in Indonesia, the number one TV shows the top streaming platform came off Wattpad. Number one on Netflix just a few months ago Through my window. It's a Spanish movie, but it's number one globally on Netflix that came off Wattpad too. So these are just a few examples and we started the company 15 years ago.
And that's where we are today.
[00:08:06] Jeffrey Feldberg: Wow. I mean a hundred million plus users a month and really you're doing today what back in the day probably wasn't even possible. Technology has changed and it's allowed you to do this without going through the entire story because that is probably episodes in and of itself. Why don't you, to quickly take us back to the origin story 15 years ago?
So firstly, what gave you this idea of books online because we take it for granted today? It's so obvious to us today, but 15 years ago it wasn't. It was a very different world at that time.
[00:08:38] Allen Lau: Yeah the idea actually started in 2002, exactly 20 years ago. I was the CTO and co-founder of another company called Tierra Wireless. Long story short, Tierra was mobile gaming publisher. So we published games not snake, but for those who remember the Nokia phone at that time, you can play ping pong or snake or some very simplistic games on those phones.
And we were one of the publishers publishing hockey games and NHL partial hockey came off but we also help other publishers to publish games on those feature phones. But what I wanna say is I love mobile technologies. I love gadgets, but I don't play games. We kind accidentally we started off as a technology platform and then accidentally became a mobile publisher, mobile gaming publisher. But it wasn't our original intention. So I was very passionate about what I built, but I wasn't passionate about the content that utilizing our technology. So in my spare time, I, my friends would know.
My media consumption is mostly reading. And my first side project in the evening was of course combining mobile and reading. So I built a mobile reading app on the Nokia phone, but instantly I know is really crappy idea because you could only read three lines of text at a time. So reading a paragraph, you have to scroll a million times so no one would use it.
I wouldn't use it myself. I parked that idea. Fast forward to year 2006, the most popular phone at that time was the flip phone, the razor, that phone, the screen size was quite a bit larger than the candy bar Nokia phone. So I resurrected that idea. Now is the time. That's what I thought.
Now is the time. Let me start this project again. And out in the blue, very good friend of mine, his name is Ivan. Ivan, he's of course the Wattpad co-founder with me now. And we were friends for many years cuz he worked for Tierra as well. He was one of the early employees that's how I knew him. So anyway, he messaged me, Hey Allen, I'm working on a new product idea.
Can you check it out and give me some feedback? Click on that link. Guess what I saw? He was building a mobile reading app as well, independently. Exactly. And at the same time, he was quite a few steps ahead of me. Not only he builds the reading app, he also builds a website where people can share the writings.
As you can see, this is very similar to how I describe Wattpad today, of course, Wattpad today has the movie business, the publishing business, and a million other things that we also do. But the idea actually has not changed in a way. We just keep on expanding and finding education areas. Anyway, that's the genesis of the story.
[00:11:35] Jeffrey Feldberg: And you know what's interesting, and for our listeners, it's an easy nuance to miss. But Allen, you said something really important. Over 20 years ago when you built the first reading app on the little phone, and you only had two or three lines to read. I mean, how many times as business owners do, we fall in love with our own idea and we just get blinded by that?
But you were smart enough and intuitive enough to say, You know what? Maybe I'm ahead of my time. Technology is not a great experience. I'm gonna park it. Let's see where time goes. Let's see how all things work out. Was that natural to you to do that? Or what was behind that?
[00:12:12] Allen Lau: I guess the main reason is I try to eat my own dog food.
I should be the best customer of my own product and when I used it I know it's sucky. Of course, as a prototype, it meant to be sucky. But even if I spent the time to polish that. Polish production-level product is still very sucky because I could not change the industry trends and industry trend at that time was the Nokia phone.
I could not change the hardware. So there are constraints that I could not impact and you have to recognize that and perhaps move on to your next idea. The idea is cheap. Yeah, anyone, any entrepreneur will tell you they don't run off ideas, but they run off time to execute on the right ideas.
[00:13:02] Jeffrey Feldberg: Well said. And so here it was yourself and Ivan. Now you got together, you started collaborating. And I remember offline, you were telling me that when you first got going, I mean today you talk about hundreds of millions of users and Netflix and movies and books, but when we go back to the beginning it was a very humble beginning and I remember you were saying you knew this was going to work.
Now, correct me if I'm wrong, I believe it was a teenager, a teenage girl I believe, who had put a story online, one of the first, and there was feedback that was taking place back and forth with the readers, and that's where it clicked for you. You know what, we're onto something here. This is different than some of the other competitors or where the marketplace was going.
Can you walk us through that insight in that experience?
[00:13:49] Allen Lau: Yes. In the very, very beginning we built the website, we built the reading app on the flip phone. We launched it. We thought we would attract millions of users overnight. Well, we got it almost spot on, except that it's not a million. We miss buy quite a few zeros, maybe closer to a thousand.
When you have a product after one year you have a thousand customers, amazing. If you have a free product that you give away and only a thousand people using it, you suck. We were really struggling I would say in the first couple of years. But we got one thing right. I think the mobile reading idea was right.
We were just maybe a year ahead of time. And then iPhone came out. And then the idea of user-generated content started to take shape. When we first started, YouTube was already like one years old, but you could also say only one year old. So sharing your content, whatever that is on the internet, was actually a very nascent idea at that time.
But one thing we got right was the product without any content, there would be no audience cuz no one would come to read nothing. And without the readers, no writer would upload anything because there's no audience. So it's a chicken-egg problem and we solve that problem by using public domain books.
That's how we got the thousand users. Mostly I would say a hundred percent readers came to our path to read the content, but at least we had some audience. However, it lasts for two years without any meaningful traffic, until that teenage girl came in 2008, two years after we started the company, she uploaded a teenage romance story. And she brought some friends over and everyone was commenting and, Wow, this is amazing. When are you going to write the next chapter? And its serialized content. It's like Charles Dicken's way of writing story over again.
And we caught that. We caught how engaging people are. We caught that, the engagement, the comments, the interaction was the key we caught that the serialization, the cliffhanger, they were all part of that amazing interaction. And then we capture that and keep on improving that experience.
And then the rest is history.
[00:16:06] Jeffrey Feldberg: And you know what's amazing with that, Allen? I mean, In the beginning, we'll talk about this. You were bootstrapping the company and you were like a cockroach startup, and you were smart enough that you took public domain books and you put them online. And from what you're saying, when the story that you just shared, you were doing okay, but it was nothing really to write home about.
But here's the lesson, here's the takeaway for the listeners. Done is always better than perfect. You're in the marketplace. You could not have planned that a teenage girl would put a chapter up that would get a community engaged and talking about it, and that gave you the insight of what you could do with this.
Truth is stranger than fiction. But because you were already in market, you took that chance. You didn't sit back and say we'll wait till we're perfect and then we'll go to market. No, we're gonna go now, see what we can do and we'll improve it. And like you said, you know the rest is history.
You never looked back once you had that. And I'm curious, once you started to get momentum, you became really a target. You were on the radar. I'm not gonna mention names here. You may choose to, but you were on the target of some very substantial companies who are in the ebook business, very large, funded, who could out-maneuver you in the blink of an eye.
I mean, you were rounding error to them. Yet you are scrappy and you figure things out. You stayed ahead of them and ultimately you're still here to talk about it. So how did you go up against incredibly organized and capitalized competition?
[00:17:34] Allen Lau: Very, very good question and I'll be happy to mention names. It's Amazon. Of course. It's okay to mention names. We started in 2006. It was a year before iPhone came out, two years before the app store. The first version, one of the iPhone did not have the app store. It was perhaps three years before Android, but also one year before kindle even existed. So we were ahead of time, but not by a decade, but by one or two years. That, to your point we had to be early, but not too early. That's how we could capture the industry trends. Sometimes, you have to be lucky, but you have to create the environment for you to capture that luck. And we did exactly that. But back to the e-reading Amazon competition during that time, it was very interesting because no one thought about e-reading before Kindle launched and after Kindle launch, everyone thought about e-reading.
So in a way depends on your perspective. You can say, oh Wow, there are so many competitors right now. But on the other hand, you could also say as a small company, I don't have to educate or bear the responsibility to create industry trends. People already educating billions of people.
You can read on your mobile devices, and you have a device that can install different apps that include apps. That education was done by Apple, done by Android, Google, done by Amazon, all in a way is sound easy. All we had to do was find the gap that these big giants could not easily capture.
And one thing that we of course in hindsight it's very much easier for me to articulate, but Amazon, It's an eCommerce company, and in the DNA it's all about selling stuff, including eBooks to you. But eBooks is just a piece of content. There's no comments. There's no social network, there's no community, there's no interaction. In fact, if you have ever used the Kindle app or the kind device, do you think you can contact the writers of the book that you just bought? No chance they don't like you. But we did the exactly opposite. In a way, we found the differentiators, and I'm just using the social network, the community as one example there, there are quite a few other examples.
That's Your competitors that are well funded 10 times, a hundred times larger than you, but they are also very rigid. There are certain things that they would not do. If you can find that one thing or two things of five things that your competitor could not do for whatever reason, capture that and own that, then you could fight the giants.
[00:20:30] Jeffrey Feldberg: And so again, for our listeners, let's just pause here for a moment because Allen, you shared some terrific strategies that really helped you grow. And one of the takeaways is, hey, we don't have to be the ones educating the marketplace. We'll leave that to our competitors. Maybe they're not competitors, we'll call them allies, whatever the case may be.
Let them use their billions of dollars to educate the marketplace. We're gonna focus on what we do best. And so you knew what your DNA was all about. You knew your heart and your soul and what was going on there. It's about a social community around custom made content by the community itself. And unlike a lot of companies, when Amazon enters into the picture, Oh my goodness, we're done.
Let's just go out of business, or let's sell to them, or, you know, we don't have a future. You were smart, you didn't panic, and you said, okay we're gonna keep on doing what we're doing and we're gonna beat them at their own game because they're so big, they're so rigid. They're all about e-commerce. We're not, let's just keep on doing what we're doing.
And ultimately, that won the day for you. And so the other takeaway is, recognize your strengths. Play to your strengths. Don't try and imitate the competition. Do what you do best, and everything else will fall into place. Maybe not easily, but it'll work out when you have that grit and that determination.
And so, Allen, I know you started off private like a scrappy cockroach startup as I like to say. And my company Embanet, we were reminiscing about that offline, how we had these two scrappy cockroach startups that really made the difference because we didn't have the money. And we always say that resources are nothing compared to resilience.
So resilience trumps resources. You don't have the money. You gotta figure out how to be that much smarter, that much better. But there did come a point in time in the company, Allen, where you did go and you raised money for the company growth. So when did you realize you were at the point of, hey, we can't bootstrap this anymore?
We wanna grow, we need to get some outside money in. And what was that like for you?
[00:22:29] Allen Lau: Yeah I think it was around 2009, 2010 we had maybe half a million users already. So the for lack of a better term, the product market fits in terms of the product is there. People love it. People are using, It might not be in millions.
People love it. However, we knew that from day one, our number one goal is to build that network as quickly as possible, and we purposely did not introduce any monetization because for example, if we have a paywall, few people could pay or wanna pay. It creates friction in using the product and joining the community, for example. So we purposely stay away from that and our ideas at that time were when you have a billion users, there will be a million ways to make money. Let's not focus on that. Let's focus on getting to a billion first.
Billion is just an aspirational number. For any company, you should start thinking about monetization. When you have tens of millions of users, that's the right time at least. Anyway because it's a two-step process, unlike some companies, the monetization or business model is built in from day one, and you know how to make money.
And if you could make a lot of money early on, figure out the business model or figure out how to generate revenue and more importantly, profit early on, then you might not need to raise capital, but we need to build hands up millions of user base first before we monetize. Then obviously we need money to get there before we flip the switch on monetization.
That's where it's becoming so obvious that we need to, is a venture, a typical venture back company, leverage capital to build a mode.
And then build a business on top. I think around that time we start to raise money from First Angel and then institutional investors.
[00:24:31] Jeffrey Feldberg: And you went really worldwide. I mean, you raised $120 million. From some of the top VCs. I mean in Silicon Valley, out of New York, some in Canada, some in Asia. But what I really like, and there's another powerful takeaway, actually, two takeaways. One I should have mentioned earlier, timing is everything.
So in 2000, your timing was off. You knew it. You were too early, you parked it. You waited for the marketplace to come up, you were just too much of a visionary, Allen. You're too smart for your own good at that time. But the marketplace caught up. But the second valuable lesson how many business owners, how many entrepreneurs or founders do we hear, Oh, I got this idea.
I'm gonna go out, I'm gonna get some venture capital, they're gonna fund me. I'm gonna make a gazillion dollars. You actually did the opposite. Let me see if I can get some traction. And so half a million users, That is proof of concept. That's more than proof of concept, hey, this is now working well, we haven't monetized it yet, but we have half a million people who can attest that they like this idea.
So I would imagine that listen, fundraising is always time-consuming. There's always hoops and hurdles to jump through, but I would imagine the fact that you can point to a half a million users, made it a whole lot easier for you to get people to buy into, hey, this concept works now let's grow it. Let's monetize it.
Did that help play a role with that proof of concept? Because you waited because you were patient.
[00:25:50] Allen Lau: Absolutely. At the same time, I would also say many investors ask me what the heck was the dollar signed. Where's the money? It only worked for those investors who could see the division that I saw. It's always very clear to the investors.
We wanna build a user base first. We might start monetizing, but not very aggressively, and then we'll figure out monetization. But not everyone liked that idea. So I just wanna clarify. But to your point about timing is absolutely right. What we have observed, especially perhaps during the.com days and also what we've seen, perhaps not this year, but last year, 2021, and 2020 a lot of companies, they raise capital without knowing why they need the capital.
When you raise capital is not just because I want to have more money on the balance sheet. There has to be a purpose that each round of funding that we raise the use of proceeds always, always very, very clear.
For example, earlier stage we just have too many product improvements that we wanna build.
And our team was so tiny, we need to hire more engineers, for example. That's the purpose for early days. And then for our series C, that was the second in 2014. That was the second. I believe the, yes. The second last round of funding we raised Series D afterward and before the company got acquired, Series C was monetization.
Now we have 40, 50 million users using the product. It's time to flip the switch let's raised some capital.
Really not a team to help us monetize. And for Series D for example is okay, now we have another revenue stream called entertainment. We are making movies now. Let's raise more capital for that purpose.
[00:27:49] Jeffrey Feldberg: And so let's listen to that progression that you just shared with us, cuz again, a number of valuable takeaways. So you brought some initial capital in and it goes without saying, you didn't really mention this, but both yourself and Ivan in the first three or four years, you were writing the check every month outta your personal savings or your life savings, whatever the case was to keep the company afloat, and I imagine between the two of you, probably a lot of late nights and early mornings just to keep this company going. You get a half million users, you get some funding in, but you're also surrounding yourself above and beyond the capital from the venture capitalist or the private equity that came in.
What you just said right now was you also surrounded yourself with smart people who helped you get the business to 40, 50 million users. You now have a business model with the entertainment industry and with the people around you, some of your investors and your board, and otherwise, you're then able to further expand on that and take the company into different areas and then raise even some more money to take you to a whole other level.
Would I be corrected in saying that?
[00:28:51] Allen Lau: Yeah. I think it's correct to say that what I would like to add is the early days was extremely stressful. We are talking about a company virtually no revenue. And during the first few years we were taking side contracts. We didn't have a job, it's not like we have a day job, a full-time job, and then in the evening building this company, we were full-time, but we need food on the table. So we take side jobs and contracts. And then when we start to raise capital from venture capitalists. And you're absolutely right I would say majority of the people on our cap table, our investors, our shareholders, of course, they are capital providers, but they provide way, way, way more than just the capital to the company. For example, some of them, they came from the entertainment background. So through the connections, it's easier for us to build the entertainment business. Some investors in tech companies that very similar to ours with one investor who wrote the first check to Twitter, Tumblr at the time SoundCloud, four Square.
You know, as you can see, they are all networks of different content or different usage. Double Sergeant Network, very similar to what we do. It just happened that we were building a reading, writing network but the knowledge know how, we can learn from other CEOs, the investors portfolio company to apply that knowledge so that cannot tell you how much it helped because it helped us avoid it a lot of the strategic mistakes because 10 other companies did that and fail already.
We don't need to try. And one thing that five companies, similar companies try already and it was very successful. I would be an idiot not to at least give it a shot.
[00:30:38] Jeffrey Feldberg: And so Allen, you know what I'm hearing you say with that is, hey, yes, myself and Ivan, we had the vision. We were smart enough to know what to program, but certain areas that the business needed, we weren't the people and we knew we weren't the people. And that's what we looked for in our investors who could help with their network with their connections, with their ideas, that together, yes, we owned a smaller piece of the pie, but it's a bigger pie than what we could have done on our own. Or maybe we couldn't have done it on our own. Maybe just left to ourselves. We'd still be in our basements today and the world passed us by.
Who knows, But you're smart enough to recognize we can't do this on our own.
[00:31:13] Allen Lau: Precisely. Well, both Ivan and I are engineers. Ivan got his MBA as well, but as you can see, in terms of knowhow, the companies, the founders, at least, dominated on the product and engineering side, but not the business side. We have to find people on the cap table that can compliment that, and over time we learn from those people.
So if you look at where I am today versus 15 years ago, the same Allen Lau, these two are very, very different people in terms of skill, knowledge, in terms of knowhow, in terms of pretty much everything as an entrepreneur, as the company continues to grow your job has changed. In fact, your job probably changed every year too.
How you spend your time, how you manage people, how you lead people who you hire is constantly changing. And you, yourself, as an entrepreneur, you have to improve and change and grow as well. That's the only way you can scale a company.
[00:32:15] Jeffrey Feldberg: And Allen what I admire about you, and I hope our listeners are picking up on this as well. You're humble and you're modest. Let's fast forward and the listeners will see what I mean by that. So fast forward, and we're gonna go back in a moment on this. But in 2021, it was a South Korean company, and some of our audience may be familiar with them.
Some of them won't be, Naver came along. And for over $600 million, over half a billion dollars, $600 million, or almost at three quarters of a billion, your company was acquired and you stayed on. And looking back at that many people who would've gone through that and firstly, not many people do could be having an ego.
Oh yes, it was all me and I'm gonna take all the credit and it was my brilliance that did that. But here we just heard you say well, you know, it was a team effort and we didn't know what we didn't know. And yes, we're engineers, but that's about it. And we needed some help with that. And that ability to be humble, I would imagine helped you.
So can you talk to us about how is, as the founder, as the visionary, both yourself and Ivan being humble, how did that serve you as a company continued to grow and really get out there and make an impact.
[00:33:27] Allen Lau: I would say two things. First of all, absolutely takes a village. By the time I step down a year after the acquisition, I step aside from my CEO role. I'm still advising them. So I'm still involved, but not the day to day. But by the time I step down step aside, I should say the company has 300 people.
Can I do this all by myself and with Ivan? No chance. Just not possible. I might be the face of the company, but I absolutely should not and would not take full credit. I'll take some credit, don't get me wrong. But the team, they deserve a lot of credit to get to where we are. But I would also say kind of something that I alluded to early on the industry trends I cannot control.
But you could see this along the journey a few times already. I captured the opportunity when iPhone came out. I captured the opportunity when the $25 Android phone was around the world. I captured the opportunity. Kindle educated the world. You can read electronically, and I capture the opportunity when the explosion of content when Netflix and then shortly after all the other streamers, they produce so much content.
The demand for content was exploding thats how we leverage that to build the entertainment business. So seize the opportunity, I think is one theme. Back to the acquisition, it was, the acquisition started, the conversation started, the process started in the second half of 2020. At that point in time we were very close to break even, practically break even. Let me put it this way, so we would never need to raise more capital if we choose not to. At the same time, we, felt like the entertainment business to fully capture the potential we probably need more capital because it's a movie or entertainment is a very capital-intensive business.
We thought about our numbers. We're good enough to consider going public, but it might not be the right type of company to go public yet because we might not have the predictability and especially the movie business still growing. Quarterly driven profit and rev top line, bottom line, probably not the right time to do it, even though the absolute numbers are good enough to do that.
And then an acquisition offer came. And we thought we have all the optionality in front of us. And this is a very interesting time because now we have an offer, not saying we never thought about selling the company, but that was never, ever the number one goal.
We wanna be an independent company, self-sustaining company. And we are okay with selling under the right circumstances. That's how we always operate. But we never optimized the company for acquisition. We never did that. So anyway, an acquisition offer came. We leveraged that to run the process.
Yeah, maybe we should test the market if we don't like what we see. We could go public, we could not raise, we could raise it not around. We have all the options in front of us. I think at the end we found a neighbor that is a very good strategic partner because they built a very similar business in Asia already.
Mostly on the digital comics, but conceptually very similar to our perfect extremely complimentary because Wattpad focuses on fiction. They focus on comics. So it's not competitive. And anyway, when we started talking the synergy, the business synergy instantly. It was there.
It's so obvious. That's why we made a call, but at the end of the day, it's all about optionality.
[00:37:11] Jeffrey Feldberg: And what's interesting about that, Allen, is again, you are always looking forward, not back, and how many business owners or founders, back in 2020, the company was just about to turn profitable. You don't need any more money or to raise capital. And you could have kept on going down that path and, hey, we made it.
We did it. Life is good. We don't have to continue innovating. But you saw, hey, it's great that we're here. But it's always a but, if we wanna take it to the next level, we can't stay still. And you know what? We're gonna need some more capital to do that. And we've got a good thing going here. Let's make it even better.
And so timing is everything. You had a knock at the door. It was the right time, you had the right mindset. You knew you were at an inflection point, and obviously, the numbers made sense for everyone, and off you went with that. When you look back, Allen, at the whole process of the liquidity event, the discussions, the negotiations, the back and forth, I'm sure both parties were posturing a little bit as it always happens.
Is there a strategy or two that really made the difference for you that you can share with our listeners?
[00:38:18] Allen Lau: I would say looking back we were very lucky to have a lot of great people surrounding us including many of our investors. So of course they've done acquisition in IPO and all those things before, so we are not going blind and you know, you don't sell your company every day.
So, everyone who is selling the company, you are the rookie, you are dealing with the very experienced investment bankers the other side. They do this every day, and you do it once in your life. So in terms of knowledge and experience and expertise, it's very asymmetrical.
It's not a fair competition, So, surrounding yourself with the right people that can help you through the process. Absolutely key. But at the end of day like many people will tell you great companies are not sold. They are bought. The distinction is you don't have to sell.
it's so counterintuitive, but if you don't have to sell, you can stand very firm on many things that you wanna negotiate, including the price. Because you know that I don't need the cash, right? So, in a way it's actually help. I think this optionality thing applies so broadly in life.
It's not just selling the company.
In many other aspects from Wealth management, from making career decisions. One thing I always do is I always ask myself, at least in for others important decisions, but I think smaller ones too. What's the plan B? What's the worst-case scenario?
It may sound like it's very conservative because I'm thinking about it downside, not the upside, but knowing the downside actually enable you to swing for the fence in the right context, in this case, is a perfect example. You know, If I was running out of cash, if Wattpad was running out of cash, I have no choice but to sell.
Do you think I would fetch amazing price? Do you think I would negotiate all the good terms? Probably you might not be in as good a position to negotiate.
[00:40:24] Jeffrey Feldberg: Absolutely. And we've had buyers come on the Deep Wealth podcast and they say, Jeffrey, when we smell blood in the water, that a potential business owner or seller is desperate or they're fearful, we're all over that. And you know, our valuation goes out the window because now we're going in for the kill.
They're desperate. Who doesn't like a good deal? We're gonna do that because we pick that up. But the other thing that you're saying, Allen, is with the plan B, but you didn't quite say it this way. I'm gonna put it out there. Again, you're always humble. You're humble, and you put things in perspective. And I think that's easier said than done.
And even with what you said, hey, I'm only gonna sell a company once in my life. Maybe if I'm really fortunate, maybe two or three times, but at least, for now, is gonna be once. Let me get people around me who do this all the time and let me look to them for some help and advice. And you're not checking outta the process.
You're not gonna go with them on autopilot that you're not doing anything but you recognize, I don't know what I don't know. Let me get some help with that. So I think between being humble and then saying, Okay, deal doesn't go through. What's the worst that can happen? Well, I have this amazing company. We have 20, 30 million users.
We'll figure out something else. I don't really need to do it. My financial needs at this point in time are taken care of. Could they be better? Sure, they could be better, but they could also be worse and they're not. So now I can, in your words, swing for the fence, because I know my plan B is a pretty good plan.
[00:41:47] Allen Lau: That's right. Precisely.
[00:41:49] Jeffrey Feldberg: Some terrific advice and some insights and for all of our listeners out there, really be humble. Look at your plan B. Have that confidence and always look for those inflection points. Allen, I love what you said, first when it was the Nokia phone just wasn't the right marketplace. And then from there to the razor phone, okay, now we got something.
And then from there to a $25 Android, and then to the iPhone, and then to the Kindle. You jumped on all those opportunities. You weren't at the center of it in terms of the technology or bringing it to the marketplace, but you're always looking for those inflection points. At Deep Wealth, we call that step number one, the big picture.
Hey, what's going on out there? Where's a market disruption I can create? So between being humble, looking for the inflection points, surrounding yourself with all the right people, and of course, having just a quality world-class offering that really made all the difference. And a tremendous congratulations on your Exit.
Before we start to wrap up, I'm just curious. You've been on with the company now, and it's a little bit different. You're not in the chair, so to speak, leading the charge. How's your post Exit life treating you? What's that like for you?
[00:42:56] Allen Lau: it is great. I loved my job. And if I were to continue the plan B that we just talked about I don't wanna sound plan too negative. It's not really plan B, and equally good plan A, I could continue and I would be more than happy to continue. However, I would also say it was a very intense job.
I did it for 15 years and am I going to start another company again? A lot of entrepreneurs could not resist the temptation, but I know that it's going to take another 10 years. Am I going to spend another 10, or 15 years in building another company? Maybe not. I think at this stage in my life I think there are other things they wanna do.
And one of the things that I really enjoy and in the past few years in a small way is investing, helping other entrepreneurs is not just about money. It's about investing in early-stage companies. It's really fun and mind-stimulating because you are trying to figure out the product market fits.
And turning that into a product is already a big step turning that usable product into a business, that's another leap. And that's the most interesting part. And once the business model has figured out, once the team has built a few hundred people or a few thousand people, many companies, I wouldn't say most, but many companies they become optimizing. It's every day is status quo, whereas early stages very, very different. That's why moving forward I won't start another company. I'm a hundred percent sure about that. But whatever time I have I would focus on investing in early stage tech companies.
I already started a bunch of fund many years ago. My wife Eva, she's the general partner, She's running with that for many years with amazing resales. It's got two small fish ventures. I'm the smaller fish tagging along. She's the big fish. Whenever I have more time and increasingly I should have more time I would be working on that.
[00:45:02] Jeffrey Feldberg: And again, Allen, I've said it before, is worth mentioning again, just your practicality of how you look at things. And so I'm hearing you say, You know what, Jeffrey? Look, 15 very intensive years that I did not prepared to do that again on my own. But I do love that startup phase of what's going on and that energy with that.
So myself and my wife, Eva, you were saying, we have this venture fund that we started where we can help startups, and obviously Allen, you have a lot to say about startups and how to go from zero to hero and it energizes you and that's something that really gives you life some purpose. And there's a lot to be said for that because in the post Exit life, and I'll put myself out there, You know what?
I wasn't as wise as you. I didn't do that preparation and that planning. I got lost in the early days of my post Exit life, and even to this day, I'm still catching up on that and making things right from when I did things wrong. And you're on the much better path. You've put some time, some thought, Hey, what do I love doing that isn't going to be overly consuming time-wise?
That I have the energy to give, that has me feel energized. And you found that for you and for business owners, that's really our challenge. Before your Exit, before your liquidity event, figure out your post Exit life. Allen, you did that with your wife Eva, when you started your venture fund before you sold the business, and now it's more in the front and center of your life post Exit.
So congratulations on that as well.
[00:46:27] Allen Lau: Thank you. In a way that was somewhat by design. When we started two small fish ventures eight years ago it was an angel for now is a proper venture capital with external LPs. Very typical GP LP structure, like many other venture funds out there. But I would say the seed was planted eight years ago cuz I was thinking what's my post Exit life. If I ever Exit, I might not, and that's okay. But if I did, I don't wanna be like a championship winning team after winning the championship. What's next? What should I do?
[00:47:02] Jeffrey Feldberg: Absolutely. This was the two small fish that was your plan B seven, eight years ago before you even had any inkling that the company would sell. Hey, but this is my plan B. We'll see where it goes. Maybe it goes somewhere, maybe it doesn't, but it went somewhere and you're now in the front and center of it.
And once again, you're thinking really made the difference for you. So lots to learn about. Allen, you and I can continue down this path and maybe there's another episode. We're talking offline. You're saying, Jeffrey, you're so gracious. Jeffrey, After our interview, if there's other questions that come up, let me know and we can talk about it.
Maybe, Allen, there's another episode in the Making Care that we can get to. But one thing at a time let's get back to this episode. And you've been very generous with your time, so let's start to wrap things up with a thought experiment. And I'm really privileged every guest on the Deep Wealth podcast, I feel so privileged to ask this question.
So here's what I'd like to ask you, Allen. Think about the movie Back to the Future. And in the movie, you have this incredible car, the DeLorean car that can take you to any point in time. So imagine now it's tomorrow morning and you look outside your window. Not only is the DeLorean car sitting there, but the door is open and is waiting for you to hop on in.
So you hop into the DeLorean car and you can now go to any point in your life, Allen, as a young child or a teenager, whatever point in life, you would go to Allen. What are you telling your younger self in terms of, Hey, Allen, here's some life wisdom, or some life lessons, or do this but don't do that. What does that sound like?
[00:48:38] Allen Lau: Well, two things I would do number one, I have to say this because one thing I still regret is I did not take enough pictures of the early days. So I was hop to that car, I take more pictures in the early days. But to answer your question about telling my younger self I would say perhaps I should start my first company a little bit earlier.
I learned a lot from my first few years of my career cuz I worked for really fast growing startup. I learned so much from the entrepreneurs, the founders at that time. Then it took me a few more years to start my first company. And one thing, I did not have the appreciation at that time, but now I know to build a very successful company, it cannot be done in two years, probably a decade if not more.
And you don't have that many answers. Each one is one decade or 15 years. You have two at bets at most. If you start your first company in your late thirties, for example, early forties, you have one shot, but the more shot on go you have higher chance to score, so yeah.
I wouldn't say it's a regret, but if I could optimize a little bit more, maybe I should have start my company a little bit earlier, but hey, timing was right for me. I started working a year before the iPhone came, a year before the kindle came. It was perfect. So I'm, It sounds like I'm complaining I'm not.
[00:50:11] Jeffrey Feldberg: Well, Allen I think you did incredibly well. And who knows, Maybe in some multiverse, you started a company much earlier and you started, a whole number of companies had all these different exits. But what we do know is congratulations. You did incredibly well with Wattpad and how you took it from a vision to reality and growing it along the way and having just a whirlwind of an Exit.
You don't hear that all that often, but you did it. So congratulations with that and really a heartfelt thank you for sharing your insights and your wisdom. Allen, we're gonna put this in the show notes for our listeners who'd like to reach out to you, what's the best place online for them to get in touch?
[00:50:49] Allen Lau: I can be found online very easily. I guess the best way is perhaps to use my LinkedIn or two small fish email or Wattpad email all three of them can reach out to me in the professional context. Very easy to guess, allen[at]wattpad[dot]com, allen[at]twosmallfish[dot]bc. And LinkedIn is not the best product, but you know, that's where my professional network is.
So, that's where I maintain my contacts sometimes.
[00:51:18] Jeffrey Feldberg: Terrific. And for our listeners there, you heard it from the master himself, how to get in touch with them with questions, and what a Wealth of resources you are Allen. Thank you so much for that, and as we wrap up this episode, as always, please stay healthy and safe.
[00:51:33] Allen Lau: You too, Hope the audience feel safe and stay safe and healthy. That's the most important thing, and find joy in life.
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[00:54:09] Jeffrey Feldberg: Are you leaving millions on the table?
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