Introduction
Naren Arulrajah: Today, we are excited to bring you our TBR Success Stories edition, where we learn from the best in tech today for our TBR Success Stories edition. I’m excited to interview Allen Lau, and our topic today is lessons from Allen Lau’s journey as the co-founder of Wattpad.
Overview of Wattpad
Naren Arulrajah: I’m sure many of you are in the Canadian Tech space. Know Allen Lau is a rock star founder and CEO. He started a company called Wattpad. A few years ago, he exited one of the largest exits in Canada for a tech company. So, I’m excited to talk to Allen Lau today about who he is, where he came from, how he ended up creating this amazing company, and everything he learned along the way, including the mistakes he learned from.
Allen Lau: Hey, it’s very great that you invited me. I appreciate it.
Naren Arulrajah: Thank you, Allen. You are a very humble person. So, I know discussing the winds will be hard for you. But still, I do feel, you know, for context, people need to understand who you are and what you have done. So before we jump in, can you kind of give us a 10,000 ft view on Wattpad in case somebody doesn’t know what Wattpad is and kind of talks about, like, the exit, like, in other words, who bought it? Why did they buy it? So, let’s start at the end, and then we’ll go back to the beginning.
Allen Lau: Let me give you the elevator pitch of what is an online platform for people to read and share stories when I say stories, I mean science fiction to romance and everything in between. I mean, mostly fictional stories. This platform has about 100 million monthly users, of which about 5 million are writers, and they upload one million new chapters of fictional stories daily on the platform in 50 different languages. Almost all the major languages and countries in this world have our users.
Wattpad’s Unique Features
Naren Arulrajah: So, what’s so interesting about the platform?
Allen Lau: Besides the traffic, very high traffic is the amount of data we collected so many years ago. I think maybe in 2011 and 2012, we started to invest in AI. Using AI to mind the data, understand the data, understand our content, and then leveraging AI and also the human, of course, we take the best stories on our platform and turn them into TV shows and movies and print books and other formats. So, if you go to Netflix or Hulu or perhaps the local streaming company in Indonesia or other regions, you will find many of the top movies, top TV shows, or even the best sellers coming off our platform as well. We were globally number one on Netflix multiple times, for instance. And that’s the very interesting part of the business, almost like the company’s beginning when we first started. we couldn’t imagine how it expanded.
Acquisition by NA
Allen Lau: And finally, I would also say we, as in Wattpad, got acquired by NA. NA is the nickname. His nickname is Google of Korea. They are the largest internet company in Korea and one of the largest in Asia. and the value of the transaction was 840 million Canadian dollars.
Naren Arulrajah: That’s amazing. That’s almost a billion dollars, $840 million. The way I understand Wattpad and summarize, I’m summarizing it; correct me if I’m wrong. So, you became a place for people to create content and get instant feedback. So if they write a chapter and a lot of people are reading it, that means it might be interesting, and they write the next chapter and the amount of data you are collecting with like a million chapters being published daily. And you know, millions of people reading it, what’s trending, what’s not. So, in the old days, somebody came up with a story and wrote a book or a movie, and it was a hit or miss.
Naren Arulrajah: Now you almost know in advance if something is going to kind of work because you know the reception it’s getting, like, very early on. And then you will be able to monetize all that intelligence and all that knowledge in all kinds of ways and all over the world.
Allen Lau: Yeah, you are correct. in publishing and, in Hollywood as well, is a hit-based business, but most of the time, it’s not a hit; almost way more than nine out of 10 movies are flops. So, with our data, we are very predictive; we can see the trends and predict how the user base and the readership will grow. And, of course, based on all the comments and one thing I didn’t mention, we also see hundreds of millions of comments monthly. Utilizing the comments, we know how emotional and gauging the readers are, and that is one of the signal sources to predict what will become the top hits. And, of course, it’s not 100%, but it’s all about massively increasing the success rate.
Introduction and Early Career
Naren Arulrajah: So you start by discussing some of your jobs and how you ended up starting Wattpad?
Allen Lau: Yeah. So well, in university and engineering school, I met my wife, Eva. So we graduated pretty much at the same time.
Meeting Eva and Joining The Arena
Allen Lau: She went to work for a startup company called The Arena. I joined IBM at that time. when we were at, the two companies were pretty much across the street. So, I started to get to know her colleagues and became friends with some of them.
Transition to Tech Startups
Allen Lau: This is important because when she joined the arena, it was a 20% company. And then I found her work, and the company was very exciting because it was a startup tech company. And I was working for one of the world’s largest and probably the slowest technology companies. So, nine months later, I also joined the arena. And by the time I joined, it was close to 100 people. And then, a few years later, Semantic acquired the company for half a billion dollars.
Co-founding Tierra Wireless
Naren: So, when did you like it? So, when did you get your first job? And when did you end up starting? And, like, maybe we’ll talk about the year or two before you start?
Allen Lau: So, it was an amazing ride. And a few years after they got acquired, two of the founders of the arena, Tony Davis, Tony wasn’t the founder; he joined afterward, but he was the creator of one fact. So, he was one of the founding team members. So Tony, Tony Davis, and Mark started Bryce Park; Bryce Box now is a capital, but at that time when they started, I think in 1999, it was an incubator and venture capital. So, both me and Eva, after working for Mark and Tony for a few years as our first job, when they started something new, we, of course, wanted to join them again, and we joined them around, yeah, actually towards the end of 1999 early 2000 at the turn of the century.
Growth and Challenges
Allen Lau: So it was a good ride. Then, we became a venture back company. We raised external capital from other VCs as well. Of course, price invested. We scaled the company to almost 200 people. So it’s relatively successful. But well, I’ll keep a long story short. When the smartphone came out, the feature phones in the past got disrupted. One of the value proper sessions at that time was because each mobile phone model from Nokia, Motorola, and perhaps LG worked differently. So, building mobile games was very difficult at that time.
Allen Lau: And that’s one of the core pieces of technology we built. But when the iPhone came out and subsequently Android, you had to build the application and the app twice: one’s on IOS, and one is on Android. And in a way, one of the biggest lessons that we learned is that our biggest competitor wasn’t any other company. It is there’s a platform shift happening. Once there’s a platform shift, once the paradigm has shifted, your product, technology, and customers might not be relevant anymore.
Tira’s Failure and Mobile Reading Idea
Allen Lau: Well, let’s go back to the days of Tira Wireless. I co-founded Tira with two other co-founders. Tira was a mobile content company, and we were actually quite successful. At its peak, we had over 200 employees and served content to over a hundred million mobile phones worldwide.
Naren Arulrajah: Wow, that’s impressive.
Allen Lau: Yeah, but you know what they say, “Success is the best teacher, but failure is a better teacher.” So, even though Tira was successful in revenue, profitability, and headcount, we had one little problem: user traction. We couldn’t get enough users to use our mobile content products.
Naren Arulrajah: I mean, I know you said Tira failed, and then, when did you guys realize it failing?
Allen Lau: Well, it was a slow realization. As I mentioned, we have been in the business for many years, and the revenue was coming in. But the user growth wasn’t there, and it was a struggle to keep going because, at the end of the day, you want to build something that people love and use. And if you don’t have the user traction, keeping the motivation going is hard.
Mobile Reading Prototype
Allen Lau: So, one interesting thing was because Tira was a mobile content company, and I kept building different product ideas within.
Naren Arulrajah: And when did you decide to do something different?
Allen Lau: Well, one of my ideas then was mobile reading. I did a mobile reading app prototype. I built this in my spare time, I think around 2002 or 2003. As a prototype, it worked, but it also didn’t work because the screen size was too small to read a paragraph. You must press the down button and scroll down a million times before finishing the paragraph. I can guarantee no one would want to use it.
Naren Arulrajah: Yeah, I can imagine that would be quite frustrating.
Allen Lau: Absolutely. So we didn’t pursue the idea, but by mid-2006, late 2006, two things had changed. Number one, the screen size got much larger. If you recall the flip phone, not only could you, unlike the Nokia, you could only read three lines of text at a time. With the flip phone, you could read ten lines of text at a time. It is still primitive by today’s standards, but actually, it’s usable. So I resurrected that idea in my basement because I love to read; this idea just kept on stuck in my mind. I just cannot get rid of it. So, by 2006, I was so passionate about this idea. I thought the timing was right. Maybe I should leave Tira and start a new company. So I left Tira in… I thought about leaving in 2005, and it was still at its peak. But I just wanted to pursue this idea of mobile reading.
Naren Arulrajah: Yeah, it’s interesting because I think many people start a company, and they feel somewhat successful, and they can’t let it go. But you were at a point where you were at 200 people. So, it was somewhat successful. How do you let it go? You feel like you’ve given so much of your time and effort, and the world is changing, but a lot of us have a hard time just letting go.
Allen Lau: Yeah, it was not easy because I started the company with two other co-founders. I had known them for many years. We were quite good friends. So, to make that decision was very difficult. And also, as you say, Tira was successful in many ways. Revenue, profitability, headcount, all those things. But at the end of the day, I just couldn’t let go of this idea.
Meeting Ivan Yen
Allen Lau: Yeah, well, the story goes that I didn’t start Wattpad by myself. It was actually a very good friend of mine, Ivan Yen.
Naren Arulrajah: So you guys knew each other from before?
Allen Lau: We actually worked together at Tira. And he was working for me, but I think we figured out that our skill sets complemented each other. The important thing in a startup is having a co-founder who complements you. I’m a very product-oriented person. I like to build things. I’m a very analytical person. I like to measure things, but I’m not a great salesperson, and I’m not as well-connected. Ivan is very different. He’s well-connected, and he’s also a great salesperson. When he left Tira in 2006, he left simultaneously. So we both left the company at the same time. So actually, it was very funny. When I left Tira, I took a month off, which I’d never done before. And that month off, I went to China. And when I went to China, I noticed something very interesting., I’m a big fan of ebooks and digital content, and I’m also a big fan of reading.
Naren Arulrajah: Okay.
Allen Lau: And I was in China, and I visited this bookstore in Beijing, and I noticed something quite interesting. In the middle of the bookstore, there was this little section that was very well-lit up. The rest of the bookstore was pretty dark, but this little section in the middle was very well lit up, and it was a section where people could read books. They had a cafe, they could sit down, they could read books. And I thought, “Wow, this is quite interesting.” People who don’t own the books could just go to the bookstore, read the books, and it’s comfortable. It’s like a library with a coffee shop. And it’s not something you can do in North America. In North America, a bookstore is where you buy books, but in Asia, a bookstore is where you read books. So I thought that was very interesting. I didn’t make anything out of it. I just thought it was interesting. So, I returned to Toronto, and the idea of mobile reading remained. I was still very passionate about it.
Launching a New Company
Naren Arulrajah: So, did you and Ivan start? Did you just say, “Hey, let’s go do this,” or how did you get started?
Allen Lau: Yeah, so when I came back to Toronto, and I still had this idea, and it was, like, nagging me. And it was a very audacious idea. It’s not an idea that you can just build a product. You have to get the content. We knew this would not be an easy project. And I thought, “Well, I need a co-founder, and I need someone who’s very well-connected.” So I called Ivan, we had lunch, and I told him about the idea. And Ivan was very open to the idea. He worked for another company then, and I said, “Ivan if you come and join me, we could start a new company and build this new platform.”
Naren Arulrajah: And this was 2006.
Allen Lau: 2006. And so, he thought about it, and he thought it was interesting. He knew that he had a skill set that I didn’t have, and he also thought it was a very big idea. So, we decided to start a new company. And we started Wattpad in late 2006. We started working on it, and we launched it in November 2006.
Naren Arulrajah: So it was a brand new company. You didn’t take any IPs or anything from the previous company.
Allen Lau: No, we didn’t. We started with a blank sheet of paper. We didn’t take any code. We didn’t take any IP. We didn’t take any employees. We just started from scratch. And, I think one thing that we learned from the experience of Tira is that, um, if we want to build something, we should just start from scratch.
Naren Arulrajah: What was the early version like? How did it work?
Allen Lau: So, the early version was very simple. you could go onto Wattpad, and you could write stories, and other people could read the stories. And, at that time, we didn’t even have any reading app. It was just a website.
Naren Arulrajah: Yeah, it was just reading, just text, pretty much.
Allen Lau: Just text on the website. And you could write stories on the website. We didn’t have a writer’s app. We didn’t have anything. It was just a website.
Naren Arulrajah: Okay, so tell me about the early days. So you launched in November 2006. How did it go?
Allen Lau: Well, it was, actually, very fortunate. we had some initial traction. And, you know, the internet was a very different place back in 2006, It was much smaller.
Naren Arulrajah: Yeah, it was a much smaller place.
Allen Lau: There were only a few platforms, like MySpace and Facebook, just starting out. And we were one of the few places where people could read stories and write stories.
Naren Arulrajah: Yeah, so, you launched, and what was the reception like? how did it start to grow?
Allen Lau: Well, we didn’t have that many users in the early days. we had a few thousand users. We were struggling, to get any traction. We were, at the beginning, we were trying to figure out what we were doing wrong.
Naren Arulrajah: Yeah.
Allen Lau: We thought, “Well, the idea is great. You can write stories. You can read stories.” But we didn’t have a lot of users, and we were trying to figure out what we were doing wrong.
Naren Arulrajah: So, what did you do?
Allen Lau: Well, we did a few things. one thing that we did is we started reaching out to writers.
Attracting Writers
Allen Lau: And we said, “Hey, would you like to come and join our platform and write stories?” It was only two years later, around 2008, we started to attract the first writer on our platform. And that’s when things took off.
Naren Arulrajah: The first two years, it was mostly readers.
Allen Lau: It was mostly readers, and we were trying to figure out how to get writers onto the platform. And one of the things we did that was quite interesting is that we started to utilize public domain books. So we utilize public domain books, but there are many readers for public domain books. people read Sherlock Holmes. Jane Austen. Arthur Conan Doyle. People read a lot of these books. So, if we had those books on our platform, then people would come and read those books. And then, hopefully, they would stick around and read the new stories. And that worked quite well for us.
Naren Arulrajah: Yeah, it’s interesting. So, you started by kind of curating content, in a way, with these public domain books.
Key Decisions and Lessons Learned
Naren Arulrajah: Yeah. I mean, it’s an incredible story. And I think the lessons there are quite powerful. I mean, I think the biggest lesson that I want to share is while there are many opportunities, the best opportunities are the ones that you are truly passionate about, where you can’t let go.
Allen Lau: Absolutely. I think that’s the most important thing. You have to be passionate about what you do. You have to care about it. Because if you don’t care about it, you will not have the perseverance to keep going. And, startups, you need to persevere. You need to keep going. You will fail many times. You will have problems. You will have challenges. You will have setbacks. But, if you care about it, you will find a way to keep going.
Naren Arulrajah: Well, Allen, it’s been a pleasure having you on the show. Thank you so much for sharing your story.
Allen Lau: Well, thank you so much for inviting me. It’s been a pleasure being here.
Conclusion
That concludes our conversation with Allen Lau, co-founder of Wattpad and now a venture capitalist. Thank you for joining us today.