Allen Lau On Selling His Storytelling Platform For $660 Million And Now Investing In AI-Driven Startups

In a captivating interview with Allen Lau, the co-founder and former CEO of Wattpad, we delve into the fascinating journey of an entrepreneur who started from humble beginnings in Hong Kong and went on to create one of the most successful storytelling platforms in the world.

Allen’s story is a testament to the resilience, adaptability, and innovation required to navigate the dynamic landscape of technology and entrepreneurship. His venture fund, Two Small Fish Ventures, has portfolio companies like SkipTheDishes, Story Protocol, and Sheertex.

In this episode, you will learn:

• Allen Lau’s journey from Hong Kong to Canada showcases the courage to break away from expectations and pursue a passion for startups.
• Tira Wireless taught Allen the importance of building timeless products, avoiding the pitfalls of “bridge technologies” that can become obsolete.
• Wattpad’s success lies in its strategic focus on building a massive user base before diversifying revenue streams and expanding into entertainment with Warpe Studios.
• The Naver acquisition of Wattpad for $660 million marked a synergistic union, validating Wattpad’s global standing and aligning with Naver’s expertise in content adaptation.
• Two Small Fish Ventures, founded by Allen’s wife, Eva Lau, has invested in over 40 companies, reflecting a commitment to supporting innovative startups.
• The investment focus of Two Small Fish Ventures includes AI, blockchain protocols, and sustainable computing, with an emphasis on transformative changes in user behavior.
• Allen Lau’s entrepreneurial journey serves as an inspiring beacon for aspiring entrepreneurs, emphasizing resilience, adaptability, and a relentless pursuit of innovation.

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About Allen Lau:

Allen Lau is the CEO and co-founder of Wattpad, a global multi-platform entertainment company. Allen is also a partner at Two Small Fish Ventures, a venture capital fund that invests in early-stage technology companies.

Prior to Wattpad, Allen was the Managing Partner and co-founder of Redboom Solutions/FeedM8, which was acquired by Upstream Systems in 2008. Allen then went on to lead Upstream Systems’ Asia division as General Manager of Asia from 2008 to 2009.

In 2006, Allen co-founded the Toronto International Film Festival’s Canada Film Day, an annual event that celebrates Canadian cinema. Allen also served on the board of C100, a non-profit organization that supports Canadian entrepreneurs in the technology sector, from 2011 to 2015.

Allen is a passionate advocate for the power of stories and their ability to connect people around the world. Allen believes that everyone has a story to tell and that stories have the ability to change lives.

Allen Lau holds an M.A.Sc. and B.A.Sc. in Electrical Engineering from the University of Toronto.

Connect with Allen Lau:

• TheOrg
• LinkedIn
• Crunchbase
• Entrepreneur

Read the Full Transcription of the Interview:

Alejandro Cremades: Alrighty hello everyone and welcome to the dealmaker show. So today. We have a really incredible um, inspiring story. You know ahead of us. You know the guest has done it multiple times we’re talking about 3 times. The last one you know was quite a home run. You know we’re talking about 660000000 of an exit. So um, again, everything that you can think of around building scaling ah lessons learned from the first company which didn’t unfold the way that he had hope for then also struggles you know, especially with the last company that he sold at the beginning. The first two years they were not a path full of roses. It was not easy and then also we’re gonna be talking about creating an impactful culture and then also the the people that they are serving with the last company and the difference that they’re making to them so without further ado. Let’s welcome our guest today Allen La welcome to the show.

Allen Lau: So well. Thanks for inviting me.

Alejandro Cremades: So originally born and raised in Hong Kong but eventually you find yourself in Canada with your family give us a walk through memory lane. How was life growing up.

Allen Lau: Yeah, born raised in Hong Kong and in the late 80 s our family decided to move to Canada and what happened was most of my extended family included mostly my on my. Mother’s side but on my father’s side too started to move to Canada in in the 70 s so um, family member by family member. We all move. We had the last ho out in a way. So um, finished high school in Hong Kong and then got my electrical engineering degree. And master degree in electrical as well. At University Of Toronto and and then my first job was at Ibm ah, since day one I know this is the wrong company for me I just cannot work in a large corporation and really quickly i. Joined um a startup company in the very beginning and that in the way I started my entrepreneurial journey.

Alejandro Cremades: But what got you there because I mean know you see the um you know the a idea, especially as as as immigrants and you know coming to to a new Country. You know you wanted Stability You know you had achieved. It. You were you know at such an incredible you know company and very Well-respected. So. Ah, what point do you realize that maybe it makes sense for you to go from like a bigger company to like a smaller company.

Allen Lau: Well, yeah, you’re absolutely right? Just like many immigrants first -generation immigrants so my parents were the same you know work for a big corporation st St job. Reputable company like ibm Ibm that time it was the largest tech company in the world at that time. So yeah, that in a way they kind of um, not pushing but subtlely and it was encouraged put it this way right. And then I was styling them. Ah okay I don’t think it’s going to work out well for me because I really don’t like the company and by the way my girlfriend and our wife ah work. She’s working for a startup company. She’s having all the fun I’m going to join her.

Allen Lau: You can just imagine the reaction from the parents but they are very supportive. You know they they didn’t say no or anything they just wow you have to think tries what you really want to do Ibm is a really good company.

Alejandro Cremades: That’s amazing.

Allen Lau: So that was an interesting conversation but you know I know what I want I know what would be good for me and make me happy and most importantly in an environment where I would thrive. So yeah, that’s that’s how I did it.

Alejandro Cremades: That’s incredible.

Alejandro Cremades: So so in this case, you know, ah the environment. You know the arena I mean when you when you joined it was under a hundred employees you know and the company ended up being acquired by none other than semantic. You know you were able to to develop a really solid relationship with the founders as well. So.

Allen Lau: Air. No.

Alejandro Cremades: How was that journey like and and what would you say were your biggest takeaways from from that experience too.

Allen Lau: Yeah, it was polar opposites to to Ibm things move fast and ah my first day because they they were growing so fast they ran out of desk the first month I did not even have a desk I was literally. Typing on my keyboard at the corner of someone else’s desk and that was a shock to me of course I understand smaller company might not have all the you know, gigantic offices like Ibm for example, for example, but that was still a shock to me and. I think this is a very good example of how a smaller startup but fast-growing startup how they make things work. There will be a million of problems but they tackle it they they they figure it out and um, the the company was. Such a rocker ship when I joined I can’t remember exactly how many people but definitely less than 100 but 3 4 years later when they were acquired by semantec um, they were the worst top 10 pc software company.

Allen Lau: Up the top 10 in the world and got acquired by semante for close to half a billion dollars and that was a really big deal. Remember this is more than twenty five years ago and the product was of course now not a lot of people are using facts anymore. Ah, but they at that time they built a product called winfax in four years five years they came from a startup to become like the the de facto standard if you want a piece of fa software on your on your pc at that time. You have to use win fact there are no other competators anymore because everyone just couldn’t jump in and went bankrupt.

Alejandro Cremades: So in this case, you ended up joining s semantic as part of the integration and you actually stayed there for quite a bit you know for a couple of years four to be precise. But 1 thing let’s do the next and then you see the the arena founders you know going at it. You know we starting a venture studio.

Allen Lau: Yep yep.

Allen Lau: Yep.

Alejandro Cremades: And you decided to join them and obviously you know 1 thing led to the next and all of hassad then you find yourself starting your first company.

Allen Lau: yeah yeah I I think that was very impactful to me as well. You know when they started that venture studio I just jump on the opportunity. Um I have to say I learn a lot at semantec as well as a much larger company. And I I guess at that time I was a little bit more more mature after working for a few years you know working for a big company. Might not be my natural instinct but I learned quite a bit and when I have the opportunity join. Ah. Venture studio is is like fish I off the water for a few years now I can jump back into the water and initially for the first year I was assigned to different companies. You know is is the lay ventureer studio and then I I had the idea of building mobile software. Um, both for for gaming publishers and also help us to build our own games as well and that idea came from me and then well it became a you know, ah project First of all. And the ventures theater and eventually that took off and became a real company.

Alejandro Cremades: I mean talking about a real company there I mean you guys raised about thirty million bucks you know you had and that was twenty years ago so obviously we can imagine but you grew the company to 200 people but over all of a sudden.

Allen Lau: Yep.

Allen Lau: Okay.

Alejandro Cremades: Where you find yourself, you know in this super successful. You know Hypergrowth trajectory but the whole thing exploded. You know what? what happened.

Allen Lau: Yeah I guess the company is called Tira Wireless so we built or create and also help other gaming studios build mobile games. That’s why we did? um.

Allen Lau: To give a little bit more context to the audience we started in 2002 it grew to um, close to 200 people around 2006 so 2007. The problem was. The technology that we built was very specific to the new gearphones to the modelola phones and we all know in 2007. What happened the iphone came out that was gamechanging and then we realized but it might be too late what we built. Is completely irrelevant in his smartphone era and I think now. Um, that’s one lesson that we learn from that experience. It’s easy for me to say now in hindsight. Um. What we built at that time. It was a bridge technology. It was a bridge between the oldschool phone and the smartphone and when you built a bridge technology that window of opportunity eventually with with close because you are jumping from 1 era to the to the other era jump ring. Like a bridge connecting 2 sides of the cliff once you cross to the other side. You don’t need that bridge anymore and that’s precisely what we built so it it wasn’t in hindsight it wasn’t we weren’t we weren’t building anything that was timeless.

Alejandro Cremades: So why would you say were your biggest lessons you know from from that journey because obviously as the saying goes you either succeed or you learn you know and it was also your first company. So not not an easy hit to to swallow.

Allen Lau: Yeah, it was difficult but um, in a way the we applied the learnings to to warped as well. How we did not want to build. Um. Another british technology company. But when we started warpe we were very clear. We were not really a publishing startup. We don’t want to build publishing tools or publishing technology but we want to focus on addressing the need. What I mean by that is initially we focus on reading writing people might might read differently. People might publish books differently but people will continue to to read if we are continuously building things addressing. A human need that would not go away the company can last forever and then eventually when we talk about the the warpe story you you would know we expanded from reading writing and eventually expand it into entertainment that includes movies. Tv shows and and and print books and other other forms of entertainment as well.

Alejandro Cremades: So let’s talk about that because you know once say you end up closing the chapter of Tira Wireless you um, basically decided to go at it again. You know as an entrepreneur you know, eventually with a whatpot but the journey of whatpot you know was not easy.

Allen Lau: And.

Alejandro Cremades: At the beginning you know the first the first two years you know were a little bit of a struggle and they actually as part of that you know 1 thing that you decided to do too was to start you know, 2 other companies you know on the in parallel which was red boom and then also fit fit me 8 So so.

Allen Lau: App.

Alejandro Cremades: Before we get into the what pot because that’s where I I think you know we should you know I think that the the listeners are going to love that story. Let’s put that in pause right now. So things are not working in what butt but walk us through why. Did you decide to switch your attention to red Bowman and and and fit 8.

Allen Lau: Yeah, so I’ll give give you a little bit more kind context. Ah I actually started to have the whatpe idea when I was the cto at tira one tiny little secret is it despite ah tira is a gaming studio I love mobile. Technologies I love gadgets and that’s one of the reasons why started the company but I don’t play a lot of games I’m not ah a gamer. So the content side doesn’t quite excite me. But if you look at my personal media consumption I read I read a lot and this is how i. Consume media and I did that prototype in 2002 to 2003 but if phone size was these screen size was so small. You just could not read comfortably, especially long form content. So I didn’t really pursue the idea and then fast forward to. 10007 when the phone screen size was much larger I resurrected this idea I was and by that time is is becoming clear tira is is starting to decline I have to think about. New idea and that’s how I started or restarted the idea I should say and then now my warpe co founder Ivan who used to work for Tira as well. Ah, send me a message hey Alan I’m working on a new product idea as well and when he said.

Allen Lau: Sent me that link. That’s what I saw is is a mobile reading app as well. So I thought wow Ivan is one of these smartst I’ve ever worked with it must be a good idea so we jump at it. Ah like all n and and started building the company. What we did not realize was um is what we built essentially as a doublesided marketplace to connect readers and and writers. It’s not just mobile reading. You know we have a platform for people to read and share stories as well and that. Takes a long time to to generate traction for any people who is running who are running um, um, a marketplace would tell you we all suffer from the chicken egg problem without any writers. There would be no readers. There’s no content without any readers. There would be no writers because like there’s no audience. Why would I upload anything so we have to overcome that and that that took so much longer than we expected and that’s why to keep us going. We have to do 1000000 things on the side. The rep boom solution was our consulting gig to um, generate some cash for for us and we also um, like the mobile advertising idea. So.

Allen Lau: You know in a way. It’s almost like a ventures theory in and of itself. You know we just try our different ideas but we truly truly believe in the wordpe idea we did not Unplug. We just keep it on a slow burn you know and and now in hindsight of course I can say this more easily. It just took time to learn. Actually what’s the right Idea. So.

Alejandro Cremades: That’s incredible. Obviously you know in this case with red boom and and fit 8 you guys send that up doing a transaction there you guys send that up and getting the company acquire by upstream and that not only gave you some more confidence because you were coming you know from really you know some significant struggles with the.

Allen Lau: Yeah.

Allen Lau: M.

Alejandro Cremades: You know company. Um folding you know the the first one you know, then what pot you know, not taking off ah the way that you had hope for. But now you got to win you know Now you got you know one exit and and at this point you know what is going on with whatpot. You know at the moment of the acquisition.

Allen Lau: Yeah, yeah.

Allen Lau: Yeah, after the acquisition of course just like most acquisition we we would work for upstream for for a while and like I mentioned before on on side when whenever we have a interesting. Feature idea on warpad we’ll just implement this in the evening over the weekend to continuously improve the product and as the product continues to improve as we start to see some writers joining the platform. Which in turn attract more readers. The the readers as we increase the the size of the audience more writers find ah this exciting to join so that fly will started to to um, turn faster and faster. So after a year at upstream we we went back to what pet and and spent hundred and ten percent of of our time on whatpat it was around maybe 2009 that we came back and.

Alejandro Cremades: So for the people that are listening to really get it. What ended up being the business model of whatpod. How are you guys making money.

Allen Lau: Do it full time.

Allen Lau: Ah, wow at that time. Um, is ah ah within we we didn’t focus on a business model which is actually quite counterintuitive but in hindsight is is actually worked out. Um. Because for for marketplace the the most important thing is getting the liquidity getting on both sides of the marketplace as scale first and once you have that traffic once you have that community once you have that user base. There will be ah many other ways to make money. Um I would say we first started as advertising. We just put some banner ads on the on the website on mobile there was no not much advertising so we use that as an as an experiment. Um.

Allen Lau: But I would say that’s not even 10% of our time we focus on building the product to to build a massive user base first and then ah towards maybe two thousand and fifteen sixteen um we started to expand into different business models of course advertising started to to work started to to be a scale to because by two thousand and fifteen sixteen we we have like 30000000 monthly users something like that and at that scale it can generate meaningful revenue. Already. Um, and then we started to think about pay content subscription and then eventually um, partially because we started to invest in Ai way back in 2012 because we we started to see. So much data. We have to figure out a way to make good use of it through the Ai investment. We realize there’s so much amazing content ip original content ip on our platform that of course we can monetize on our own platform through pay content. Ah, eventually, but these ah ips can be turned into movies can can they can turn into Tv shows or other forms of entertainment. So that’s when um, around 2016 we we started a new division called wa past studios.

Allen Lau: Um, we um, we don’t hold the camera at least at that time we we withint our job is to figure out the ips the content I piece on our platform find the amazing 1 find the one that turn into an amazing movie. But also the one based on a trajectory based on ai telling us it will become a big head. It will become the story art is very suitable for adaptation to movies and of course building fan base with millions of people is.

Allen Lau: Ah, these kind the content would become a proven hit. Um because I have to give a little bit more context to to the audience. Um, in hollywood you see the Oscar winning movies. Those are the 1 % 90% of the. Movies don’t make any money the the success rate the probability probability of success is actually quite low but having using technology to pick out the content from our platform. We see 1000000 of blues every day and. Even today we only produce maybe a hundred movies or Tv shows and hundred projects per year. So it’s really small percentage but these are the gems when we adapt them to movies and and tv show they have far higher. Probability of success way more than 10 percent that hollywood typically see and that’s the business model.

Alejandro Cremades: So so in this case I mean you guys raised some a fair amount of money I mean you guys raised 120000000 from the likes of Union Score ventures you had Yari young you know the founder of Yahoo I mean you had some really big heavy hitters and tremendous business that you guys have built.

Allen Lau: Yep.

Allen Lau: Who who.

Alejandro Cremades: And eventually you know there is say suitors you know coming and knocking. You know that are interested on ah pursuing an acquisition so tell us about how the whole acquisition with the navier. Ah you know make us insiders like how did this whole thing you know started brewing.

Allen Lau: Nope.

Alejandro Cremades: Ah, what was the process like because it ended up being a 660000000 home run of an exit you know which is remarkable so walk us through it.

Allen Lau: Yeah, yeah, yeah, so um, maybe let me let me step back. We we got.

Allen Lau: Investments from unis square ventures and and costla ventures in the valley as well and 1 thing in Kar about these 2 firms and many of our other investors on our cap table is they never ask for an exit which is. Very very counterintuitive as well. Um, the the conversation over the years we never talk about the exit in the in the boardroom we just focus on building a great business and we believe by doing so it actually would enable the optionality for us. Perhaps go ipo perhaps ah m and a when the right opportunities come. But perhaps we just keep going and and that’s all right. There’s nothing wrong to to build um, highly profitable, highly successful. Ah, private company. And never go public never sell and that’s okay, too. However, in 2021? Um, we um, receive and inbound offer and and then we said huh. Maybe we should just see. What the market looks like we’re not selling. We are not putting up the for sale sign. But at least engage into a conversation and and see what other corporations other bigger players in the market are thinking.

Allen Lau: And then of course we know? Naver especially the web tune division well to to give more context. Naver is 1 of the largest internet companies in asia they are the largest in in Korea they have 20000 employees and they they. It’s like. Amazon or Abat They have multiple divisions but 1 of the largest divisions they start ah off with search like Google but they also have a division like Google’s Youtube Neighbor has a division called web term is. Basically what what pet does except for comics is for comics is for manga you know more visual content. Um, and they also have a studio turning some of the ips the content I piece. Top content I piece on on web 10 and turn them into Tv shows and animation as well. So they they understand this this is business model really well using a digital platform find the ip and then adapt to as many forms of entertainment as possible. Um.

Allen Lau: In a way I don’t have to even explain to them what we do they they got it and the most important thing is is so complimentary because they don’t have fiction at least not in I South Korea we have ah fiction we are global business. We have users around the world. So there’s no overlap and also from a geographic perspective. They are very strong in and East Asia we actually don’t have a lot of users in East Asia we have users and. Practically any country every country in the world except for countries in this ah East Asia so from that perspective also a mesh made in heaven. So once we started talking. We just realized this synergy was was just so massive.

Alejandro Cremades: So what was that day when that what was that day like when you inked the deal 660000000

Allen Lau: And then.

Allen Lau: It it was ah it was a surreal experience. Um because six months before we announced that deal if you asked me are we selling the company and I would give you a very definitive answer. No we are not even. Thinking about this and this opportunity in in a way just kind of fell on our ah lab and of course is ah is a good outcome financially for the founders for for the investors for. Pretty much everyone on ah on the on the cap table. Um, but that’s only 1 piece of the puzzle. Um, at that time. Um, when we talk about whether we should sell or not of course financial is 1 aspect but the the other aspect is. Strategically does it does it really make sense. Is it going to take what pat to to the to the next level. Um, yeah, that was actually a very important part of the consideration and I think based on all the reasons that i. Just talk about it. It. It was a very attractive deal to to us.

Alejandro Cremades: So obviously you know the transaction happens but you know you’re an entrepreneur. You know you got to keep going and the creativity and the and the juice is flowing now and and on the on the on the side actually in parallel your wife you know who? also.

Allen Lau: And.

Allen Lau: And.

Alejandro Cremades: Happened to be ah part of the story of wapat as well. You know she had left the company in 2014 to start a venture capital firm. Basically the company the the venture capital firm is called 2 small fish ventures and you guys have already invested in over 40 companies.

Allen Lau: Over.

Alejandro Cremades: What do you guys typically look for and what has been your biggest lesson 2 from now seeing things from the other side of the table.

Allen Lau: Um.

Allen Lau: Yeah, so the thesis our investment thesis change over time because what pad is as I mentioned is is is a marketplace so we early on. Um, we. Solely invested in network fact-based business. So there are a lot of marketplaces. But of course ah not only marketplaces we we invested in in some other companies too. Um, so um, a couple of the notable. Um. Investments and we wrote the first check to these companies at least when they first came up of the idea it it looked they they both look kind of weird. They both look. Ah I I’m I’m not sure but we kind of saw the the diamond in the rough partially because of our experience. Um, and in building warpad and these two companies I would highlight as one is co benchai the other is called ada um benchai as ah. Is an Ai company that helped scientists especially in pharmaceutical companies to to kind of share their failures share their knowledge and and over time they build our very gigantic.

Allen Lau: Ah, knowledge repository to help people to find new protein for for for drugs and now today 16 hour of the 20 top from from pharmaceutical companies are using the product and a the ada is an Ai company. A chat bot for for support. But now they’re handling millions of chat transaction for customer support. Um for airline companies to telcos like every day on the on the platform. So these 2 are good examples of. How we leverage our previous experience and and find the gems before other people can see it. Um at the same time. The the the the market also evolved so skip a few steps fast forward to today. Um.

Allen Lau: Ah, the area of focus. There are 3 areas of focus. The first one is Ai well we we ran an Ai company for over decade we we know what we are talking about. So that’s an obvious one. The second one is ah protocols. Mainly blockchain protocols because we we start to see ai and and and blockchain start to emerge what I mean by that is. For example, we have a portfolio company. Called story protocol is in the world of generative Ai as we we see even further explosion of content there needs to be a central repository. Not just to to store the content. It’s not less about storage but to manage the the ownership the the share the the the upside of of the content. It’s like github for for creative ip so this company is also doing really well so this. That’s the second area of focus and then third area of focus is some ah sustainable computing also almost like like protocols. It’s a second order effect of ah of ai because the complete demand is drastically increased because I’ve generated Ai.

Allen Lau: And we just happen that we have both both my wife Eva and I we are engineers. She used to work for atinow Amd I’m an electoral engineer and my ah partner Brandon who was the founding data scientist of warpad. Ah. He also joined us as one of the partners of of the firm. He has a short stint at at Nvidia so we understand simmi khn we understand hardware really well as well. So we are finding some very very interesting opportunities in these areas but I would also add 1 thing that we. Always look for as um, whether this product protocol or platform would would um, completely change the behavior whether as consumer or business users because when we see it a drastic change in behavior like. Upending the the workflow in a company or if it can eliminate ah in an entire department that’s easily can generate 10 x return and then early stage we got in early and not a 10 x so um I would like to. Summarize our objective is to look for those hundred x return companies when we write a dollar check to the company we we we hope we we can get better a hundred dollar Bill

Alejandro Cremades: That’s amazing finding those gems. So I guess for the people that are listening that will love to um, reach out and and and and say hi. What is the best way for them to do so.

Allen Lau: I’m the easiest person to find on the internet so send me an email at allen a l l e n at 2 small fish dot v see or find me on on on x or or link.

Alejandro Cremades: Amazing! Well hey, easy enough. Well Allen thank you so much for being on the deal maker show today. It has been an honor to have you with us.

Allen Lau: Is an honor to be part of it. Thank you.

*****

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