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.
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From Hong Kong to Canada
Born and raised in Hong Kong, Allen Lau’s journey began when his family decided to move to Canada in the late ’80s.
This transition marked the start of a series of bold moves, as Allen finished his high school education in Hong Kong and pursued both his undergraduate and master’s degrees in electrical engineering at the University of Toronto.
Despite initial expectations of finding stability in established corporations, Allen quickly realized that his passion lay in the fast-paced world of startups.
The Entrepreneurial Leap
In a pivotal moment, Allen took the plunge into the startup ecosystem, leaving a secure job at IBM to join a fledgling company. This decision wasn’t without its challenges, especially considering the expectations placed on immigrants to seek stability in reputable corporations.
Allen’s determination and conviction led him to follow his passion, eventually becoming a key player in the startup, Delrina, which he joined. At the time, the company had under a hundred employees and was acquired by Symantec for $0.5B. But also considered the worst top 10 PC software company.
Around 25 years ago, the company had developed a product called WinFax, which was the de facto standard users needed to integrate fax software into their PCs. WinFax had no competitors since it was virtually impossible for them to duplicate the technology.
Allen recalls building a robust relationship with the new owners of Symantec and continued working with them post-integration for four years. He learned a lot but when he got the opportunity to work at Brightspark, the Venture Studio founded by the Delrina founders, he jumped right in.
During his stint at the venture studio, Allen got the idea of building mobile software for gaming publishers. This concept set the company on its success trajectory. Allen remembers raising $30M for the company and growing it to 200 people.
However, the technology Allen had developed was specific to Motorola phones and when the iPhone came out in 2007, it proved to be a game-changer. Allen’s product was completely irrelevant to the smartphone era.
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Tira Wireless: A Lesson in Adaptation
Allen’s entrepreneurial journey continued with Tira Wireless, a company specializing in mobile game development. The experience with Tira Wireless provided valuable lessons, especially when the advent of the iPhone rendered their technology obsolete.
This setback taught Allen the importance of building timeless products rather than “bridge technologies” that cater to a specific era. He recalls how he ideated the concept for Wattpad while he was working as the CTO at Tira Wireless.
Although Allen loved mobile technologies and gadgets, he didn’t play games himself. However, his personal media consumption centered around reading books.
He created the product prototype for Wattpad sometime in 2002-2003 but had to put it on the back burner because of the small size of mobile phone screens.
With the launch of the iPhone and other bigger screens, Allen resurrected his idea and took it back to the drawing board.
Undeterred by past challenges, Allen and his co-founder, Ivan Yuen, embarked on a new venture, Wattpad, in 2006. Initially focusing on mobile reading, Wattpad evolved into a global platform connecting readers and writers.
From the onset, Allen was very clear that theirs was not a publishing startup. They didn’t want to build publishing tools or publishing technology, but instead wanted to address a need. The objective was to ensure that the company would last forever regardless of how people published books.
Allen’s strategic approach to building a massive user base before exploring diverse revenue streams set the stage for Wattpad’s success. More than just reading, Wattpad transitioned into a platform for people to share stories as well.
Allen recalls how they were also running Redboom Solutions/FeedM8 on the side as their consultancy company. Its purpose was to generate cash for them, but getting the company acquired by Upstream Systems added to their confidence.
Allen and Ivan continued to work for Upstream for a year until Wattpad started to scale exponentially. The duo went back to the company to work on it full-time.
Wattpad Studios: Expanding Beyond Reading and Writing
Wattpad’s journey took a significant turn in 2016 when they introduced Wattpad Studios. Leveraging data and AI, Wattpad identified potential content that could be adapted into movies and TV shows.
This move not only diversified their revenue streams but also increased the probability of success in the competitive entertainment industry by including print books and other forms of entertainment.
As Allen explains, they first started advertising by putting some banner ads on the website on mobile.
By 2016, they started to expand into different business models thanks to the scalability they achieved from advertising. Allen recalls they had 30 million monthly users with the potential to generate meaningful revenue. Next, they started to think about paid content subscriptions.
Allen and Ivan’s objective was to invest in AI since they could see the data indicating its success. They had valuable original content IP on their platform which they could monetize. That’s when they started a new division called Wattpad Studios.
Naver Acquisition: A Synergistic Union
In a surprising turn of events, Wattpad was acquired by Naver, known for its Webtoon division. The $660M acquisition validated Wattpad’s unique position in the global market and aligned with Naver’s expertise in digital platforms and content adaptation.
Prior to the acquisition, Allen recalls raising $120M for the company from investors like Union Square Ventures, Khosla Ventures, the founder of Yahoo, and several other heavy hitters.
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Alan provides some context to Wattpad’s acquisition. Naver is the largest internet company in Asia and the largest in Korea with 20,000 employees and multiple divisions. Naver also has a studio turning out the IPs and content that is eventually transformed into TV shows and animation.
The decision to accept their offer for an acquisition was about recognizing the enormous potential for synergy. Primarily because the two companies had an entirely distinct geographical customer base with no overlaps.
The Next Chapter: Two Small Fish Ventures
Parallel to his journey with Wattpad, Allen’s wife, Eva Lau, played a significant role in the entrepreneurial landscape. In 2014, she founded Two Small Fish Ventures, a venture capital firm that has invested in over 40 companies, showcasing the couple’s commitment to supporting innovative startups.
The firm initially invested almost entirely in network-based businesses. One of the startups they have backed is an AI company that helped scientists, especially in pharmaceutical companies to share their failures and knowledge.
Over time the company has built a gigantic knowledge repository to help people find new proteins for drugs. Allen reveals that today, 16 of the top 20 pharmaceutical companies are using the product.
Investment Focus: AI, Protocols, and Sustainable Computing
Two Small Fish Ventures has evolved its investment thesis over the years, focusing on the next frontier of computing – AI, protocols (especially blockchain), and sustainable infrastructure.
Allen Lau and his team are keen on identifying companies that bring about transformative changes in behavior, whether in consumer habits or business workflows.
He talks about their portfolio company, Story Protocol in the world of generative AI since they expect a further explosion of content that needs a central repository.
This repository will not only store content but also manage the ownership and share the upside of the content. Allen describes it as similar to the GitHub of creative IP.
Allen Lau’s entrepreneurial journey from Hong Kong to Canada, navigating through startups, lessons learned, and the ultimate success of Wattpad, is a source of inspiration for aspiring entrepreneurs.
The story exemplifies the importance of resilience, adaptability, and a relentless pursuit of innovation in the ever-evolving tech landscape. As Allen continues to invest in groundbreaking ideas through Two Small Fish Ventures, his journey serves as a beacon for those venturing into the world of entrepreneurship.
Listen to the full podcast episode to know more including:
- 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.