In 2007, Allen Lau stepped into a coffee shop in his hometown of Toronto to meet with his business partner, Ivan Yuen. The topic of discussion that day: decide what to do with Wattpad, their struggling business. When Allen sat down, he pushed his coffee to the center of the table and said to Ivan, "I just spent our total revenue from last month on this coffee, so we have to share it."
The moment was a low point for Allen, one that stood in sharp contrast to the optimism he had felt a year earlier on a flight home from Vancouver. Earlier that day, he had met with his friend Ivan in the food court of the Vancouver airport to talk about their mutual interest in mobile reading platforms. That conversation gave birth to Wattpad, which the two men envisioned as an online community where people would share their writing--stories, poems, fanfiction, serialized novels, etc.--and readers would consume the user-generated content on mobile devices. It would be a place where writers and avid readers could find each other and interact.
At the time, Google had just bought YouTube, which was just over a year old, for $1.65 billion. Allen and Ivan believed Wattpad had similar potential. After all, as Allen saw it, human beings have been sharing stories for thousands of years--around fires and town squares prior to the written word. Wattpad would tap into this basic, human drive, but on a massive, global scale. Allen imagined millions, eventually billions, using the platform.
Based on his initial optimism, Allen decided to leave his full-time job and focus on building Wattpad for a year. Considering what YouTube had been able to do in a year, Allen expected that at the end of 12 months he would be able to raise capital--lots of it--for Wattpad.
The Crisis
But a year later, Allen and Ivan could only muster enough revenue to buy a single cup of joe and they had only around a few hundred people using Wattpad. With a product that wasn't gaining traction, they stood no chance of raising money. But both still believed in Wattpad's potential, and both badly wanted to realize their vision of a global storytelling community.
As they considered what to do, Allen thought about the prevailing wisdom of startup success, which was all about focus. Unless you were laser focused on building your product, evolving it, driving users to it, and quickly creating critical mass, the startup would never get off the ground. YouTube, which had inspired Allen and Ivan, had achieved their success through the relentless focus of the founders. There was no point limping along.
Or was there?
Shunning Conventional Wisdom
As Allen thought more about their problem, he began to feel that focus might not be their best bet. Rather, limping along for the time being might just be the road to success for Wattpad. As he saw it, Wattpad was where it was because their timing was off. The Motorola Razr, one of the most popular mobile devices at the time, only let you read eight lines of text. Allen knew that Wattpad would never take off until mobile device makers caught on to the idea that people wanted to consume content on their devices and built them for that use. If Allen and Ivan chose to keep focusing, they would both struggle to survive financially and quickly burnout, and then they'd have nothing to give to Wattpad when the timing was better.
So Allen decided to shun the advice to focus. Instead, he and Ivan would dabble in Wattpad in their spare time, while they turned the majority of their attention to starting a consulting company and founding another startup. The revenue they generated from both ventures would allow them to support their families and keep the lights on at Wattpad.
Over the ensuing months and years, Allen and Ivan would tinker with the product, adding new features, and slowly, gradually, people started to sign up. Then, as Allen suspected, as mobile devices evolved to make the reading experience easier, Wattpad's number of users grew. Two years later, limping along had finally paid off. By 2009, Wattpad had a million monthly users. Allen and Ivan left the new startup they were working on at the time, jumped back into Wattpad full-time, and went looking for investors. The pair would raise $600K that year, and by the following year over five million people would download Wattpad's mobile app. Later they would raise $3.5 million in 2011 from various investors, including Union Square Ventures.
Less than a year later, the company would raise another round with participation from Khosla Ventures and AME Cloud Ventures, which was founded by Jerry Yang, the co-founder and former CEO of Yahoo! The monthly users would continue to grow and so would the amount of money investors poured into Wattpad. By the end of 2014, they had 35 million monthly users who would share close to 100,000 uploads a day, and another $46 million from investors, bringing the total funds raised for Wattpad close to $70 million.
Today, Wattpad is the largest community in the world for reading and sharing stories. Each month, over 40 million people read and share stories on Wattpad, which now employs over 100 people. As Allen says, "We would never be here if we hadn't followed the right strategy for Wattpad during the crisis in 2007. Focusing was not the right thing to do. Buying time was."
Allen's advice to other entrepreneurs: "There's always a prevailing wisdom. 'Focus' or 'Pivot' or 'Bootstrap.' You have to be careful not to follow the wisdom blindly. Look carefully at what's happening and why, and prescribe the best solution. It might not be what others suggest you do."