A few years ago, Wattpad was nothing more than scribbles on a wrinkled napkin in the Vancouver International Airport. But instead of becoming forgotten trash swept up by the broom of a janitor that evening like most napkin-based ideas, Wattpad went on to become Canada's Best Overall Startup last year.
Its success continues today, to the point that we probably shouldn't call Wattpad a startup anymore. Of course, that's a good thing for them.
Co-founder Allen Lau's story is the classic two-step beginning of most startups: he observed a problem and envisioned a solution.
"I was trying to solve a problem that I faced myself," he explained to Techvibes in an interview. "I'm not a writer but I read a lot. My iPod is pretty empty. If you look at my recently watched movie list, you would see Jurassic park in there. Reading is my main thing. [I thought], 'how can I bring my reading material on my mobile device?' Because that is how I can best utilize my time effectively."
Wattpad was going to be technology based. Both Allen and his fellow co-founder Ivan Yuen were techies. Check.
But Wattpad was also a startup and neither had a background in business development. No check.
In the face of such an obstacle, Allen and Ivan clearly fared atypically well enough. They saw major digitally driven disruption occurring all around them in different industries and knew they wanted to apply that to the publishing industry.
"YouTube was just sold to Google for $1.6 billion," Allen says of Wattpad's beginnings in 2006. "[Our idea] was pre-kindle and half a year before iPhone."
Digital reading was about to become huge. But few others besides Wattpad knew it, or at least opted to believe it. "We knew that the paper format would become obsolete," Allen affirms. "We knew people would read digitally, electronically. Exactly how… it was kind of fuzzy."
The iPad was years away but Wattpad "knew device capabilities were going to get better"—or, at least, it was assumed. Unfortunately, investors didn't assume along with Wattpad.
"Five years from now devices will be much more capable and much more comfortable for reading," Allen thought at the time. But he says with startups, "you don't want to be too late, you want to be early. In our case we were a little bit too early." That's why Wattpad bootstrapped for three years before raising money. Since then the company has raised more than $20 million.
Unlike most startups in Canada, which often take the first exit they can get, Wattpad is a decidedly long-term play. In fact, the company—now in its sixth year—has barely begun to focus on monetization.
"No one is giving me any pressure," Allen remarks. "In fact, investor Vinod Khosla [co-founder of Sun Microsystems and venture capitalist] said, 'if I were you I would focus on building an amazing, transformative product—don't worry about monetization for now. You are building something very special. Your user base, I can tell, they have some permanency, unlike a lot of the other social networks that can become obsolete in two years. You are building something that looks like a permanent fixture, so build it before you monetize.'"
If Wattpad isn't planning to be acquired anytime soon, does that mean it will also remain in Canada? Yes, Allen says. Contrary to popular belief, there's no reason to.
"I've proved that I can build a super amazing, super disruptive company right here in Canada," Allen states. "I would argue that in Silicon Valley, there is too much silicon and not enough art. Wattpad is not only a technology company, it's a blend of arts and science."
The article was sponsored by KPMG Canada and is part of a series of interviews conducted by Techvibes with CEOs of Canada's Top Startups.