How Wattpad Co-founder Allen Lau Built a $750-Million Business

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Alan Lau launches social-storytelling platform wattpad in 2006 to help writers self-publish content and connect with readers. In 2021, the Toronto-based company was acquired by giant South Korean internet company Naver for over $754 million. Now, Lau is working on his latest venture: a VC fund called two little fish,

I was born and raised in Hong Kong. When I was in junior high school, my father bought me an Apple II, one of the world’s first mass-produced personal computers. I taught myself programming from the machine and some books. That was a game-changing moment because it helped me get into the habit of teaching myself and sparked my curiosity in technology.

I moved to Toronto in the late 80’s to pursue my engineering and master’s degree at the University of Toronto. After graduation, I got a job as a software developer at IBM. But I didn’t like working at such a large company, and longed for the energy and excitement of an early-stage firm. I moved to Delrina, a Toronto-based software start-up that had 100 employees when I joined in 1993. Two years later, it had 700 employees and was acquired for half a billion dollars. I was the fastest rocket ship ever. I wanted more of that feeling.

A few years later, I joined BrightSpark, a Toronto-based venture capital incubator founded by the same entrepreneurs who started Delrina. Within Brightspark I started my first company, Tiera Wireless, which published games for mobile phones. That’s where I got the idea for Wattpad, an online literature platform that hosts user-generated stories. It was a way to combine the trends of cell phones and user-generated content. At the time, going through a traditional publisher was the only possible way for fiction writers to find an audience. Readers and writers weren’t able to connect directly, and people had no easy way to get to the content they wanted to read. I co-founded Wattpad in 2006 to fill these gaps in the market.

It certainly wasn’t an easy start. Our first office was my dining room. Me, my co-founder Evan Yuen, and Eva Lau (my wife at the time and Wattpad’s head of content and community—she has since left the position) would sit around the table bouncing ideas off each other. We launched with public-domain books like pride and Prejudice To attract readers to the platform, and earned a total of $2 through Google Adsense in our first year.

But it was also a fortunate time. A year after the company was founded, the first iPhone came out—and a year after that, the first Android. In 2008, Wattpad was available as an app on iPhone, Android and Blackberry devices, allowing people to read user-generated content on their phones. In 2011, we doubled the size of our team, had one million registered users and attracted over $4.1 million in funding. As of 2013, we had 20 million monthly users. A few years later, streaming exploded on the scene, and I pivoted the company accordingly.

Using AI to gauge the popularity of stories on the platform, Wattpad launched a studio arm to leverage our user-generated IP library and cut deals between writers and production studios. The value proposition was a built-in audience for the app’s most popular content. If a writer’s story was popular on Wattpad, he could get an option to produce a film. In 2021, the the company was acquired by giant South Korean Internet company Naver over $754 million, I stepped down as CEO, but remain an executive advisor to Wattpad.

Since I’m no longer devoting 16 hours a day to Wattpad, I have more time to allocate to Two Small Fish—the VC fund I co-founded with Eva in 2014. In October, Too Small Fish raised $24 million in its third round. Funding, targeting an aggregate size of $40 million. with 40 companies under our belt and five have exited so far – including Skip the Dishes, which was bought for $110 million In 2016—we’re just getting started.

The thesis is transformative technology with a global scale. We are sector-agnostic, because technology is everywhere. This means I am constantly on the lookout for the latest developments in many different industries, from fashion and fintech to healthcare and mining. Context-changing is challenging, but in an intellectually stimulating way. I feel like I’m making an impact by leveraging my experiences as an entrepreneur—and that makes me very happy. If you look at the tech ecosystem in Canada, with many technologies in the early stages of disruption—from AI and Web3 to the future of work—it’s an amazing time to invest.

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