Amy Errett’s company, Madison Reed, headquartered in Northern California, sells women’s in-home hair coloring products. It turns out, it’s a very durable business, done the right way. Not only has the seven-year-old outfit been slowly chipping away at the dominant personal care giants like L’Oreal that have long controlled what’s currently a USD 30 billion market, but during one of the most dramatic economic downturns of the past century, it has been attracting new customers.
In fact, Errett — who was previously a VC with Maveron and has a side hustle as a venture partner with True Ventures — says the 300-person company is seeing revenue in excess of USD 100 million per year and that it will be profitable in the second half of this year. Presumably, that makes it a likely candidate for an IPO in the not-too-distant future.
Errett provides an update on the business, which raised USD 125 million to date from investors, including True Ventures, Norwest Venture Partners, and Comcast Ventures.
Below are the most valuable to our mind abstracts of the interview.
“The gross margin of the business, fully loaded, is 60%. The growth has been amazing. We have 300,000 subscribers now. We’re a private company, so I don’t disclose specifics but we will be profitable the second half of this year.”
“52% of women in the US color exclusively at home; 48% go to salons, some to our color bars (would have 25 open thoughout the country); then 25% are called duelists. They’re excessively gray, or they want to stretch out salon appointments, so they do their hair at home in between bookings.”
“We had to buy and send headsets to everyone at home, teach them about all of the technology support in customer service, which is very different than the skills you’d use working in the store. And away we went.”
“Everyone at our call center was already a certified licensed colorist as our sale is a very technical sale. Every woman in the world has at least five bad hair stories, so we put what I call a “belt and suspenders” around the advice because the most important thing for a customer at Madison Reed is to get the color right. You get one shot.”
“We’re taking the most stringent guidelines of any state and laying that across the entire system. So even if a state says that a client doesn’t need to wear a mask, we’re wearing masks and our clients are wearing masks. Some people don’t want to do that. That’s okay. Then we’re not the right place for people to come if that’s true because our clients’ and our team members’ safety comes first.”
“I’m an investor too. I was a GP and open and ran Maveron’s office in the Bay Area. I’m also a partner at True, so I do invest as well as part of the investment team. Like, 80%-plus of our revenues are recurring in this company. At our color bars, we’re the only people who have the ability to use our own product.”
“I use Madison Reed and I can walk into a Madison Reed color bar and get the same consistency. The same exact color that I could take home, someone’s going to apply for me. That is a game changer in this industry.”
“We are the only people who are agnostic as to whether you want us to color your hair in a store or you do it at home. If you look at L’Oreal, 85% of its business is selling tubes of color to stylists in salons. It is not a direct relationship with a consumer. L’Oreal’s and Unilever’s professional channel creates a conflict for them to innovate directly, based on technology or otherwise, to the direct consumer.”
“We have about 15 products, all in the category of ammonia-free hair color that’s better for you, whether it’s permanent hair color, semi-permanent hair color, glosses, toners, a highlight kit with non-ammonia bleach. . .We’re also rolling out color depositing masks that you apply in the shower that aren’t permanent.”
Right now our business is really focused on women, so you can imagine that there’s a separate gender that may color their hair. That is a market that’s just terrific, right? We’re going to blow the doors off the market for men.”
Source: TechCrunch, Fortune