On Building A $30M/Year Busines By Rethinking Hair Care

Hello! Who are you and what business did you start?

My name is Eli Halliwell and I’m the co-founder and CEO of Hairstory, a company dedicated to rethinking everything about hair in a world where the old rules no longer apply.

We founded Hairstory on two bets. The first is that we could change the way people clean their hair. We believe traditional shampoo is the enemy of good hair, and our main product, New Wash, cleans your hair with no detergent.

The second bet is that we could enable hairdressers to participate in eCommerce rather than be trounced by it. We have developed a perpetual affiliate model that ensures hairdressers always earn profits whenever their clients buy our products, regardless of where they buy.

Our business was founded in 2015, we’ve been self-funding since raising money from friends, and we are on pace to generate $30mm in sales this year, profitably.

What's your backstory and how did you come up with the idea?

I have been back and forth in my career between investing and running companies. I helped run Bumble and bumble, a professional haircare brand, for about five years and discovered how much I enjoy hair care and how much I respect hairdressers as a channel for introducing products to consumers.

In the ten years after I left Bumble, I watched as the professional hair care channel was decimated by the rise of eCommerce, social media, and smartphones. Retail sales, which had been a cornerstone of salon profitability, fell by double digits every year as brands diversified away from hairdressers and started selling multi-channel. I thought to myself: what if someone could use technology to enable hairdressers to participate in eCommerce?

Taking VC funding is very fraught with risks because the incentives simply are not aligned.

That was the aha moment. Within three months, Hairstory was founded and fully funded.

Take us through the process of designing, prototyping, and manufacturing your first product.

Before having my aha moment, my former boss - Michael Gordon, the founder of Bumble and bumble - had asked me to help him with a new project he was working on. I was busy with my investing job but agreed to try out the core product and meet with him to share any advice or feedback I could offer.

He and several other people who we had worked with at Bumble had developed a product that would both clean and condition hair without using any detergent. The inspiration had been Jackie Bauer, a co-worker, who had long suffered from severe psoriasis of the scalp. She was convinced that shampoo was making her condition worse, and was on a mission to discover an alternative way to clean her hair that was more healthful and yet still did a good job.

Her analogy was face wash - for years women had been switching from using soap on their faces to oil-based, non-foaming cleansers. She wanted to develop the same idea but for your hair and scalp.

From the first moment I tested the product that would eventually become New Wash, I was blown away. It was so unique, so different from anything I’d ever used before, and I could instantly tell the results would be fantastic.

A few months later, when I had my idea for a new way to sell through hairdressers, I knew that if I were to start a new business I would want to build it around New Wash. I worked out a deal with Michael to acquire his assets, and we were able to launch very quickly.

Describe the process of launching the business.

Because we were starting with a finished product already, we were able to launch very quickly. We found a software platform that we could customize to deliver our hairdresser, perpetual affiliate model, built a very simple design for it, finalized all our packaging, and placed orders.

It all happened very fast - I quit my job within a few months of having the aha moment, we raised $5mm (from friends, no VCs) and founded the business within a few months of quitting work, and four months later we launched. Twelve months later, we achieved cash flow breakeven and we’ve been self-funding ever since.

Along with being quick, the most important detail above is that we didn’t raise any institutional capital (and we have not since). If you have experience building and running businesses, taking VC funding is very fraught with risks because the incentives simply are not aligned. VCs make multiple bets and work hard to figure out quickly which will be big hits and which won’t. Their incentive is to push you to “go big or go home.” The entrepreneur’s portfolio has only one investment and you’re all in.

If you really believe in your idea, you need the time and flexibility to make mistakes, adjust and figure out the few important decisions that will bring it to its full potential. I watched as my first company was pushed by our board of very capable, kind, and intelligent venture capitalists to go big exactly at the wrong time, and it killed the business. A carbon copy of that business plan is now valued at $50b.

Since launch, what has worked to attract and retain customers?

We have two core customer acquisition channels - digital marketing and hairdressers. Initially, I thought the hairdresser channel would drive the majority of customers and the DTC channel would be icing on the cake, but it turned out exactly the opposite.

Finding the right hairdressers, learning how to onboard them and make them productive turned out to be harder and take longer than I had expected. We are there now and have been scaling the business very quickly, but it took several years longer than I anticipated.

The DTC business on the other hand took off very quickly and aggressively. Almost all of our growth in that channel was dependent on Facebook and Instagram for several years. We have always had a strong word-of-mouth business as well, but the growth engine was Facebook. Recently we’ve been able to diversify that dependency a bit, but we are still too dependent on Facebook for new customers. That remains the next big nut to crack.

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How are you doing today and what does the future look like?

We grew aggressively from founding in 2015 through to the end of 2017. At that point, we were approaching $10mm in sales and the “MVP” infrastructure we’d used to launch was starting to collapse. We had been self-funding for a year, so I diverted cash from acquisition to rebuilding our infrastructure. It took longer than planned, and we weren’t ready to turn the acquisition engines back on until mid-2019, but since then we have been growing exceptionally quickly again. This year we’re on pace to do $28-30mm in sales (we are already there on a run-rate basis).

We focus on doing the best we can now to build something of true value to our customers, our employees, and by correlation, our investors.

It is worth noting that we have built a good business, meaning it is simple and has a very good flow of cash. Gross margins are healthy and that enables very good contribution margins, so we are often able to break even on new customer acquisition.

The hairdresser model has lower contribution margins, but no capital outlay risk for customer acquisition, and the channel contribution of the two businesses are almost identical. And because our products are very good (and unique), our repeat purchase rates are very high, which funds the overhead and enables reinvestment without new capital. We recently started allowing some profitability to flow through, but we are prepared to reinvest that if/when we find new opportunities to scale growth.

Through starting the business, have you learned anything particularly helpful or advantageous?

Building Hairstory has been incredibly rewarding. I set out to create something that could support my family and meet my desire to bring something new of value to the world. I conscripted my wife to help with the business (she runs finance, HR, and CX), which has been nothing short of wonderful on so many levels.

My partner, Mauricio Bellora, has been a perfect counterbalance to me, and we never would have achieved this level of success without the deep personal commitment of our team, many of whom have been with us for many years.

I’m a big believer in the idea that life is all about the journey, not the destination, and it has been wonderful to see that you can apply that philosophy to business as well. Our goals are long-term, amorphous, and ultimately unknowable, so we don’t fixate on them. Instead, we focus on doing the best we can now to build something of true value to our customers, our employees, and by correlating our investors.

We definitely work to live (not live to work), and so does our team. None of this means we aren’t super focused on metrics and data and financials - those are required feedback mechanisms to help you understand what’s working and what isn’t. But having the freedom to create and build without a gun to our heads has meant we could focus on true value creation, which feels like it has made all the difference.

What platform/tools do you use for your business?

Because our business model is unique, we were not able to use any of the traditional eCommerce platforms like Shopify or Magento. We built our own custom system and have been integrating it through Segment, ContentStack, Iterable, Hubspot and several other core platforms.

The innovation around tools to support eCommerce has been amazing, but it is also expensive. It is often hard to know what is really worth paying for and what is smoke and mirrors.

What have been the most influential books, podcasts, or other resources?

Read Let my people go surfing by Yvon Chouinard, the founder of Patagonia.

Advice for other entrepreneurs who want to get started or are just starting?

Bootstrap or raise money from friends and family. Avoid VCs at all costs if at all possible.

Are you looking to hire for certain positions right now?

Yes! We are looking for a new Head of Marketing and a Product Manager.

Where can we go to learn more?

• Website
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• Pinterest

If you have any questions or comments, drop a comment below!