Harry’s Razors: Andy Katz-Mayfield and Jeff Raider

26:36Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2012 and Jeff and Andy are trying to answer the question, does the world need another razor company? And to answer it, they're doing a lot of shaving. You guys were literally presumably buying every razor you could buy and just shaving with it. Yes, we tried everything. I think came to the determination that Andy mentioned pretty quickly that like there's a significant difference between, you know, kind of high performing products in this market and lower performing products in this market. And in order for us to build a brand, we had to be in that kind of high performance tier.

27:16Otherwise, it just wouldn't work. And were most razors made, I'm assuming, probably China, Germany, Korea? No. There's a significant concentration, probably relative to lots of other industries, of manufacturing in North America and in Europe. And the reason is, one reason is because a lot of this stuff is highly automated. you're talking about machines that have to make little grind a perfect edge on little blades millions and millions and millions of times over with like zero deviation otherwise you're going to feel it in your shave experience and then slot them into cartridges with like immense precision and so what you i think where where the industry grew up was in places with really really strong engineering cultures and and the the dynamic in the industry which is interesting is that most of the brands are fully vertically integrated.

28:06They do everything. Yeah. Gillette owns all their own manufacturing. It's harder to find like a co-packer, as you would say, in the food industry. It's very, very hard. And so when we started, that was our biggest concern. And then the other thing we were really concerned about was even if we could find quality razor blades, how could we make sure that they were unique and distinct to Harry's? Yeah. Because our concern is like, let's say we scour the earth and we find the one place that could make amazing razor blades for us, which we ended up thinking we actually did. Then we have to make sure that those people don't just turn around and sell the exact same razor blades to Larrys and Barrys and whoever, because then what's going to be unique about us?

28:47And what about you, Andy? I mean, was it also just all-consuming? You became really convinced that this could work? I mean, you mentioned that there were a few moments where you thought, okay, we've hit a roadblock and maybe maybe this isn't going to work. Yeah. I mean, it was all consuming. And I think there was kind of a trifecta of, of factors as I, you know, was getting increasingly excited about the idea and, you know, also trying to make a rational decision of like, all right, do I want to make this jump? Do I want to, you know, spend all my time and energy on this and take that level of, you know, career risk.

29:24But in Jeff, I had somebody who I respected tremendously. Obviously, he had the Warby Parker experience, and we'd worked together. But, you know, we were also close friends, it felt like almost the perfect match for somebody who you would want to start a business for. So and yeah, the thing that the really the only thing that was giving me pause was this, hey, can we make a product that actually works and performs and is sufficient quality? Yeah. Given the stakes involved, you're literally taking a knife to your face and it's a pretty important experience, probably the most important grooming experience for guys from sort of a both practical and emotional standpoint that if the product doesn't perform, nobody's going to come back and buy your product again.

30:08Like they're going to be resigned and go back and spend$25 on Gillette and that's the model that had worked for Gillette forever. All right. So you guys are digging into this and you're looking for some partner that could manufacture blades that would be somewhat different. And so how did you identify what that would be? I was reading like a shave blog one night written by like real shave enthusiasts, you know, who tend to use double-edged blades. That single-edge blade that you can... A single blade that goes into a safety razor. And you can use both sides. Yeah, use both sides, exactly. And they were talking about this factory in Germany called Fine Technique that they said made some of the best double-edge blades in the world.

31:01And I was like, huh, that's interesting. German factory, I wonder if they make anything else. And so I literally just like Googled, you know, looked them up online And they made, you know, like more advanced razor blade products. They made, you know, three blade and five blade razor systems. So, you know, where you have a cartridge and it connects into the handle. The next step was for us to try to get in touch with them. We ended up just like literally reaching out cold. And I think maybe sent them an email and I was like, hey, I started this company called Warby Parker and we've had some success in eyewear.

31:34And we think there's an interesting opportunity to apply a similar model to shaving. But in order to do that, we need to find a partner who can make us an amazing product. And then we said, okay, before we move it forward, send us, you can just send us some to try. And so I think I literally remember getting a box sent to New York. I got home, immediately tried the product, walked out of the bathroom, like saw my wife. I was like, these are good. Like these will work. These are good. All right. Let me just ask you about the razor blade technology for a moment. You mentioned that you first heard about them because you heard they made a great double-edged single razor, right?

32:09Which is like that old school, like my grandpa used to use. And some people still use them, especially people who get irritated skin. Totally. And then over the years, these three-blade systems and then four-blade systems and now five-blade systems were introduced, which is what many people use. These cartridges you attach to a handle. and it's got literally four or five blades. And so it like shaves under the skin. It shaves so close, right? It like actually takes a micro layer of skin off, basically. Yeah, it also just, it covers like more surface area. So they're absolutely superior products in terms of, you know, shave performance, like quality and comfort relative to, you know, an older style.

32:54And so in the grinding process, which is really where the secret sauce of razor blade manufacturing comes in. It's the actual grinding of this very thin steel to get that edge and get that shape is a very hard process to perfect. And to get billions of these things made at very, very high velocity in a consistent way is really where the complexity of the process comes into play. Were they using special steel, for example? I think ours comes from Sweden. Yeah, so very sort of technical manufacturing of the steel itself that we source. Yes, there's special steel. There's a process effectively to heat and cool the steel, which is what kind of makes it malleable first, which has to be done at extremely high temperatures, extremely low temperatures.

33:47It's, you know, and a ton of precision in how that happens and these giant ovens that are literally like the length of a football field. And then the thing that kind of blew my mind when I went to the factory the first time is through this heating and cooling process that Andy mentioned, you actually change the metallurgical composition of steel. You like liquefy it in the heating process and then you cool it to harden it. And you actually need a harder form of steel to put the edge on that Andy just mentioned. And so we actually changed the steel itself. even if someone was going to source the same exact steel, the manufacturing process, the first step of the process actually is to change the steel itself.

34:29Wow. Such that you can then grind this edge in a way that's going to sort of work well. It's like using a diamond to cut a diamond. You kind of have to do that, I guess. Yeah, I guess so. You guys get these samples from Fine Technique, this factory in Germany, and I guess you decide we got to go there. We got to go check it out. Yeah, I think the first time we went was January of 2012. Yeah, I think we got the product right before Christmas, or maybe right around Thanksgiving. What was the goal of that trip? Well, as Jeff mentioned, for us, what was going to be important was, they had sort of a catalog, and they would have just sold us off-the-shelf product.

35:10But we wanted to build a brand that looked and felt very different, that had a more elevated aesthetic, and so it was going to require some level of customization. So we needed them to buy into doing that for us. Sorry, when you say customization, like that the cartridges would connect with your handles? Cartridges would connect with our handles, that we could make our own handles that had a very different look and feel and design, that we wanted the head to bend in a specific way that we thought was going to be best for the consumer. We wanted, you know, different colorways. So things that would make our product look and feel and in fact be unique and different.

35:48Tell me about your impressions. I mean, you get to Germany. It's a tiny town. It's like, I looked at it on the map. I think, is it in the former East Germany? Yeah. It's very rural. It's this very small town where there are a few manufacturers there, but Feintechnik was kind of the biggest employer and biggest came in town. And And yeah, I remember getting there. It was late January. You know, at night, it was freezing cold. We were like, what are we doing here? And I remember we got there and it was so cold. I mean, the name of the town where the factory is, is Icefeld, which literally translates to Icefield, if it gives you any sense for the environment there.

36:29So when you get there and you talk to them about this vision, what's their response? I mean, you guys were a couple of young guys out of business school. They probably had no idea what Warby Parker was. I don't know if that impressed them. And they were happy to just sell you razors, but you wanted something a bit more complicated. Yeah, I think it took us time to try to build some credibility there. In the early kind of days, we'd be emailing with them. they would email to each other in German. And then we would obviously look at the, all this German back and forth between them and put it into Google translate and be like, what are they talking about?

37:14And like, they would literally like in their emails being like the American internet boys would like to order, you know, X, Y, Z from, they'd like us to customize the razor cartridge in this way. And we're like, Oh my gosh, they're calling us the American internet boys. But you know, I think, um, I think that through a set of a long set of interactions, again like over many months we tried to convince them that like we were legit and then we committed to buying a million razor blades like we signed a contract to buy a million razor blades which for them at the time was like a meaningful number um and that i think also indicated that we were legit and we gave them a forecast based on kind of some of our early trajectory at warby and some kind of modeling that we did that said yeah the million could turn into many millions uh pretty quickly if we can get this thing moving.

37:59And so I think that was helpful for us in terms of building credibility, but that definitely took time. But I mean, when you made a commitment to buy a million razors from these guys, did you have millions of dollars at that point to give to them? No. Nope. No. Because at that point you had not raised money yet. Right. So we had to come back to the States pretty quickly. And yeah, at that point, I told the folks at Charles Bank, I was leaving, we were on the hook for a million razor blades. So we need to make this business come to life. Yeah, it was$300 ,000. I remember that it was like 30 or$350 ,000, like 35 cents a cartridge, I think.

38:39No, it was more. It was like 500 or more. Was it 500? Oh, I guess our prices came down over time. Yeah, euro cents versus dollar cents. And so we had to figure that all out. And we were like, you know, what do we do? Like, how do we figure this out? And, and so yeah, we wrote a business plan. We had a contract, like literally a physical contract. And we and we had good investor relationships with early stage venture investors, you know, because of Warby Parker, Warby Parker, at that point had raised a couple of rounds of capital and had a great investors. And And so I knew some of them and some of them I got introductions to.

39:15But we had a bunch of Warby Parker investors who, you know, in retrospect are going to do great on Warby Parker, who invested early at Warby Parker, not invest in Harry's. And so it wasn't like everybody was rolling out the red carpet. Like we still had to, you know, go out and do our best to get that capital. And, yeah, we were very fortunate to have a bunch of folks who believed in us enough to want to do it. Before you – at what point do the two of you – I mean, obviously, you've got traction now. It's the summer, almost the fall of 2012, and I think that's when the two of you left your day jobs.

39:55And you officially founded Harry's in September of 2012. Yeah. I mean, first of all, I mean, when did you decide? Do you remember when the two of you said, we're going to go for this, quit our jobs, and we're going to start a business? Like it must have been a few months before that. Well, I remember a distinct – so we went back to Germany in May of 2012. That was our second trip. And that's when we actually negotiated and signed the contract. And so I remember being in the rental car with Jeff driving back to the airport and kind of looking over at him and be like, we're doing this, right? Because like, I'm going to go quit my job.

40:36Are you going to quit yours? I don't want to quit mine if you quit yours. And he was like, yeah, yeah, we're going to do this. I was like, okay. So that at least for me was sort of the point of no return in the moment in time when, you know, it was going to go from a nights and weekend adventure to a full-time endeavor. I don't know if that was it for you, Jeff. Yep, that was it. ride back from the factory in May after we had a deal. Wow. Okay. And the deal was to buy... A million razor blades. A million razor blades. Okay. So you had to go back. And at that point, did you have a name for this potential business?

41:10I'm not exactly sure when we had Harry's as the name, but I think we were at least... It was around then. How did you come up with a name? Is there a person named Harry? Yeah. So there was a grandfather figure of mine named Harry who we liked. We liked the idea of shaving being passed down from grandfathers to fathers and fathers to sons as like a general idea. So we, we wrote down all of these kind of like people in our lives who were kind of grandfather, father figures as like a beginning of inspiration. Then we saw Harry's and we're like, can we really call up shaving brand Harry's? And we both kind of laughed.

41:41It was like, you know, funny in that way. And then when we started talking to people about it, we're like, you know, what do you think about calling it Harry's? They're like, oh yeah, like my uncle Harry or my neighborhood bar Harry's like, and we're like, that's what we want. Like, that's the, the feeling we want. And then we felt like we could pair it with kind of warm, masculine colors like Navy and olive green and burgundy to make it kind of, you know, build this kind of warm, but, but sort of design centric world around it. I forget the references we were thinking about at the time, but like we liked, you know, Barneys or even Fred Siegel, you know, they were just like kind of these like elevated, but warm.

42:15And so we felt like that was a good kind of place in contrast to the other brands in the category that we felt like maybe we're trying to tell guys to be the best and perfect. And the traditional kind of shaving, kind of like ads of a guy with a six pack looking off into the distance with like a perfect jawline, shaving one side of his face as like a woman runs the other. Like that was kind of like what was out there and maybe what wasn't as appealing to us. And we just wanted to be like this kind of like honest, open, warm, approachable, friendly brand. That's like, we don't actually, we're two guys just like you.

42:48And what about, I mean, you mentioned colors. I think of orange or that blue as Harry's colors. Were those colors from the beginning? Yeah. So we were sitting around with this design agency that we work with. Today, they're called Mythology. At the time, they were called Partners in Spade. One of the folks there looked at us and was like, you guys should make razors that look like traffic cones. And we're like, what? And he's like, yeah, orange, traffic cones. Just try it. it'll be cool and we're like okay like i'm why not and so we mocked up a sample of an orange razor that we looked at and we're like this looks cool and then we started to meet with people and everyone would be like what's up this orange one looks awesome like i love the orange and over time we're like huh there there really is something to orange orange was our number one handle when we started and it totally surprised us all right so you have um you've got the name and you've got this commitment to get the raisers made, but you've got to raise the capital to pay for them and also to make the handles and then to start this business.

43:55So you, Jeff, had had obviously experience raising money with Warby Parker. How much initially did you guys need to raise? I think we ended up raising$4 million in our first round. Now it sounds quaint. There's like$10 million seed rounds, but at the time it was actually a pretty big seed round and people were like, well, you know, what's, what's, you know, minimum viable product MVP. We're like, oh, there isn't really like an MVP here. Like we need this thing to work out of the gate. Like it's a, it's a razor. We need the product to be good. We need the inventory. Yeah. I think we, I think we set out trying to raise three and wound up raising four or something like that.

44:30And how did you guys split the company between the two of you? Was it just, you know, 50, 50 simple? I think that's actually been really important for us too. Like having the same economic incentives all the time, same ownership, like it's just good, you know, equal partnership. That's, I'm really glad we did that in retrospect. All right. So you guys have this money to launch. And did you, I mean, by the end of 2012, you've raised the money and you've got a plan here. So what was the plan? What was the idea? I know you launched in 2013, in March of 2013, but what did you do to prepare for that launch?

45:12Did you hire people? What happened during that time? So we raised money over the summer of 2012. I quit my job like around Memorial Day. And I think Jeff stayed at Charles Bank through Labor Day. We had all these designs. We had to go manufacture the product and ensure that we needed packaging. We needed the handle. We needed the cartridges. We needed to assemble all this stuff. We needed a website. And we needed some people to help us do those things. Neither Jeff nor I had really operated before. You know, Jeff had a little bit of experience with Warby Parker, but, you know, and actually one of our biggest, earliest investor.

45:51They were like, look, we'll back you guys, but you need to find somebody that actually knows what they're doing, like, from an operational standpoint. You guys seem smart, but you've never done this before. And so they introduced us to this guy, Will, who's still our COO to this day. I would say that, you know, Jeff spent more of his time and energy and what he's really, really good at, you know, sort of brand and design and consumer and marketing. So he was really leading the charge on a lot of that work and a lot of those decisions. I spent a lot more time and energy on the operations and setting up the manufacturing partner.

46:25And so that was sort of how we divided and conquered things through that. I guess it was about a nine month period from when we raised capital to when we launched in March of 2013. I mean, the idea was was what at the beginning? It was to just it was to was it to be like a monthly subscription? Was it to be selling, you know, just razors and blades a la carte? What was it going to be? We always thought of Harry's as a brand first. And so the way that we started was not on subscription, actually. But we made these shave sets. They were a razor. We still have them today. A razor with a handle on it, plus two additional handles and a shave cream for$15.

47:15And were you making the, was it branded Harry's shave cream from the beginning? Okay. Yeah, yeah. Harry's branded shave cream. So what we did is we tried to find the labs that made the most prestige products that we could and the chemists. And then we were like, okay, can you just make us that? But we're not going to charge$20 for it. We're going to charge eight and try to make that kind of part of the Harry's brand identity, which is like we can deliver you kind of great value across the line. Prestige products at mass prices. I mean, so it's not like one product, one copac or one manufacturer.

47:48There's a lot of different suppliers here. That's right. Right. And as Andy mentioned, kind of while I was dreaming up ways to sell stuff, he was diligently with our team figuring out how to bring all that together. And by the way, where were they all put together? Were they all brought together to like a central warehouse somewhere and packaged? We actually had the razor blades shipped from Germany to China where they were assembled onto the handle and put into the packaging there. So there was like an assembly operation in China. then those were shipped over to this 3PL in Connecticut. Our shaving cream and shaving gel were manufactured at a facility in New Jersey.

48:30We had another supplier in New Jersey that was making these boxes and these inserts that the initial kits would be assembled into that would ultimately be shipped to the customer. So yeah, it was a crash course in supply chain. Yeah. Yeah. So basically, and when you were ready to launch, how many people did you have full-time as full-time employees? Yeah, we had like 12 people as full-time employees and turned the website on, got a bunch of great press right at the start, and kind of we were off to the races. How did you do that? Did you hire the same PR firm that Warby Parker had used? Yep. Yep.

49:16We hired the same PR. We actually worked with two PR firms and leveraged every personal relationship we had just to try to get, yeah. We were like literally running around New York for the few weeks before launch, just trying to meet with as many people as possible to tell them about Harry's before Harry's actually launched. In that process, we were getting incredible feedback from people on the brand and how they thought about it, how we should talk about it. And that was great. And so what happened? I mean, when you launched, you already had press. And so did your, I mean, did you guys have tons of traffic right away?

49:49Yeah, we were kind of blown away. There was this great, it still is, this great men's blog called Uncrate. And I'd reached out to the guy who ran it. I know that blog, yeah. And he never responded. So I was like, oh, I guess he didn't, you know, didn't want to talk about Harry's. And then all of a sudden, right after we launched, we sent him a sample. Right after we launched, I just got an email from him that says, hope you have a good server, son. and then he posted the link to the uncreate article and like our whole website like blew up i was like oh my gosh we uh immediately just uh started to see like a ton of demand and i think what within like a couple of weeks or maybe a month you sold out of everything that you had bought that you ordered yeah we had more coming but for a little while we were sold out and we started this thing internally that we weren't going to shave until our customers were shaving So we were like walking around three weeks after launching this stuff with like, you know, 10 day beards with people being like, what's wrong with you?

50:45Well, we're trying to get in stock, you know, and once we do, we'll shave ourselves. Now, this manufacturer, Fine Technique, I mean, were they able to, I mean, given the demand, right? And you had ordered a million blades from them. But each kit was coming with three to five blades, I guess. Three, yeah. I mean, were you confident that they could ramp up production for you? In the short term, yes. In the medium to long term, we knew that we were going to need many millions a month. Moreover, while the product when we launched, we thought was really good, we immediately and we sort of knew this already.

51:22But one of the beauty of having direct relationships with customers is that we immediately started getting all sorts of feedback, which like, oh, I like this. But could you add that trimmer blade thing on the back? Could you make the thing more flexible? It would be really difficult to meaningfully inflect product improvement without actually owning the manufacturing process. So even before we launched, we're like, we're going to have to own this thing at some point. Maybe not the whole factory, but we need to own our own production line. We have to be vertically integrated. So it was clear to you that one solution could be to build a product line in their factory that would be dedicated just to Harry's, and that was a potential solution.

52:06Did you propose this idea to anyone? Yeah, in some ways that would have been the logical place to start. So we did have that conversation with them. And what wound up happening is the conversation moved from, well, we could try to have some sort of joint production line or we could buy this thing outright. Wow. I mean, this is like two months into your business where you're having this conversation, I think, something like that. Yeah, it was a little bit crazy. And, you know, I actually remember one of our investors who invested personally in our seed round. His name's Lee. You know, we were talking about this, the idea of vertical integration with him in the seed round.

52:50And he was like, well, how much money would it cost to buy the factory? And I was like, I don't know, probably like$100 million. And he was like, well, you should probably launch the brand first and see if it works. But if it does, come talk to me. So I think Jeff and I sort of like took that to heart. And yeah, we said, well, you know, probably didn't intend to try to go find$100 million to buy a factory two months into our company's existence. But the time is now. So let's let's go see if we can make it happen. when we come back in just a moment how jeff and andy deal with the inevitable angst of marrying an old-school german company with an upstart american one stay with us i'm guy roz and you're listening to how i built this

53:48Hey, welcome back to How I Built This. So it's around 2012, 2013, very early in the business. And Jeff and Andy are already looking to acquire a German company that makes their razors. And one of the reasons they want to move quickly, they're worried about competition. Yeah, I was very worried that we would have our legs cut out from underneath us, and particularly the risk of Gillette or somebody like that buying this thing and basically putting us out of business. And so we did not want, if we could avoid it, like a full-blown competitive sales process. So time was of the essence to try to preempt that.

54:28Yeah, so we started talking to them and outlining what a deal could look like and then had to go figure out how to find$100 million to finance it. So how did you, I mean, how did you do that? How did we do that? Yeah. Well, we called Lee, who, as I mentioned, had invested personally in our seed round. And he was at a hedge fund, Tiger Global, and called him and said, Hey, Lee, remember about that factory thing we chatted about back in December? Well, we launched, like the business is doing well. and there might be an opportunity to actually go buy that. And he said, well, okay, cool. Come up next week and talk to me and my partner about it.

55:15So we went up to Midtown to meet with him and his partner and pitched them on this idea. And we had a bunch of other great existing investors. And so I think with Lee's excitement and support, that helped us to start to build a syndicate essentially of investors who would want to do this with us. And so we were able to get commitments for$65 million of equity. We then went to Germany to raise$35 million of debt, which was a whole different challenge to convince these very conservative German bank lenders to lend us the money to go buy this factory. The funniest thing about the negotiating process was that we didn't have a conference room in our office.

56:04And so Andy was sitting in like with like a makeshift table in the stairwell next to our office doing all of this, you know, on the phone with Germany with papers are everywhere like for months on end. All right. So now, I mean, once this is done, I mean, you now own a razor blade company. I want to ask you about so many things about it, but just, I mean, essentially this makes you what, you know, it's a term we hear a lot on the show and also it's vertically integrated. Now you own, you're not dependent on a supplier to make your product. You make it yourself. Yeah, we went from a sort of technology-enabled startup that was doing, I don't know what we were doing at the time, Jeff,$5 or$10 million of revenue on an annualized basis to a fully vertically integrated global consumer packaged goods company overnight, which was both exciting and daunting.

57:04I distinctly remember, you know, they put us up effectively on like milk crates on the factory floor and gathered all the workers to like announce this and to introduce ourselves. And we're looking out there at 300 or 400 German factory workers. And it was definitely like an oh, crap moment of, you know, like it was exciting. But the other time was like, what did we get ourselves into here? And now you went from 30 people who worked for Harry's to having 420 additional people who worked for this company. Yeah. And we felt a lot of responsibility to them. Felt like the whole town of Icefeld was there hearing us talk about the future of this factory and like, we better make it work.

57:46I think in retrospect, we were slow to really, yeah, say, hey, this is Harry's. You know, we've got a certain set of values. We've got a certain way of doing things. Because, you know, they were bigger than us and we didn't want to upset the apple cart and we didn't know, you know, like we're not manufacturing experts. You know, we're trusting them to run the factory. But we did need to integrate in some way, shape or form. And what about just cultural differences? You know, what were some of the challenges that you had to work through? We might need three hours for my German-American, you know, cultural adventures.

58:25Um, probably the biggest difference that we had to work through is that, you know, we were a fast moving entrepreneurial culture, like tests, learn, iterate, like two steps forward, one step back. And the Germans perceive that as just these guys have no idea what they're doing. It's, it's complete chaos. It's, it's unorganized, disorganized. But, you know, the Germans are a lot of planning before doing. And the American perception of the German team was they're not doing anything. Why? They're not working. They're moving slowly. And of course, in a manufacturing environment, like you need to be more planful.

58:58You can't just like test and learn things on the fly on a website. You can do that stuff. So it was it was challenging. Now that you owned this factory, I mean, there were competitors out there and there are some competitors who started even before you like Dollar Shave Club and, you know, obviously the big ones like Gillette and Schick. Now that you owned your own production facility, presumably it puts you in a slightly different position than, say, like a Dollar Shave Club, which I don't think owned its own factory. Right. And I think that did differentiate us from others. I think we sort of at one point said we were kind of the only truly vertically integrated company in the shave industry in that we literally grind steel and make razor blades and deliver them to your door vis-a-vis our own kind of e-commerce platform.

59:48And having that whole loop from the customer back to the factory was like an area of advantage for us, I think, at the time. As Andy mentioned, we had all these ideas from customers and how we wanted to improve the product, and now we actually had the capability to go back to the very source and do that directly. I wonder with respect to your competitors. I mean, sometimes people on the shelf say, well, I don't pay attention to my competitors. I don't. But I'm not sure that's necessarily a good thing. I mean, I think that sometimes it's important to look at what your competitors are doing and to have a competitive sensibility to feel like you really want to beat them.

1:00:27And did you guys have any of that? It was an interesting dynamic because Gillette globally had, you know, 70 percent market share, like truly insane. And, you know, some people looked at that and said, my gosh, like, you know, that's crazy to take those guys on. Like, you know, and they're owned by Procter & Gamble, the biggest, baddest CPG company on the planet. And I think for us, it was always helpful to sort of have this, you know, there was like a David and Goliath narrative that I think played into our brand and that played into, you know, customers getting behind us. And I think we paid a lot less attention to Dollar Shave Club or other upstarts.

1:01:14Like what everybody else was doing was sort of immaterial at the end of the day relative to what Gillette was doing. Tell me how you – I mean so essentially you've got this. You've got your production facility. And I think you guys really went – maybe aggressively is the right word. But you really went for it in terms of raising capital. for the next couple of years. And there's debate about this right now. A lot of people, there are lots of people who are saying, well, in the last 10 years, this idea of growth, growth, growth, growth, maybe not the best approach. Other people say, well, but that is the best approach.

1:01:52You've got to raise a lot of money and grow because otherwise you won't be able to establish a foothold. Talk to me a little bit about the strategy of raising money and raising more capital. I'm assuming it was to fuel faster growth. Yeah. So one of the things that happened at Harry's really started beginning in late 2013, so call it six months after we launched, and then through 2014, was that we started to really learn how to market to people online and get them to come to our website. And started to grow in ways that we had not anticipated. And so in 2014, I think our plan was to do like$10 million of revenue or something.

1:02:38And by like June, we'd already done$10 million revenue and we were going to on the way to do 20 or more. And then at the same time, we were recognizing we were running out of factory capacity and, you know, the industry was starting to change. Like, as you'd mentioned, Dollar Shave Club had launched, Gillette was out there changing. Like it was just a dynamic picture. And so we're like, okay, we think this is an important time for us to actually continue to grow, to really establish ourselves as a strong brand in the space. And as a result, we ended up raising a fair bit of capital. I would say at least half of that capital, those kind of early rounds of capital, went to Germany to sort of build out the factory, the plan.

1:03:15I remember sitting there, gosh, this was probably 2016, 2015, with a reporter who was asking us the same question. And I was like, look around. There were like cranes building new buildings and dropping in heavy equipment like everywhere. I was like, this is where all the money's going. So as you mentioned earlier, getting people to try something once is one thing, but then getting them to try it again and again is another thing. And part of that was obviously the quality of the product and the design and the price point. But did you also see

1:03:50Gillette lowering its price to start to match what you guys and some of the other competitive companies were offering at lower rates? Yeah, I think actually when we really started to sort of have competitors take notice was after we launched at retail. Yeah, at 16, you were at Target, right? We launched at Target. We met Target in 2014. we spoke at their design, like design month and we liked them. I mean, I think that what struck me when we first met them was that they talked about their customer as a guest. Like we feel like if, I don't know, we're not sure about Harry's, but if the guest tells us they want Harry's, then we should be serious about giving the guests some Harry's and, and with Target.

1:04:34And then we, you know, we launched at Walmart in 2018 and then we had to kind of work with Target to try to bring Harry's to life in their stores in a way that would be unique and sort of exciting and compelling to us in an aisle that, you know, was a source of frustration for lots of guys. It was one of the reasons why we started the company. And so we didn't just want to kind of do the same thing as everybody else. And so when you started to sell in Target, you started, this is when you started to see Gillette change, you respond. And what did you see? Yeah. When we launched in Target, we took over 50 % market share of the category at Target overnight.

1:05:14And so whoever was sitting in Cincinnati at Procter & Gamble when that report came through probably fell out of their chair. Yeah, that's crazy. I mean, it blew all of our expectations. It blew Target's expectations away. It blew our own personal expectations away. It certainly sent us into a bit of crisis mode as it related to supply chain and manufacturing razor blades and um i think it was that moment probably that some of the traditional cpg players got religion that like hey these aren't like e-commerce startups like these are serious consumer brands that are threatening our core franchises and yeah that's when you start to to see much more aggressive responses um in terms of price action yeah and i honestly feel like that was one of like the greatest victories that we've had since we started harry's like we got one of the biggest companies in the industry to drop their prices, to be more consumer centric, to try to sort of engage with us.

1:06:11And on the marketing side, I think the place where we went public the most was they created a campaign. It was to the song Welcome Back. And it said that most of the customers who try Harry's leave Harry's. And that just wasn't true. Like we had all the data of our direct-to-consumer business. And so we sent them back a letter with literally all the data. We're like, every cohort of customers since the beginning of Harry's, the majority of customers who try Harry's stay with Harry's. They didn't really respond. And so we eventually just took that letter and made it public. It was written by our lawyers, but it was kind of funny, tongue-in-cheek.

1:06:48I think that's the point when our customer base really came to our defense and said, okay, like it's kind of messed up that these guys are picking on you. And did Gillette back off? They just stopped running the campaign. I think they realized that them as the Goliath picking on the David was not a good strategy. One of the things that I'm curious about, something that you did around 2018, is you established an incubator called Harry's Labs. And I know it's changed somewhat, a little bit from what it originally was designed to do. But essentially, it's an accelerator, right? You've developed products in-house and then you've purchased kind of small brands and made them bigger.

1:07:32But before we talk about the details, what was the idea here about diversification? Because at some point, right, there was going to be more competition in this space and your market share might have stalled out. So was that the idea behind creating an internal incubator? Yeah, I think that was part of it. Um, you know, Harry's was doing great, but we were kind of looking at this saying, okay, how big could Harry's really, really be over time? Even if we got to, you know, huge market shares everywhere, like there's going to be some cap on our growth and shave. And so if we thought about it, we thought, Hey, like, you know, if we could increase our addressable market, not just to kind of men's grooming and personal care, but to all of CPG, that's a pretty significant sort of shift in the opportunity set that we have.

1:08:27And then we're starting to build good relationships with some of these great retailers like Walmart and Target and, you know, later Kroger and Grocery and Meijer and Costco and CVS and Walgreens and all these places. And they're excited about this. They're excited about us building brands online that are kind of modern brands that have interest and awareness around them and then coming to retail eventually. Yeah. You know, the vision really evolved from, hey, we're going to build, you know, a next generation Gillette or a next generation Old Spice, you know, from a Harry's brand standpoint to, hey, we're going to build a next generation, you know, Procter & Gamble.

1:09:04Like we want a family of brands. We had, you know, an idea for a woman's brand in the space. So that was kind of a logical place for us to start. So while you sort of launch the lab and begin to incubate ideas, I think the first one was Flamingo, which is a woman's razor skincare brand. You are approached by Edgewell, which is a company that I think owns Schick and tons of other, you know, Banana Boat and Hawaiian Tropic, a bunch of different brands. Essentially, they decide, they offer to acquire you. In May 2019, it's announced that they would buy Harry's for close to$1.4 billion in stock and in cash.

1:09:50I'm assuming that now you're roughly six years in, your investors may want to return. And was that the thinking behind the acquisition, agreeing to it? It was certainly a benefit of doing the deal, but it was a little bit more serendipitous than that in that Edgewell, as you mentioned, owns Schick. And Schick historically had been the number two to Gillette. And Gillette is the 300-pound gorilla. And we thought it was potentially compelling to combine with Schick and have a more formidable competitor vis-a-vis Gillette. And, you know, we were actually, you know, Jeff and I were talking about like, hey, could we buy these guys?

1:10:36I actually talked to a couple of private equity firms about because Edgewell was a public company, but a reasonably small public company about trying to buy them, take them private and fold it into our business. That was actually how it started. And we could never get the math to work to take them private, but it's a small industry. And so we got to know them a little bit through that process. And yeah, at some point they turned around and said, well, why don't we buy you guys, but we'll just give you the keys. You guys were going to be the co-presidents of Edgewell. Yeah, in North America. Yeah, it was very much fine technique all over again in that sense.

1:11:12Wow. Because while they were acquiring us, it was a reverse merger in practice. And yeah, it was the same level of skepticism of like, hey, do these guys, you know, Jeff and Andy, do they value, you know, what we bring to the table? They're, you know, they've got their young, fancy New York, you know, startup workforce. And we're out here in suburban Connecticut, you know, doing things more traditionally. And so there was a lot of, you know, trust building and, you know, the same as Jeff mentioned, we were going to need our team to stick around to make this work. But we were also going to need their team to stick around and make this work and figure out a way to bring these cultures together.

1:11:47So you were really investing a lot of time and energy into this because, I mean, obviously you wanted it to go well. but ultimately the merger got blocked and not by you or Edgewell but by the Federal Trade Commission they basically said if you guys were one company it would stifle competition like it would be an antitrust thing yeah so do you remember the moment when you heard about that yeah we the actual moment was not a surprise because as things continued to progress, it got clearer and clearer that we were fighting an uphill battle. And so, you know, while it wasn't a surprise, it was certainly still, you know, a bit of a gut punch.

1:12:38And, you know, we felt like we had sort of let our team, you know, down this path and on this journey and, you know, kind of had to then mea culpa and pick ourselves up and get everybody re-motivated around a standalone vision and path. It started, I think, with Andy and I apologizing. So as Andy mentioned, we had to do this mea culpa, which was important for us to say both to each other and to the team, like, hey, you've trusted us on this journey. We're really sorry that this happened the way that it happened. We didn't think it was going to happen this way. And we know that it's caused you all a lot of work.

1:13:14We still believe that we have a really compelling and exciting vision for the future. This whole thing about NextGenCBG, in some ways, it's going to be easier and better for us to build these brands from scratch ourselves or buy them. And actually, Andy and I were talking about this the other day. I remember a couple of folks coming up to us, like people have been at Harry's for a long time and being like, just so you guys know, we're in. Whatever you need, we're in. We got you. We're going to make this thing awesome. And for us, that was so uplifting and inspiring. And investors, too, just calling us and being like, we got your back.

1:13:42Yeah. And then three weeks later, COVID starts. Yeah. Nice one-two punch for us, huh? I know. In some ways, COVID was a good thing for us. And in some ways, it was a hard thing. On the good side, all the people who are like, oh my gosh, Harry is like, this business is in crisis. This deal got blocked. What are you going to do? Now everyone was in crisis. And so we're like, welcome to our world. That was a good thing. Also, our business did really well during COVID. So people stopped buying razor blades in stores so much, but they started buying lots of stuff online. And, you know, Flamingo, which is a brand we mentioned has an amazing wax at home wax product and people stopped going to, you know, sort of salons to get wax.

1:14:25And so that product totally took off. And then our online business, you know, DTC also started to grow in a significant way because people weren't going to stores. And so I think we actually, we also turned the business to profitability. We were EBITDA positive. And so, and I think that business underlying business momentum then helped us to start to convince the team that hey like this is going to be awesome like we have a great sort of standalone business and exciting future vision like let's all kind of do this together yeah so when you think about where you are today right now what are we about 11 years in to the company 10 years into the company.

1:15:08Yeah, a little over 10. That makes us feel old, by the way. You're both still pretty young. You're both in your 40s, right? How much of where you are today do you attribute to the work and the strategy? And how much do you think has to do with luck? First to you, Jeff. I think that there's certainly been a lot of serendipity and luck in my life. Like, you know having been sitting with neil after class one day when dave walked up with the idea for warby parker like andy having gotten to know andy at bain like gosh i could have made a hundred different decisions in life that i wouldn't have where i wouldn't have gotten to know him and i think like in making the ideas come to life um i think we we've worked really hard to go do that and i think made a lot of conscious decisions over time some days i'm like oh gosh i just wish we could get a break and then we get a great break and it's awesome and we learned something new but I think that's probably a function of the fact that we have a team that's continuing to iterate and innovate.

1:16:13And so I guess, you know, in that way, like we do kind of manufacture our own luck or success. I think Jeff's being modest because I would find he'd be a really lucky guy to have started two multi-billion dollar brands and just gotten lucky. So there's probably, you know, 15 or 20 people on the planet who can say that they've successfully started two multi-billion dollar companies. I would ascribe the lucky part to be like situation and circumstance. Like I was lucky in having access to like amazing education and, you know, the network where fundraising was easier than it might be for somebody who was born into a different environment.

1:16:54And, you know, I think the adversity along the way and kind of determination to sort of push through that adversity is not luck at all. It's just hard work. It's me and Jeff that have to sort of steer the ship there. So, you know, I don't think that part is luck. A lot of that's hard work. That's Andy Katz Mayfield and Jeff Rader, co-founders of Harry's. so jeff are you excited to teach your 11 year old to shave one day oh yeah totally you know we had at harry's we made um these razors in our very early days that were kids razors so they had like kind of toy heads and you could just like shave with them not actually have blades in them and we used to sort of stand there next to the mirror and shave together him with like his you know a little razor and me with like a regular Harry's razor.

1:17:49And it was great. Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show. And it's totally free. This episode was produced by Liz Metzger with music composed by Ramteen Arablui. It was edited by Neva Grant with research help from Catherine Seifer. Our production staff also includes J.C. Howard, Casey Herman, Carrie Thompson, Sam Paulson, Alex Chung, Elaine Coates, John Isabella, Chris Messini, and Carla Estevez. I'm Guy Raz, and you've been listening to How I Built This.

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