Hero Cosmetics: Ju Rhyu and Dwight Lee

27:34You're seeing that people are talking about this. But there's a lot more to do if you're going to kind of even think about getting something going. What did you start to do? You know what? In Korea, cosmetic manufacturers are required to list the name of the manufacturer. Oh, like if they white label it, which most of them do. They have to tell you, wow, because in the U.S., they don't want to tell you that at all. Right. They want to keep it secret. Yeah. So I went to a pharmacy. I bought up like 10 to 15 different brands. I turned over the box and I listed the name of all the manufacturers that these brands were using.

28:13And I just – I started cold contacting them. I would call them. I would email them. And, I mean, most of them didn't write back to me. But there were two or three maybe that did. And I remember there was one where I had to buy some samples. I asked for some samples. And so that was sort of the first step in identifying a potential supplier to kind of figure out how I would get this product created. Yeah. So tell me what you find one of these companies is like, yeah, we're open to working with you. And what did that mean? I mean, it was just a matter of like, okay, just buying a bunch of these things and shipping them over.

28:57Like, what did you start to do? So, first I got some samples. And then actually one of them, I actually visited their factory. They invited me. They were like, come, come visit. You know, we'll show you a little bit about, you know, how we make these products. And then it was just sort of conversations around like, well, can this be changed? Can that be changed? Can I increase this? Can I change that to see if the capabilities were there to make something more unique for the American audience? Okay. So sounds like a plan. And how much money was it going to take? Because some of these places have minimum per buys.

29:43Like you got to, well, we're not going to talk to you unless you spend$100 ,000. What were they saying? I think it was 10 ,000 units. And so that probably would have been probably, I don't know, 15, 20 grand or something like that. And did you have the cash to do that? You know, I did. And I went down the rabbit hole. Like I had a name. I hired a designer. I had like a sleeve design that was like ready to go. And then I remember I submitted it to the manufacturer and they were like, oh. Because they could do everything. They would package it up. Yes. They would put your label on the deal. It would be finished good.

30:19Right. Yeah, and I remember him saying like, oh, it's not going to work because it has to be in a box to protect the patches because the patches, you know, if there's too much weight on them, like the gel could squeeze out. I remember I had some other colleagues, you know, who are in my like social circle who are also like wanting to do something entrepreneurial. And I kept like pitching the idea to them like, oh, you know, like what about this? And, you know, I think it could do well. So, yeah, I went down the rabbit hole of launching this. This was probably 2013, 2014. And then in the end, did not do it.

30:59Why not? You know, when it came time to submit that PO, I just, I don't know, I chickened out. It's a lot of money. It's a lot of money. It's a lot of work. Like, do I know that it's going to work out? I don't know. So, yeah, I chickened out, got cold feet. When we come back in just a moment, Ju finds the courage to launch her idea after joining forces with friend and future co-founder Dwight Lee, who joins us after the break. Stay with us. I'm Guy Raz, and you're listening to How I Built This.

31:41If you've been listening to the show these last couple of episodes, you've probably heard me mention the Airbnb original experience that I'm hosting. I'm so excited to have a chance to connect with listeners in a completely new way. It's called the Reinvention Lab, and it's designed to help you think about how to unlock your next big move in your career or even in your life. I'll help you discover your own story in ways I do on this show with my guests. And attendees will get a chance to take a deeper dive with me on so many lessons I've learned from this show. Lessons that have transformed how I work and think about the future.

32:19All proceeds from the event will go to support the Ronald McDonald houses that helps families stay near their children who are being treated at nearby hospitals. It's going to be really fun and I can't wait to meet you. So come join me in San Francisco and take your idea to the next level. To grab your spot, visit airbnb.com slash guy. It's going to be great. Now a quick break switching topics to one of our favorite sponsors, Vital Proteins. Vital Proteins is the number one brand of collagen peptides in the U.S. By taking collagen peptides every day, you can help support your hair, skin, nail, bone, and joint health.

33:00And now you can try Vital Protein's new collagen and protein shake. It has all the benefits of collagen in a ready-to-drink chocolate protein shake. With 30 grams of protein, it's great for healthy hair, skin, nails, and joints. And it's perfect when I'm on the go. I use it at the gym. I use it after a workout. It's delicious. And the chocolate flavor is awesome. I highly recommend it. Go to www.vitalproteins.com to learn more and where to buy. Get 20 % off your next order by entering promo code BUILT at checkout. Ever had one of those afternoons where your brain just quits on you? You're sluggish, hangry, maybe even a little foggy.

33:45What if it's your glucose? See, glucose is an energy currency for your mind and body. When it's stable, you're on point. When it crashes, so can you. That's why Lingo is so interesting. Lingo is a glucose wearable designed to help you connect the dots between your glucose and what you eat, how you move, and how you feel. It shows your glucose data in real time. Instead of guessing, you see the impact of your choices. Maybe that healthy snack is actually sending your glucose on a roller coaster. Or that afternoon walk is the perfect stabilizer. It's about unlocking your consistent best all day long by truly understanding your body's unique responses.

34:25Get to know your glucose and learn about how to build healthy habits that work for you with Lingo, designed for you by Abbott. Through November 30th, use code GUY10 on HelloLingo.com to get 10 % off a Lingo plan purchase, one use per customer. This offer cannot be combined with other offers, U.S., Puerto Rico, and U.K. only. The LingoGlucosystem is for users 18 years and older, not on insulin. It is not intended for diagnosis of diseases, including diabetes. Individual responses may vary.

35:05Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2014 and Ju's contract with Samsung is over. So she heads to New York and lands a job in the Korean beauty industry, which is how she meets the guys who will be her future business partners, brothers Dwight and Andy Lee. At that time, K-beauty, Korean beauty was really trending and I was doing a little bit of consultancy. And then I ended up taking a marketing job at a K-beauty startup called Peach and Lee. And just kind of give me like the sort of basic description of what is K-beauty? What makes something Korean beauty? I mean, I think there's probably maybe a little bit of debate about the definition, but really it's Korean brands, Korean beauty brands that have a Korean approach to beauty and skincare.

35:59So that's usually like innovative textures, very interesting ingredients. Like, you know, one of the really popular products is a snail mucin moisturizer. Snail, like from a snail? Yes, right. That's interesting. Like from snail shells or? No, they like the snails will just crawl and they leave like a little trail of. Of that gunk, like the gunk. Yeah, and apparently that's really good for your skin. Wow, I did not know that. I'm going to start collecting snail slime. Yeah.

36:33So the American audience just suddenly became really interested in products that were beauty products that were Korean from Korean brands. And it spurred a whole industry in the U.S. where there are these e-commerce sites. So Peach and Lili is one where they would bring these Korean brands into the U.S. and create a marketplace for the American consumer to access them. All right. So you're working for this startup. But meantime, I think you still have this idea in your head, right? Like this idea of these patches. because no one had really brought them to the U.S. at this point. And now you're like a year, two years later since when you first started this.

37:19Yeah. I mean, it was still nagging at me. It was still in the back of my head. And now I work at this K-beauty startup and I am kind of watching the industry and I see that some of these Korean brands that have these acne patches are doing quite well. and I'm seeing this kind of emerging category take off. And I just kept thinking to myself like, oh my gosh, like someone needs to do this. And meantime, I guess, you know, sort of you're working for this startup for some time, but you also end up starting your own beauty consulting company, doing some consulting work. And this is where I want to bring in Dwight, who's been patiently waiting here in this interview because around this time is when you meet a guy named Dwight Lee.

38:10And Dwight, what were you doing at the time, and how did you meet you? So Andy, my brother, who is the third co-founder of Hero, and I, we were running a digital agency called Division Of. It was mostly a production studio. We were designing and building experiences for screens. So think like websites, apps, interactive kiosks, out-of-home displays, things like that. And so we had met Jew through Peach and Lily. They were one of our clients. And so we met and we started working on the projects for Peach and Lily. And Jew, I guess at a certain point, you tell Dwight about this idea that you had or this pimple patch thing.

38:56Dwight, what do you remember when you first heard? Like, what do you remember Jew telling you about it when you first heard about it? And we'd meet up for dinner and sort of talk shop and spitball a lot of ideas. I think there was a lot of interest on both sides to try to get something going. And I do remember talking about sort of different cosmetic products and, hey, maybe we should try this. Should we try a moisturizer or like a cleansing balm or stuff like that? And she mentioned the patches and it seemed really interesting to me. I remember, you know, sort of later on, Drew gave me the product and I tried it myself and I was sort of blown away.

39:35So that really helped the cause too. So Drew, did you, I mean, at what point did you feel like maybe Dwight was the person that you might want to work with? Did you think that? So this is where I feel like we were so lucky in many ways because it was not that I had this idea and it was looking for a co-founder. It really was a very organic discussion where like, oh gosh, like someone should do this. I think it's such a good idea. And I just remember Dwight saying like, hey, if you want to do it, I'll do it with you. And it turns out, so there's three of us, right? There's Andy, myself and Dwight.

40:18It actually turned out that we have very complimentary experiences and skills. So, you know, I sort of had more of this like corporate marketing experience. And then Dwight is a technical engineer. And then Andy is a creative person. And now in retrospect, I'm like, oh, that's a really good kind of cross-section of skill sets because we covered big parts of the business just with the three of us. Luckily, I mean, it just happened very organically. so twight what was it about this product that seemed interesting to you i mean you you were i don't think were you selling stuff like were you i know you'd worked with brands that launched products but what why did you think that this was particularly interesting so in the early years of the agency we're always trying to launch our own products internally um and i mean we have like a list of products.

41:20I have a list of products that just never took off. Like what were you looking at launching? Oh man. I mean, we were trying to do a wedding management software at one point, LinkedIn for lawyers. We launched a web hosting platform to some, to some success. We started a wine subscription app at one point. I mean, you name it. We were just, we were just always building things in the agency, but we wanted a product to sell, uh, particularly on Amazon. and the acne patches seemed like a really good product because of the size, the entry, the sort of low barriers to entry in terms of cost. But there was no market for the US and it just seemed like a really innovative product.

42:05But I think more so than the product, I was really interested also in working with Ju. And I think when you're starting a business, finding a good partner is sort of like 90 % of the battle. Yeah. And so I think when Ju suggested the idea, I was game. I mean, I think if she had suggested vacuum cleaners or something like that, I might be like, well, maybe. Yeah, okay, maybe. But, you know, I think that patches were a really good product. But also, you know, working with Ju was one of the draws as well. All right. So you, Dwight, your brother Andy, and you, Jude, decide to kind of join forces and to try and see if you could sell these products, which you were really excited about.

42:53First of all, let's talk about the name that you came up with. Tell me about how you came up with it. We started with a product name, which is the Mighty Patch. So that's the hydrocolla acne patch that we were talking about. And I just, I remember for me, it was really important that the name be emotional because my insight was that acne, like it sucks to get acne. No matter your age, you wake up, you have that pimple, you're like, oh, you know. And I mean, I personally know because it happens to me. And so I knew the power of this product. It was an amazing product with real results. And I wanted a name that was like positive and punchy and emotive.

43:40And it's actually Andy. They came up with a name. I remember we were like just brainstorming all sorts of different names. And I think when he was like, oh, Mighty, Mighty Patch. And we're like, that's the one. And then with Hero, again, like wanted something positive, emotional. And the product, you know, I mean, it's a little bit literal, but it literally can save the day. Because when you, again, have, when you wake up with that breakout, you know, before an important moment, you panic. And, yeah, then it's always like a little bit of like, is a trademark free? Is a URL free? You know, all that stuff.

44:22And, but really behind it was more of an emotional motivation. And in terms of like just startup capital also, I mean, did you – you guys were going to bootstrap this initially. How much money did it take initially to do the kinds of things you need to do, which is order the inventory, get the branding and the packaging put together. and, you know, basically import all this stuff and use third-party logistics or however you're doing it. Like, did you need like$100 ,000,$200 ,000,$300 ,000 bucks to get this off the ground? We started with$50 ,000. Between the three of you? Yes. And did you go back to that same company that you went to in 2014 to order the patches?

45:15Yes. All right. Right. And and by the way, tell me about launching on Amazon, because there are million, millions of products on Amazon, right? Like type anything in and you will just find tons of just obscure brands you never heard of that make the same thing. So there is a strategy to getting noticed on Amazon, too. Right. Like, did you set up a store? Did you use other sellers who are influential? Like, how does it work? Well, I think the first thing we did was, I mean, we looked at Amazon as a sort of store shelf. So we just thought about it that way. And we took a step back and said, how can our product stand out on this digital shelf?

46:02And so we designed the package very intentionally to stand out. I mean, the early thesis was that we wanted it to feel like an OTC product. So feel very medical, but also sort of playful, right? So that's why the early packaging was it was white with a pop of color. So it was it felt playful, but still medical. You want it to be like an over-the-counter medicine, but something that was fun, too. Correct. And we also want it to be unisex. We didn't want it to be solely targeted for females. Acne affects everybody, male and female. And so we want it to be conscious of that. Okay, so you have packaging.

46:41I think you launched it on Amazon in September of 2017. How did you get anybody to be aware of it? What did you do? We ran ads. I mean, that's always, you know, kind of the Amazon playbook. But Gifted Influencers, Press back then was a big one. I remember back then Into the Gloss, which is a beauty blog, was really popular. and we got a write-up into the gloss. And we only had one channel. We were only selling on Amazon. So I remember that article went out and then our sales on Amazon spiked. And so that was a moment where I thought, like, we've got to double down on press. Did you hire a PR firm?

47:26I mean, you had 50 grand. So presumably at least a third, maybe half of that went to that first order, maybe more. So there's a website where it's almost like, DIY PR. So you pay for the service and then you log on and they, cause there are a lot, there are a lot of editors who are doing articles and they'll submit their requests. They'll say, I'm doing an article on this. So I'm sourcing brands that are in acne or in baby care or in whatnot, you know, and they, they share their email. So I took that, I took their emails and I would pitch them. How many, roughly how many emails do you think you wrote?

48:03Oh, gosh. I mean, it was just constant. But every month, a good, I don't know, 20 emails or something. And I think leaning into PR was that earned media was really helpful for us. You know, it saved us from having to dump a bunch of money into Instagram or Facebook or even Amazon ads. I mean, you get a press release or an article and close a big one like New York Times early in the day. And that can really transform your business overnight. All right. So you've got, you know, the middle of 2017 or I think September of 2017, you're on Amazon. And how much did that into the gloss or those like hits on those websites affect sales?

48:50I mean, did you start to see traction right away? Yeah, we did. I mean, I think within 90 days, we had run out of our initial inventory. And I remember before launch, we were talking about, like, how long do you think it's going to take us to sell through 10 ,000 units? Would it take us a year? Is it going to take us six months? And it ended up taking us 90 days. So the traction was there, yeah, from early on pretty quickly. And I think we also benefited from the fact that the category wasn't as saturated as it is today. I mean, today, if you go to Amazon and you search pimple patches, you have like pages and pages of search results.

49:31But when we launched in 2017, it wasn't like that. We were one of like a handful. So I think that also helped us stand out a bit. Yeah, I mean, it totally makes sense. And so, I mean, because you sold out your initial inventory so fast and, you know, you had experience in the Korean beauty industry, were you kind of thinking that the next big push would be into like the K-beauty market? So I actually did not want it to be K-beauty. You didn't? Okay. Yeah, just because I thought it should be an American brand for this American audience. And that was actually part of the value prop, because sometimes when you buy, I mean, even today, it still happens.

50:15I think there's a little bit of a trust issue, because the supply chain of sometimes the products that come from one country that end up in another, it's not always clear. And I mean, sometimes there are a lot of dupes or a lot of fakes and things like that. So us being like this American-based brand for the American audience and then adjusting our marketing. You also have to think seven years ago. I mean, it's super popular now, but seven years ago, it wasn't as popular. It was just sort of coming into its own in terms of K-Beauty and things like that. And so it was really important that we removed all sort of barriers for someone that's maybe not on the coast, that's not familiar with K-Beauty to try that product.

51:00And so, you know, if you go and see a product that has a different language on it, you're almost immediately turned off. And so we just wanted to steer clear of that as much as possible. Right. And so you really didn't want people to – I mean, some people would have been like, oh, I know these because I went to Korea. idea but but really you just wanted people to think oh that's interesting what an interesting idea yep absolutely okay so you you sell 10 000 units by the end of 2017 entirely through amazon and that really proves out this that there's something there and i guess at this point you're you really want to figure out how to get this onto shelves of in retail how to get this into shop so what do you do how do you start that process yeah i also cold emailed retailers so I just shot off a bunch of emails to different buyers at different retailers some of them I had had their contacts some of them I literally just I went on to LinkedIn found the name of the buyer guessed their email pitched the product and why I thought they needed it and the first retailer to say yes was anthropology wow and and it's interesting Because Anthropologie, right, it's a fashion retailer.

52:14I don't think they, in lifestyle, I don't think they sell men's clothing, right? I think it's mainly women's clothing. Yeah, I think it's mostly, yeah, women's and home. Yeah. And they, you know, it's a national chain, but not that many stores, I think. But 200. So it's a great brand, right? But at the same time, like, it's not a shop that, like, everyone's going into every day all the time. but also influential. And were they the only ones initially that bit or were there others who were like, yeah, we want to do this too? They were the only ones at the time. So, I mean, we launched September, probably immediately I started pitching retailers.

52:53And then, yeah, I can't remember exactly when, maybe like October, November, Anthropologie said, okay, like we'll test you in 80 stores. And that started in January of 2018. So just a few months after launch. And Anthropologie is interesting because their demographic is, right? I mean, let's just be honest. I'm 50, so it's very rare when I get acne just because your body changes and you just don't develop those things that cause that as much, right? But, you know, between the ages of, I don't know, 12 and let's say 35, you are more likely to develop skin blemishes of that type, right? And that's who's going to anthropology, particularly women.

53:36Yeah, exactly. So it's a great place to be, even though it's not huge. It's a pretty good place to be. Yeah, and I think retailers like that, they tend to be more trend forward, too. And they can take more risks versus like a massive chain that has, I don't know, 10 ,000 stores. And then I think for us, too, like it was good for us to sort of dip our toe into retail because we weren't launching again like with a massive retailer. It was 80 stores, you know. And then we expanded to 200. So it was very sort of thoughtfully approached. Yeah, we got that call. I think it was a week or two weeks after the buyer called and said, we were selling so well that we're going to go full chain immediately.

54:21Wow. But I think the size of Anthropologie was just perfect for us to dip into retail, like you said. What we did in those early days with both Anthropologie and Amazon was do a lot of updates to the product. So how you sell a product in retail is much different than how you sell it online. And so the box has to stand upright. The text has to be legible from, say, 10 feet away as opposed to three feet from your monitor. And so we did a lot of testing. We updated the packaging. We created display packs. There was a lot of learning that we took. And we updated the packaging quite a bit, which set us up for bigger retailers later.

55:09So when you, you know, when you had that success with anthropology, presumably you could use that in your pitches to other retailers. I mean, this is like 2018 now. And Jew, from what I gather, like you were still up until this point consulting, doing consulting work for other brands just to bring in some income for yourself, right? Consulting, full-time job. So, yeah, this was basically my side hustle. But with the success, I guess, in anthropology, that maybe prompted you to kind of shut down your consulting business and leave that behind? Well, I did that when I was able to pay myself a salary from Hero, which I want to say, you know, we launched in September 2017.

55:56I want to say it was around March or April of 2018. I mean, it wasn't a big salary. It was a small salary. But still, that was when I decided, OK, I'm all in on this. All right. So once the anthropology thing worked out, where did you go next? Because you want to presumably go into other retailers. Who did you approach? 2018 was a year of specialty retail. So after Anthropologie, it was Free People, Neiman Marcus, Goop, Urban Outfitters, like those types of kind of lifestyle fashion retailers that had a beauty assortment. One of the things that's interesting to me about cosmetics brands, especially if they work, is the margins can be really high compared to other products, right?

56:45Because to make them doesn't often cost that much, but you can sell them at a premium. People are willing to pay for good products at work. And so were you, I mean, I guess your sales were financing the business, right? There was cash flow. Yeah. So Amazon for us was a very profitable channel. And the money we made from Amazon, we put towards launching our DTC site, launching slowly in retail. And I mean, we bootstrapped for the first three years. and I think largely the economics of our product and the way that we built the business, it lended itself to a lot of efficiency. And how, I mean, marketing is a big part of a success of a brand, but it can take hundreds of thousands, millions of dollars.

57:33I mean, were you guys spending a lot on marketing by this point? No, we spent, I mean, a lot of sampling, again, gifting, gifting to influencers, scissors, anything free, we would try. I think sampling for us was really helpful. We got on all these sort of box programs. We had college ambassadors really early on. The key with this product is that once you get it in someone's hand and they try a patch and it works, I mean, that person is a customer for life. And so for us, we sort of realized that early on. and so we we got samples made little six packs and we were just giving samples out to everybody and anybody we could so that that was a big part of the strategy what are tell me more about these college ambassadors yeah i mean we're trying to find people on college campuses that would be sort of an ambassador for hero and we'd get we'd send them a box uh with some collateral little postcards and things like that as well as a box of samples and we were you know it wasn't too complex of a program.

58:36It was kind of an honesty policy where we just give them a box of samples and trust that they would give it out to all their friends and people on campus and things like that. But we were really targeting, I mean, college, that age group is a big demographic for us. And so we were targeting heavily. And, you know, Jew, I'm curious, because when you were in Korea, right, in 2012, you noticed people wearing these patches on their faces, which was unusual to you because you hadn't seen it before. And so what's interesting to me is like, how was this adopted so quickly by young people in the United States?

59:12I mean, all of a sudden, people felt comfortable just having like a patch on their face, like overnight. Yeah, I mean, overnight, yeah, probably took a few years to get there. But I mean, we did a lot of the education. I consider us a category creator in the U.S. and sampling and talking about the benefits. And then also a big thing that we did with Hero was really kind of what we call like normalized acne because I think there's a lot of shame associated with having that breakout or having acne. And so just being a brand that says, you break out, you have acne, it's okay. Like we understand, we have it too.

59:56And I think that's communication that resonates with people. And so we're seeing, I think, a whole generation that is OK now with that occasional breakout. And sometimes, you know, they kind of flaunt the fact that they have that breakout and they wear the patch on their face and they just they don't care. And I think it's great. When we come back in just a moment, Ju and Dwight deal with the challenges of a growing business. whether to expand into new products, take on investors, and ultimately sell their brand. Stay with us. I'm Guy Raz, and you're listening to How I Built This.

1:00:42This episode is brought to you by Klaviyo, the only CRM built for B2C and the key to making Black Friday and Cyber Monday your biggest wins yet. When the holidays hit, your competition only gets louder. That's why the most successful brands use Klaviyo to cut through the noise and build personalized relationships that drive more revenue. With Klaviyo, you get marketing, service, analytics, and all your customer data together on one AI-powered platform. It's everything you need to build lasting customer relationships. Send exclusive email offers to your VIP customers. Deliver perfectly timed text to high-intent shoppers.

1:01:26Maximize your ad dollars with precision. Join the more than 176 ,000 brands, including Away, Patrick Ta, and Dollar Shave Club, already growing with Klaviyo. Make this holiday season your best yet at klaviyo.com. AI companies have unique business models, each with distinct billing needs. Stripe is the go-to choice for AI leaders, from early-stage startups to scaled enterprises. Whether it's OpenAI offering tiered plans based on user needs, or Cursor implementing flexible billing structures for code access, redefining the future requires sophisticated business models. With Stripe Billing, you can support any business model from credit-based to sales-negotiated contracts and easily align your monetization strategy with customer value.

1:02:23Join the ranks of 78 % of the Forbes AI 50 and millions of businesses worldwide that trust Stripe to help them build more profitable, scalable businesses. Discover more at Stripe.com.

1:02:48Hey, welcome back to How I Built This. I'm Guy Raj. So it's 2018, and Hero Cosmetics is making more and more retail deals, and their online sales are growing. Ju, Dwight, and Andy want to capitalize on this, and they think that new product lines might be the answer. We had one of those sort of, like, pivotal moments that really, I think, in my opinion, changed the trajectory of the business. But we had this product, the Mighty Patch. It was doing really well. And so logically you think, well, you're going to launch a new product, offer something else in your product portfolio. And we were talking about doing a wash-off mask.

1:03:26It was going to be like a clay mask that you mix with water, you apply it to your face and you rinse off. And then I had a coffee chat with this investor in the space, showed her Mighty Patch. I said, I want to do this new product. I think it's going to be a wash off face mask. She said, no, you should not do that. You should stick to patches. You should dominate this category. Do them in every shape, every size for every need, just go all in. And I just remember thinking she's right. And so we shelved the face mask product. And then And we came out with Mighty Patch, Invisible Plus, Surface, Variety Pack.

1:04:04It was just go all in on focusing on kind of dominating this category of blemish patches. Yeah, one for daytime, one for nighttime, a bigger one for larger surface areas, any type of like acne problem that we could solve with our patches. That's what we tried to do for a good like two years. Okay, so you are focused on doing this meantime around this time when the business is really starting to take off, Jew. You do something quite unusual, which is you move to Paris with your husband because in the meantime, you were married. You got married. I guess he's French and he wanted to go to France.

1:04:49That's – I mean how are you going to do – like my question to you at the time would have been like, how are you going to run the business from France? How are we going to do this? A lot of travel. A lot of frequent flyer miles. Dwight, were you worried about that when she was like, oh, I'm moving to Paris? I wasn't worried because shortly after I moved to Seattle. Okay. Wow. And you know what? Let's have a nine-hour time difference between us. Let's make it even more fun. Yeah. Poor Andy. We left him with the office and all the employees. And we're like, good luck. So how did that work? Were you working at like two in the morning and, I don't know, and, Jew, you were working until like 11, 12 at night?

1:05:30I would structure my days where my meetings started at 2 p.m. my time. Yeah, because it's a six-hour difference with New York. And New York was really the hub because that's where the team was, the office was. So my meetings didn't really start until 2, but, you know, in the mornings I would do all my catch-up work or my thinking work. And then I stopped taking meetings at 8 p.m., which is 2 p.m. Eastern. So, I mean, there wasn't a lot of overlap with anyone Pacific time. But I mean, at the time, like really, Dwight was the only one who was on the West Coast. How often did you guys meet given that nine hour time difference?

1:06:04Once a week. And then whenever we would overlap in New York, we would get together. But we were on Slack and Zoom, I mean, just all day long. The good part of it was that it meant like when COVID happened, we were set up because we were already a remote office. And we already had people, you know, dispersed and on all the communication systems. So, I mean, of course, there are other difficulties, but I think we were pretty used to remote working situation. Yeah. Meantime, 2019, you guys get into Target, and I think it did like 700 targets, right? Now, here's the thing about Target again. Like you have a product and now there's awareness around this product.

1:06:52And if Target just puts you on the on the shelves, people still have to discover it. Was that an issue for you or did you already have enough awareness where you could just send people to Target now to get it? I mean, the dilemma that I think the buyer had was they were intrigued, but we didn't have a lot of SKUs at the time. And then also she didn't know where to put us. And so what we decided together was they had this new beauty mini section, which kind of acts like a discovery cash wrap type of thing. And they were like, we have this new thing. It's doing really well. well, can you do a mini SKU version of your Mighty Patch for it?

1:07:40And it'll be in around 700, 800 doors. So that's what we did. We created a special SKU. I think we priced it at like$7. And it was kind of a sampler. And I mean, yeah, the worry was, well, it's one thing to get in. And then it's another thing to get people to buy it. So I remember we had queued up some, I mean, this was 2019. So we didn't, I mean, TikTok wasn't even a thing, but we had hired someone who had the foresight to tell us we should be on TikTok. So I remember we made a big TikTok push, Instagram push, just letting everyone know. I mean, every channel we had control over, we pushed them to Target because we knew it had to be a success.

1:08:22Yeah. So I guess heading into 2020, all right, this is still pre-COVID. And I mean, you've made like six and a half million dollars in revenue, which is pretty amazing. Uh, and you've been entirely self-funded up until this point. So, so like, was, was that when you thought that you might need investor money to scale up? Yeah. You have to remember, I mean, we were profitable early on, but the problem with the business was we're always chasing growth in terms of the, we were growing so rapidly and the POs were getting bigger and bigger that even though our top line was really high, I mean, At the end of the day, we had so little money in the bank because we're always just cutting bigger POs to have more inventory on hand to fulfill these orders for Target.

1:09:08So the money would come in and go out right away. Oh, yeah. 100%. All right. So you start having conversations. And did you get any term sheets? We did. But the term sheets were due the week of lockdown. Right. I remember the Dow dropped by 1 ,000 points. Yeah. And then there were a bunch of firms that were interested who suddenly dropped out because they had to do triage on their current portfolio companies. But we did get some term sheets. And did you decide to take some of those offers? No, we didn't take any. You didn't take any? The term sheets we got were so bad. possibly because they just didn't have faith in the company or because they smelled blood in the water with everything that was going on in the market it's tough to say who knows right but they were just so bad and they seemed so onerous to us to the point where i mean the our attorneys at the time we were on a call and the the lead attorney he he said hey guys i'm gonna take off my attorney hat right now and i'm just gonna put on my business hat and i have to say frankly this This is a terrible, these are terrible term sheets.

1:10:20Like I would not recommend taking them. What were they? I mean, what were some of the, I mean, presumably they were looking for huge percentage ownership and things like that. Yeah. And there were just a lot of, a lot of little tricks, a lot of trap doors and, you know, onerous prep structures so that essentially we could sell the business later on and still walk away with barely anything. I mean, they were just very investor friendly, very founder unfriendly. So you turned them down. We did turn them down. Yes. OK, so now it's covid time. And and there was a I mean, around this time, there was a real risk that, you know, everything could go south.

1:11:00Right. Of course, that wouldn't happen for certainly for a lot of direct to consumer brands. But, you know, all of a sudden people are focusing on like buying energy bars and hand sanitizer and toilet paper, whatever they are. Hand sanitizer. Yeah. So did you see a brief dip in your business? No, we didn't. I mean, luckily, we were in the channels that were still deemed like essential retailers. So Amazon was still online. Target was deemed essential retailers. So we really didn't see much impact. What about the supply chain challenge? I mean, with, you know, just ships not being able to come in.

1:11:43and you were bringing the stuff from Korea. Yeah, it was a real nightmare. I mean, every day we were trying to just triage an issue, whether there was delays with ships on the water or the ports were shut down because of COVID outbreaks or our suppliers couldn't get the ingredients for something. I mean, it was just every day for probably three years was very stressful for sure. So how did you keep your inventory stocked? And for us, the strategy was to just lean into the inventory, which is risky. So we went essentially from one month of inventory on hand with lots of orders to at one point, we're up to six months of inventory on hand.

1:12:26Oh, you just bought as much as you could get. Oh, yeah. Oh, yeah. Which is a huge risk, right? I mean, if sales dropped at any point, we would have been stuck with just millions of units in a warehouse that we would have to gotten rid of. But luckily, sales kept up and we were able to sort of keep things moving. But for me, the main thing, the main strategy was just never going out of stock. Yeah. Okay. So now you get through the first year of COVID 2020. You're in 2021, which is now the second year of COVID. and I guess you decide to try and re-engage with some of these investors that had originally gave you terms to see if maybe you could negotiate something a little bit better.

1:13:14Is that right? Actually, there was one investor that we wanted to work with. So in the first process in early 2020, this guy, Trevor, he was just really smart, really engaged. Every meeting that he would come to, every discussion that we'd have with him, he'd leave us thinking about something. And so even in those early days, we felt like he helped contribute and shape the business. The funny thing is, he turned us down the first time around, not because of COVID or anything. He just said, you guys aren't ready yet. You know, I see a lot of potential in this business, but you aren't ready yet.

1:13:49So maybe we can talk in a couple of years or something like that, which totally baffled me because I was like, look at these numbers. I mean, this brand is exploding. But I mean, talk about discipline. and this guy, he basically turned us down. We still wanted him, so we kept talking to him. We kept sort of the relationship warm. And then when it came time later on, I think it was October of 2020, actually, we went back to him and said, hey, here's some updated information about our target sales. Here's how the business is doing. Do you want to do a deal? And he responded and came back with a really good, clean, fair deal.

1:14:29All right. So I guess one of the things that you – I mean, because at this point, you must be – I think you start to think, hey, we're getting close to acquisition time, right? I mean, is that fair to say? And if so, what was the threshold you had to reach in order to become attractive to a buyer? $100 million. $100 million in sales. Okay. Yeah. Um, tell me about, about the, the process of finding and acquire, because I mean, God, it's amazing. Just two and a half years in, barely three years in, you start to have serious conversations about an acquisition. Yeah, I mean, the first is sort of, you know, are we at that scale where we would be attractive to people?

1:15:15And I remember, you know, 2021, it was clear we were going to hit that$100 million threshold. So there was a board meeting, and then it was a topic. And the question was, like, should we start a process? Should we think about this? And then everyone was like, yes, it is time. So we kicked that off in 2022. You eventually did start to engage in a deeper discussion with Church and Dwight. And I think they own, man, a bunch of brands, Arm & Hammer and Waterpik and even own Trojan condoms. I mean, they own a bunch of different brands. And so you engage in a conversation with them. I mean, this is going to take a bit of time.

1:16:04Tell me a little bit about that process, because, you know, when you sign an engagement letter, it's not guaranteed that it's going to go through either. Yeah, you're right. I mean, signing it is just one step and then there's a whole due diligence process. Yeah. But, you know, for us, when we were selling the company, partnership was really critical. Like culture fit was a must. So we wanted someone who, you know, we could trust with the culture and the team and someone who also had the platform to continue to grow and scale this business. And we got to know the management team at Church and White and they ended up being the one.

1:16:48The acquisition also meant for us that the brand would have a sort of forever home, a place that it could live and grow beyond us and after us. We were really focused on having a place where this brand could live on for 50 years, where I could bring my kids to Target later on and say, hey, this brand, it's still here, it's still flourishing. And so that, more so than anything, first and foremost, it was really important that the brand had a home. And so Church & Dwight was good. We felt like the best place for it. The acquisition was announced in August of 2022,$630 million acquisition is amazing for a brand that really launched in September of 2017 on Amazon.

1:17:29So, you know, a little under, what, five years after your official launch for, you know, just a really incredible exit. At that point, I mean, what did that mean for you guys? Did that also mean that you were committing yourselves to working for Church and Dwight for, you know, for a period of time? Yeah, for three years. So tell me a little bit about what that means. I mean, now you have this brand that you started and you controlled, really, and now you work for it. So you're not the decision makers anymore. What is that like? I mean, I think a founder's role is sort of ever evolving. the three of us the work that we were doing in 2017 is different than what it was what we're doing in 2019 and it's different today it changes all the time i mean like i don't really oversee supply chain and look at the shit the list of ships coming in and stuff like that anymore it wouldn't make sense for me to do it when church and white has you know vast infrastructure to do that yeah so the role is evolving but for us number one is to make sure that the brand is safe the brand is going to continue to grow and the culture does evolve in a way that we wanted to and, you know, it'll be successful at Church and Dwight.

1:18:50When you guys think about, you know, where you got in the journey, how much of this do you attribute to the work you put in and how much do you think has to do with just luck? Dwight, first to you. I think hard work is the baseline for any sort of success. I mean, you just have to work your tail off and make the sacrifices. But also, I think we're all just floating or being carried really in a river of randomness that sometimes we call luck. I've been blessed with an immense amount of luck in my life. And for that, I'm so appreciative and grateful. Ju? I agree. I mean, I think the hard work is, you know, that's what it takes.

1:19:40Really, if you're going to commit to an entrepreneurial journey, like you got to work really hard. But I mean, I think we were so lucky in many, many instances. Like, you know, I think the timing of when we launched, the timing of when we sold, you know, me meeting Dwight and Andy and us turning out to be a really great team, actually. Like, there are a lot of, I think, happy accidents that I attribute to luck. That's Juru and Dwight Lee, co-founders of Hero Cosmetics. By the way, Juru mentioned it earlier in the interview, but a big way that Mighty Patch really took off was through social media platforms like TikTok.

1:20:23I have watched, preparing for this interview, so many TikTok videos of young people showing me their skin up close and their zits. I can tell you I should be paid extra just for doing that. But I really understand it now. 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 as always, it's free. And if you're interested in insights, ideas, and lessons from some of the world's greatest entrepreneurs, sign up for my newsletter at GuyRoz.com or on Substack. This episode was produced by Chris Massini with music composed by Ramtina Raluy and Sam Paulson.

1:21:05It was edited by Andrea Bruce with research assistance from Olivia Rockman. Our engineers were Gilly Moon and Robert Rodriguez. Our production staff also includes Alex Chung, Carla Estevez, JC Howard, Devin Schwartz, Catherine Seifer, Carrie Thompson, Neva Grant, John Isabella, and Elaine Coates. I'm Guy Raz, and you've been listening to How I Built This.

1:21:36If you like How I Built This, you can listen early and ad-free right now by joining Wondery Plus in the Wondery app or on Apple Podcasts. Prime members can listen ad-free on Amazon Music. Before you go, tell us about yourself by filling out a short survey at wondery.com slash survey. Say what you want about AI, but it's here. And it's helping businesses get more done in a day. Wix's website builder is infused with AI so you can stay ahead. Create a beautiful, functional website just by describing your idea. Track how your site appears in AI search results. Create custom images on demand. Or launch an entire campaign in a matter of minutes.

1:22:18Wix gives you AI wherever you need it. Try it out for yourself at Wix.com.