How this first-time founder landed a $630 million exit

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1:21I tried to launch it. I had a name. I had sourced the manufacturer. You know, I had the packaging. And then I just, I chickened out. You got scared? Yeah. I mean, it's a lot. It's a lot of commitment. A shelved idea. It took years for Ju Ryu to work up the courage to launch Hero Cosmetics and its signature acne-fighting product, the Mighty Patch. Soon after, she faced another big decision. Should the company take on outside investors? They were already profitable, but what could they unlock with even more resources? The answer? A whole new level of scale. We went from just like nickeling and diming everything.

2:10We had to do it on the cheap. But once we put a little money into the company, we were like, this is now an investment. This week on the show, Hero Cosmetics co-founder Ju Ryu takes us inside each critical inflection point along her extraordinary scale journey. From the first product sold on Amazon, to getting on target shelves, to exiting the company after it hit$100 million in sales. You got to have incredible talent at every position. It's like this huge push. There are fires burning when you're going home. Can you believe it? Such an idiot. And then you go back to, this is totally going to be amazing.

2:52There are so many easy ways. I have no idea what to do. Sorry, we made a mistake. But you have to time it right. Oops. Working out of a three-bedroom apartment. Stuff that just seems absolutely nut balls. Ten years later, we're like, well, that's just how you do it. We haven't made it just how you do it.

3:10This is Masters of Scale.

3:15I'm Jeff Berman, your host. After a rapid rise in the skincare space, Ju Ryu sold Hero Cosmetics in 2022 for$630 million. Before we get her insights about scaling and selling a business, let's hear how she finally found the courage to leave her steady corporate job and become an entrepreneur.

3:43Ju, welcome to Masters of Scale. Yeah, thanks for having me. I've been really excited to have this conversation because I have three teenagers, so I'm deeply familiar with your products. But before we get to Hero Cosmetics and pimple patches and all sorts of other interesting things, I'm curious about your entrepreneurial roots. You come from an immigrant family. Talk about what it was like growing up and where your entrepreneurial spirit came from. I think it comes from my dad. My dad is an entrepreneur. We moved from Korea when I was three. This was in the 80s. And he actually moved to Seattle as an expat.

4:21So he was working for a big Korean company and then he moved the family to Seattle as an expat and then just sort of saw the writing on the wall for himself as a kind of salaryman, I guess, at this big Korean company. And then he decided to leave and start his own business. So he's in the logging industry. He's a log broker. And just growing up with that influence in my life and seeing how he worked from home and he was able to control his schedule and he was able to fit work into his life. I think those are all things that I grew up with. A lot of kids who grew up in families like that will go in another direction because there's a lot of uncertainty with an entrepreneur parent and some lean really into it.

5:06It almost feels like you went in both directions. So you didn't become an entrepreneur right away. It's not like you dropped out of college to start a company. Will you take us through a bit of your journey leading up to becoming an entrepreneur? So I had an internship at Kraft Foods Mondelez, worked on the Planters brand and Back to Nature, and then went to American Express. So I worked for these big companies, getting the experience, getting established. But inside, I always had the entrepreneurial drive. A lot of times, these big companies, I would just get frustrated because they would move slow, where I had all these ideas that just I couldn't get anywhere.

5:42And so the drive was always there, even though I had more of a classic corporate career. Did you think about, like, could I become an entrepreneur? Could I work at one of these big companies? Yeah, that's what I called myself. I called myself an intrapreneur because Kraft Foods, for example, like I loved working on the Back to Nature brand. It was smaller, a lot more entrepreneurial. I loved new product innovation. Like I loved ideating and finding the white space and really learning about consumer needs so that we can meet them with new products. I always gravitated towards new businesses, new products, the new thing sort of.

6:17So many big companies struggle with innovation, right? Whether it's because they're disrupting their own business or, you know, you have to do 47 turns of a budget deck before anyone will be willing to approve your budget. What did you learn about what works in moving innovation forward in big companies while you were working at places like Kraft Dynamics? You know what? It takes a lot of support from the top, actually. And I mean, I'm sure we'll get to this, but so my company, Hero Cosmetics, we got acquired by a company called Church & Dwight, And they are a big company, not unlike, you know, the Procter & Gamble's or the Unilevers of the world.

6:50But I've seen them move really fast. I've seen them move really fast, especially with our international expansion. But I think the reason why they were able to move so fast is it was a priority at the top. This is the number one priority. We have to get this into, you know, 50 countries in two years or whatever. Really does have to be embraced, I think, at high levels. It's sort of a trope, but for a reason that you get what you measure and you get what you incentivize. Okay, so let's go back. So you go from Kraft, you're at Amex. I think you then went back to Korea. I went to Korea, yeah. What led you back to Korea?

7:22So I worked as an expat at Samsung. Samsung in Korea, I think we all know it as an electronics company, but in Korea they have many, many different branches of this ginormous conglomerate. So I worked for the financial services arm. It was a big move. I had never spent a lot of time. I mean, the most amount of time I spent in Korea was probably like a month every summer. It was not without risk. The big question actually was, if I go, how do I come back? Would I be stuck there forever? I don't really know. Just because your relationships and your... Like, and is that experience going to be desirable for American companies?

8:01And at the end of the day, it was sort of like, why not? I was pretty confident that it would give me good experience and I could somehow figure out if I wanted to come back, a way to come back. What did you learn in Korea? Oh, gosh. I learned a lot about corporate culture there, just societal culture. I learned a lot about myself, too. So I'm Korean American. I moved to the U.S. when I was three. But when I'm in Korea, I feel so American. The cultural gap is really big. How does that show up? I mean, even in communication, like I have an accent, I have an American accent when I speak Korean. And I think American society and American culture is a lot more about the individual.

8:43And in Korea, it's more about the family unit or the community. Like you're part of a bigger community that you need to worry about. The role of women is different, too. So, I mean, it's changing in Korea. But I think like traditional roles for women in Korea tend to be a lot more common still. A lot of big differences. Gotcha. And so you're at Samsung. Again, you're sort of on this trajectory with these bigger companies. Is there an aha moment? Is there an epiphany where you say, I'm now at a place where I really want to go do my own thing? What happens that leads you to launch Hero? You know, I actually tried to launch it before.

9:19So I lived in Korea from 2012 to 2014. And after like six to eight months of living there, I did notice the acne patches back then. So people were wearing them in public, like to the office. And, you know, you go out to a cafe and you just see them on people. And this is a good moment just to explain what the acne patches are for our audience who don't know. So the acne patch, it's a patch made out of something called hydrocolloid. Hydrocolloid is technically a wound dressing. And so the way that it works is, A, it creates more of a moist environment because when the skin is dry, it doesn't heal as well.

9:56The hydrocolloid, it pulls moisture out. So someone along the line, you know, along in this journey realized that, oh, the hydrocolloid, this wound dressing, you could actually apply it to a pimple. And when you do, it absorbs out the inflammatory pus and it creates that sort of seal over so you're not like touching and picking. And it just really became popularized in Korea. And so what you were seeing in Korea back in 2012, 2014 range was, oh, here's an acne solution. But people are not embarrassed to have something on their face covering up acne and curing it. Yes. And that was where sort of the coin dropped for you that there's an opportunity here.

10:37Well, I used it myself. And I mean, that was my transformative moment where when I peeled the patch off and it just got all that gunk from my pimple, my pimple literally was flattened overnight. And it just worked better than anything I had used before. I just, I kept asking myself, like, why is this not available in the U.S.? It should be available in the U.S. Why wasn't it available in the U.S.? Sometimes ideas take, you know, an entrepreneur to see the opportunity and bring it over. I mean, on Reddit, I saw a lot of people saying, my sister is going to Korea, so I'm asking her to buy me all these boxes of these acne patches.

11:16And so I saw the demand, but there was no one that really owned the category. Right, right. And so what happens? Because you don't launch the company until 2017. So what happens between 2015 and 2017? Yeah. What took that time? So I tried to launch it. I had a name. I had sourced the manufacturer. You know, I had the packaging. And so this was probably like 2014, 2015. and then it came time to place that first PO, which was like 10 ,000 units and however many tens of thousands of dollars. And then I just, I just, I chickened out. You got scared? Yeah, it's a lot. It's a lot of commitment. I was by myself.

11:58And I remember I had some coworkers and friends in Korea at the time and I kept talking it up to them like, oh, you know, we could do this. And I really think this is a big opportunity. And I don't know, I just couldn't really get anyone else sort of on board. And then I moved back to the U.S. and I just shelved the idea. More with Juwiu about how she got her idea off the shelf and onto the faces of millions of customers in just a minute.

12:33Real leaders don't back down when the stakes are high. They innovate, they push forward, and then they take the stage at the Masters of Scale Summit. Join us in San Francisco, October 7th to 9th, to hear from the CEO of the New York Times, scientists using cutting-edge technology to find cures, the leader of crypto powerhouse Coinbase, a retired four-star general, and many, many more. Apply now at mastersofscale.com slash apply25. That's mastersofscale.com slash apply25.

13:32aws.amazon.com slash activate and start building. Expanding your business in the U.S. can feel like a maze. Every state has its own payroll, benefits, and compliance rules, which can pull your focus away from growth. That's why founders use Deal. Deal is the professional employer organization, or PEO, that gives you a dedicated HR expert plus Fortune 500 level benefits for your team. The National Association of PEOs says businesses can grow twice as fast if they use one. So if you're scaling, make it simple with Deal. Go to deel.com slash MOS and get up to three months free. Welcome back to Masters of Scale.

14:20You can find this conversation and more on our YouTube channel. What happens where you're able to restart the entrepreneurial process? For me, it was finding co-founders. And there are a lot of solo founders out there and I respect them a lot because having been through the whole process, it can be a very lonely, difficult journey. And I realized, yeah, I think for me, I'd rather have co-founders because it's actually more fun, especially the first time, like you don't know what you're doing. And it's just, it's nice to have other people to talk to and bounce ideas off of. So really, I mean, the idea was still there.

14:57I had shelved it, let's say 2015, two years past, 2017. And one of my co-founders, we have dinner and I tell him like, oh my gosh, like someone needs to do this. I think it's such a great idea. He was like, I'll do it with you. How did you know him? So he was a colleague, turned into a friend. So him and his brother, his brother is also a co-founder. It was the three of us. They had a digital agency and that digital agency I had hired. They were a digital agency where they did. ads, they built Shopify websites, they built apps, anything digital, they really did. So I was her client. And in that capacity, we had experience working together.

15:37And then we became friends. And they had been running this agency for like seven years. And I think they were also ready for a new challenge. And then so Dwight, who I had dinner with, he was really interested in the Amazon marketplace and being an Amazon seller. And I had this idea and I thought it would be really great on Amazon. And so that's kind of what kicked it off. It's a big decision to start a company with one person, much less two people who happen to be related to each other. Was it just instinct? How did you get to a point of saying, great, this is the right partnership. This is what I want to do.

16:08These are the people with whom I want to do it. This is where I feel very lucky because I did not consider any of that, but ended up working out. I mean, I know there are a lot of like founder divorces. I've seen them and they're very difficult. They can be super messy. Yeah. Yeah. And I mean, thank God we never went through that. But in hindsight, actually, the reasons why it worked out, I actually think a co-founding team of three, it's actually great. And I remember someone told me like, oh, three is one too many. But I think it's great because there's always a tiebreaker. So if two people don't agree on something, I think there's always a third person who can kind of tip it over to one side.

16:46And in retrospect, I think we had really complementary skill sets. So I knew this category, had more of a marketing background. I had that corporate experience, had some finance experience. And then one co-founder, he's a technical engineer. So anything related to like DTC, Amazon, operations, it was great for him. And then the third, Andy, he's a creative guy. So anything design, packaging, all that was his responsibility. And so, you know, we didn't always agree, but I think we always had a willingness to like talk things out. And then there was always a tiebreaker to kind of help make the decision.

17:25And so the three of you decide you're going to do this together. What's the vision for the company? You know, in the beginning, we did not have like grand visions of like, oh, my gosh, we're going to build this like huge company and it's going to be, you know, this big and we're going to conquer the world. We're very practical. There's this product out there. It does really well in Korea. There's early demand in the U.S. we think it's going to do well in the U.S. So let's just start with one product and let's test it out. So we tested it out on Amazon. What was the first product? It was the Mighty Patch 36 count.

17:58We priced it at$12.99. It's still the OG, like the classic, the original. And put it on Amazon. We're like, let's see what happens. And really, I mean, it took off. What does taking off look like at that time? So one of the things that we did that I tell people to do and I would do again is you have to define what is success. So we came out with like different scenarios. We said, what is, you hit it out of the ballpark and it's a home run. What is that? Is it a million dollars in a year? Is it more? Do you have to be profitable? And what is failing? So when do you say, okay, this is not working out.

18:38We had a theory, a thesis, but it's not turning out as we thought. And then what's sort of like the middle ground and when you're in that middle ground, then what do you do? Because it's not a home run, but you're not really failing. And I can't remember the exact like metrics, but I think success for us was something like half a million dollars in the first year and we're making money. That would be like success. And then failing was, this is just going to take way too much more money. We're doing maybe$100 ,000 and unprofitable and it's just going to be a slog. So that idea was test, put it out there and kind of fail fast.

19:14Yep. Did you quit your job to go do this full time or was this a side hustle first? It was a side hustle first. Okay. And so to get that first order, how much did you put into the business among the three of you at that point? I think it was 50 ,000 initially. So that's what got us up and running. And then we were growing really fast. So we had to make loans to the company just for cashflow. But we bootstrapped for the first three years. As you're watching the sales climb there, what's working for you? How are people finding the product? Like you don't have a big marketing budget. So how are people discovering the product?

19:48What were you doing to get it out there? We did earned media. We seeded a lot of micro-influencers, asked them to post, asked them to talk about it. Just send them free product. Just gifting, gifting, gifting as much as possible. And then where we saw a lot of success also was with press. BuzzFeed had a lot of like the 50 top products you need to buy today. Or I think the New York Times Wirecutter is also a good example. Sure. Okay. So you're on this three-year initial part of the journey where the business is growing. You and your co-founders are making loans to the business to be able to stay ahead with your purchase orders and what have you.

20:23At what point did you say, gosh, we really need more capital and we should take on an outside investor? It was always a question like, do we raise money? Should we raise money? Do we do it now? We seriously started to think about it. that was in year three. So that was in 2020. Great year to be. Oh, yeah. Well, our term sheets were due the week in March when the lockdown started. Wow. So that was a disaster. The raise didn't happen. But fortunately, we didn't need the money. Right. So we were OK. Why had you decided that was the time setting COVID aside and what the craziness that happened that year as a profitable company that's growing, why did you say now's the time to raise capital?

21:06It was more about needing the strategic guidance. So we were kind of on this rocket ship trajectory and we, you know, we're first time entrepreneurs in this category. And so we're like, we don't know what we're doing. We should get some smart money around us so they can help guide us and make sure that we have a successful outcome. So it was really about the partner and less about the money, it really transformed our business. Because when you're growing really fast, that cash flow sort of chase is always tricky. Like you get paid, but then you need to buy more inventory and just the timing of it all can be really tricky.

21:45And then it can impede you from making investments like hiring investments because good people, they're expensive. And so when we put the money into the company, I remember our mind shift changed because we went from just like like, nickeling and diming everything. So like, photo shoot, like everything. We just, we had to do it on the cheap. But once we put a little money into the company, we were like, you know what? This is now an investment. And so instead of like, nickeling and diming and trying to find affordable talent, I was like, I want the best VP of marketing. I want the best VP of sales.

22:19And so we were able to invest in areas like people. So that was really nice. What was the inflection point where you went beyond Amazon? Yeah, we're kind of weird because we launched on Amazon at one point. It was like 100 % of our revenue. Then it became like 90 and then maybe became 80. But I remember I went to a conference and these bankers were talking about channel diversification and they were saying the ideal channel diversification is a third retail, a third Amazon, a third D2C. I was like, oh, they're probably right. Because of course, relying on one channel for most of your business is always risky.

22:54This is the PayPal problem back in the eBay days. Yeah, right. Yeah. I remember we tried really hard to make DTC work. We're like, we have to grow DTC to be more than whatever percent of the business. It was a small percentage of the business. And then we have to get into retail. Those are going to be the three pillars of this business. So early on, we tried to diversify and got into Target. We were exclusive at Target, grew very deeply with them. With the exception of Amazon, because you're already selling there? Yes. Okay. So for retail, you're exclusive to Target. Correct. Okay. There are other retailers who matter.

23:28There's one really big one that matters. How do you make the decision that we're willing to go exclusive with you in the retail category? I always thought Target had a really great brand image. I thought they had really smart merchandisers who were merchandising like cool, new, hip indie brands, these challenger brands. I knew this was going to be a mass market brand. And what better kind of elevated mass market retail partner than Target. What does the scale journey then look like? You got to north of 100 million in sales, right? Before you exited the company. So what were the next set of inflection points where that up to the right kind of hockey stick curve is happening for you?

24:07Building out the team was a big, big one. So I had touched upon it before, but because, you know, when you're a small company and you're bootstrapping, like you can't afford expensive talent. And so what you tend to do is you hire the interns, you hire the 22 or 23 year old who just graduated. And they're great because they're hungry, but they don't have a lot of experience. So you tend to have to coach them and train them and work really closely with them to help develop them. But when we took on the growth round, we knew we needed to level up talent. And so some of the first hires were these VP levels, like experienced people.