SaaS Interviews with CEOs, Startups, Founders

EP 391: Why Gary V Led $1.5M Round In This Cosmetics Company

19 Aug 2016

26 min

4971 words

3 speakers

19 Aug 2016

Audio

Description

Julie Fredrickson from Stowaway Cosmetics. Have you ever felt like your purse was so heavy it could take someone out with one swing? Every lip gloss, concealer, and eyeliner really adds up! Julie has a found a solution to this problem with Stowaway Cosmetics, which focuses on creating a more mobile product for women on the go. Listen as she tells us how she has transformed the beauty industry with products that actually get used. Famous Five: Favorite Book? – Five Dysfunctions of a Team What CEO do you follow? — Gary Vaynerchuck Favorite online tool? — Google Apps Do you get 8 hours of sleep?—Religiously. If you could let your 20 year old self know one thing, what would it be? — Don't be a jerk. Being kind costs you nothing. Time Stamped Show Notes: 01:05 – Nathan introduces Julie 01:30 – Stowaway Cosmetics is about mobile products that women can use anywhere 02:10 – Launched 18 months ago 02:25 – Learning to run an effective ecommerce business 02:35 -- $1.5 M in capital 02:45 – Equity 03:15 – Valuation is private at an early stage 03:45 – A good valuation is a balance 05:15 – Gary Vaynerchuck 05:40 – The beauty industry has been giving out products that people don't finish 06:50 – Brands need to see more repeat purchasing 07:25 – Margins for a palette of eyeshadow 08:10 – Effective and a better value than their competitors 08:30 – Direct consumers 08:45 – A normal margin is about 50% through retailers 09:20 – Their margin is about 85% 09:45 – Monopolies in the makeup industry 10:15 – "You should have a choice as a consumer to carry a product that fits your lifestyle." 11:00 – Weighing down your purse with cosmetics 11:35 – Launched in Feb 2015 12:00 – Fundraising started in early 2014 12:15 – Valuation was based on pre-sales 13:25 – Influence in the marketplace 14:05 – Passed $100k in lipsticks sold 14:20 – Their focus changed to repeat purchasing and having a comfortable growing rate 15:20 – Now they spend nothing on marketing 16:25 – They care more about repeat customers than getting more customers 17:30 – On average, women come back to purchase again in 90 days 18:20 – 40% have made at least 3 purchases 19:00 – minimalists vs. maximalists 19:30 – Follow at Julie at @stowaway on Twitter and on Anchor 21:55 – The Famous Five 3 Key Points: Find a problem and do the research to come up with a good solution. Look at a particular industry and evaluate where its setbacks are. Develop a relationship with your customers. Resources Mentioned: Host Gator – The site Nathan uses to buy his domain names and hosting for cheapest price possible. Freshbooks - The site Nathan uses to manage his invoices and accounts. Leadpages – The drag and drop tool Nathan uses to quickly create his webinar landing pages which convert at 35%+ Audible – Nathan uses Audible when he's driving from Austin to San Antonio (1.5 hour drive) to listen to audio books. Google Apps – Julie's favorite online tool for her business Show Notes provided by Mallard Creatives

Chapters

1. What is the main topic discussed in this episode? 2. What is Stowaway Cosmetics and how does it differentiate itself in the beauty industry? 3. How much funding has Stowaway Cosmetics raised and what was the purpose? 4. What challenges does the beauty industry face regarding product usage? 5. How does Stowaway Cosmetics ensure repeat purchasing from customers? 6. What strategies did Julie use to launch Stowaway Cosmetics? 7. How does Stowaway Cosmetics maintain higher margins compared to competitors? 8. What insights does Julie share about customer acquisition costs?

Featured

Nathan Latka

Gary Vaynerchuk

Julie Fredrickson

Transcription

Chapter 1: What is the main topic discussed in this episode?

0.031 - 9.02 Nathan Latka

This is The Top, where I interview entrepreneurs who are number one or number two in their industry in terms of revenue or customer base.

Chapter 2: What is Stowaway Cosmetics and how does it differentiate itself in the beauty industry?

9.521 - 21.193 Nathan Latka

You'll learn how much revenue they're making, what their marketing funnel looks like, and how many customers they have. I'm now at $20,000 per top. Five and six million. He is hell-bent on global domination.

Chapter 3: How much funding has Stowaway Cosmetics raised and what was the purpose?

21.253 - 23.795 Nathan Latka

We just broke our 100,000-unit soul mark.

Chapter 4: What challenges does the beauty industry face regarding product usage?

24.076 - 51.064 Nathan Latka

And I'm your host, Nathan Latka. Okay, Top Tribe, this week's winner is Charlie Daggs, okay? He was a middle manager at a manufacturing company. He wants to break free, and he won the $100 I give out every Monday. For your chance to win, simply subscribe to the podcast on iTunes right now, and then text the word Nathan to 33444 to prove that you did it. This is episode 391. Coming up to

51.044 - 58.86 Nathan Latka

Tomorrow morning, you'll hear from Joe Hirkin. He already works with 3 million publishers, 100,000 of which have paid him.

Chapter 5: How does Stowaway Cosmetics ensure repeat purchasing from customers?

61.102 - 89.151 Nathan Latka

top try what is up this morning you're gonna love our guest her name is julie frederickson she's the ceo and co-founder of stowaway cosmetics a venture-backed makeup startup taking on the entrenched and heavily consolidated 60 billion dollar beauty uh industry here in the u.s she has prior experience as a brand manager both in-house at ann taylor and equinox as an agency director with brands like pepsi nike gap and michael kors julie are you ready to take us to the top

90.447 - 91.875 Julie Fredrickson

As ready as I'll ever be.

92.036 - 97.183 Nathan Latka

All right, let's do this. So tell us what Stowaway Cosmetics is and how do you generate revenue?

97.737 - 98.078 Julie Fredrickson

Sure.

Chapter 6: What strategies did Julie use to launch Stowaway Cosmetics?

98.158 - 121.416 Julie Fredrickson

So Stowaway Cosmetics is right-sized cosmetics. What does that mean? It's makeup that women love in sizes they can carry and actually finish. It turns out 75% of women don't finish the cosmetics they buy, not just before they expire, but at all. So our products are designed to be mobile for busy women who want products that help them feel beautiful no matter where they are.

121.396 - 127.614 Julie Fredrickson

So a quick way of thinking about us is we are cosmetics that are half the size and half the price of a typical prestige cosmetic.

128.336 - 133.431 Nathan Latka

Got it. And walk us through kind of when you launched this thing. How many years ago was it? Why'd you do it?

Chapter 7: How does Stowaway Cosmetics maintain higher margins compared to competitors?

133.968 - 153.066 Julie Fredrickson

So, you know, we're babies. We've only been launched 18 months now. And it was really a long journey of both passion for developing great products and then learning all the tricks of the trade and leveraging some of the tricks we already knew to really run an effective e-commerce business.

153.967 - 156.85 Nathan Latka

And what you said, you've raised capital as venture backed. How much have you raised?

158.031 - 160.773 Julie Fredrickson

So we raised one point five million as our seed round.

160.973 - 162.675 Nathan Latka

Was that on a note or equity?

163.583 - 166.057 Julie Fredrickson

It was equity. We were priced and proud of it too.

166.299 - 166.661 Nathan Latka

Yeah.

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Chapter 8: What insights does Julie share about customer acquisition costs?

166.681 - 168.733 Nathan Latka

Tell me, tell me why. Why are we proud of that?

169.388 - 188.771 Julie Fredrickson

Well, so there is always that hope when you take a note and leave it unpriced or have a cap that you'll be able to get a better valuation down the road. But the truth is, if you can price something and price it now, it gives you something to work from and gives you more stability because you never know when your next financing round is going to come.

189.252 - 194.618 Julie Fredrickson

And you should always assume that you're on your own with the cash you have. Always treat it as the last money you'll ever get.

195.419 - 198.923 Nathan Latka

So what were you guys able to negotiate in terms of valuation on that price round?

199.375 - 200.993 Julie Fredrickson

Cole, I'm certainly not going to tell you that.

201.378 - 202.045 Nathan Latka

Why not?

203.02 - 213.489 Julie Fredrickson

Because it's generally something that companies like to keep private, especially at an early stage. I know that there can be a lot of braggadocio, as it were, on very high valuations for companies at later stage.

214.45 - 226.421 Nathan Latka

That's why I try and tackle it. That's the exact reason people read TechCrunch. They get into this stuff and it brainwashes middle America and entrepreneurs into thinking they're not worth anything unless they go raise capital, which is just not the case. So I'm curious.

226.801 - 233.027 Nathan Latka

You don't have to give a direct number, but the reason I ask the question is to get more inside your brain in terms of how you thought about negotiating it and why