Masters of Scale - Turning a Korean skincare trend into $630 million (Hero Cosmetics' Ju Rhyu) | Masters of Scale
Ju Ryu, founder of Hero Cosmetics, transitioned from a corporate career to entrepreneurship, inspired by her father's entrepreneurial spirit. She initially shelved her idea for acne patches due to fear of commitment but later launched Hero Cosmetics with co-founders. The company started with the Mighty Patch, a hydrocolloid-based acne treatment, which quickly gained popularity on Amazon. Ryu emphasizes the importance of defining success metrics early on and being open to pivoting if necessary. Hero Cosmetics grew by leveraging earned media and influencer marketing, eventually expanding into retail with Target. The decision to take on investors was driven by the need for strategic guidance and resources to scale. Ryu highlights the significance of hiring experienced talent to drive growth and the strategic decision to sell the company at the right time to maximize value. She advises entrepreneurs to consider the market size and potential buyers when planning an exit strategy. Ryu remains passionate about innovation and is eager to explore new entrepreneurial ventures.
Key Points:
- Define success metrics early to guide business decisions and pivot if necessary.
- Leverage earned media and influencer marketing for cost-effective growth.
- Hire experienced talent to scale operations and drive strategic growth.
- Consider market size and potential buyers when planning an exit strategy.
- Maintain a focus on innovation and identifying market gaps for future ventures.
Details:
1. 🚀 Launching Hero Cosmetics
- J Ryu initially hesitated to launch Hero Cosmetics despite having a name, manufacturer, and packaging ready, due to the commitment it required. The decision to proceed was driven by the potential of the skincare market and the strength of the product idea.
- Hero Cosmetics' Mighty Patch was launched as its signature product, quickly establishing a strong market presence.
- The company achieved profitability early on, which led to a strategic decision to seek outside investment. This investment was crucial in scaling the business, enabling Hero Cosmetics to shift from cost-saving measures to aggressive growth strategies.
- Key milestones included successfully selling products on Amazon, entering Target stores, and reaching $100 million in sales, reflecting successful market penetration and brand recognition.
- In 2022, Hero Cosmetics was sold for $630 million, demonstrating the effectiveness of the growth strategies implemented and the brand's strong position in the skincare industry.
2. 💡 Entrepreneurial Roots and Early Career
2.1. Influence of Entrepreneurial Family Background
2.2. Corporate Career with Entrepreneurial Drive
2.3. Insights on Innovation in Big Companies
3. 🔄 Cultural Insights from Korea
- The transition to working in Korea with Samsung's financial services was strategically significant, presenting both career growth opportunities and challenges, such as potential perceptions by American companies due to geographical distance.
- Samsung's role as a conglomerate in Korea offers diverse career paths beyond electronics, which is crucial for understanding the multifaceted job market there.
- The decision to move was based on weighing risks and benefits, concluding that the international experience was inherently valuable.
- Personal experiences highlighted a cultural gap, with the individual feeling more American in Korea, which underscores challenges like language barriers and accent differences when speaking Korean.
- Cultural differences manifest in societal structures; American culture emphasizes individualism, while Korean culture prioritizes family and community, affecting social interactions and workplace dynamics.
- Traditional gender roles are more prevalent in Korea compared to the US, though societal norms are changing, reflecting a gradual shift towards gender equality.
4. ⚙️ Journey to Founding Hero Cosmetics
- The concept of acne patches was observed by the founder during her stay in Korea from 2012 to 2014, where they were used publicly.
- Acne patches are made of hydrocolloid, originally a wound dressing, which creates a moist environment for healing and absorbs inflammatory pus from pimples.
- The founder personally experienced significant improvement using acne patches, noting a transformative effect on her acne, which prompted her to consider their potential in the U.S. market.
- Despite the absence of acne patches in the U.S. at the time, there was observable demand through forums like Reddit, and Korean brands were already gaining traction in the U.S. by 2015.
5. 👥 Partnering Up and Initial Launch
5.1. Formation of Partnership
5.2. Initial Launch Strategy
6. 📈 Scaling and Defining Success
- The company defined success with clear financial metrics: achieving $500,000 in revenue and profitability in the first year was seen as successful, while $100,000 in revenue and unprofitability indicated failure.
- They started with a practical goal of testing a single product, the Mighty Patch 36 count, on Amazon at $12.99 rather than pursuing a grand vision.
- The initial investment was $50,000, and the company remained bootstrapped for the first three years, emphasizing financial discipline.
- Marketing strategies included leveraging earned media, micro-influencers, and securing press in commerce-oriented publications like Buzzfeed and New York Times Wirecutter, which significantly boosted sales and product visibility.
- Challenges in scaling included maintaining profitability while increasing product visibility, which was addressed through strategic use of cost-effective marketing channels.
- The success of these strategies was evident as the company gained traction through effective press coverage and influencer partnerships, which were key to driving sales and establishing the brand.
7. 💸 Funding and Strategic Growth
- The company achieved profitability from year one, and by year three (2020), it faced a decision about raising external capital, which was interrupted by the March 2020 lockdown.
- Despite the disruption, the business remained financially stable and opted for funding to gain strategic insights rather than out of financial necessity, emphasizing the value of 'smart money' for first-time entrepreneurs.
- Strategic partners played a transformative role by alleviating cash flow constraints associated with rapid growth, such as inventory and staffing investments.
- Capital infusion led to a strategic shift from cost-saving to investing in high-quality talent and resources, including hiring top VPs for marketing and sales.
8. 📊 Diversification and Retail Expansion
- Initially, Amazon represented nearly 100% of revenue, highlighting a need for diversification to mitigate risk.
- The goal was to achieve a balanced channel distribution: one-third retail, one-third Amazon, and one-third Direct-To-Consumer (DTOC), as suggested by industry experts.
- A single-channel dependency was compared to PayPal's previous reliance on eBay, emphasizing potential vulnerabilities.
- Efforts to grow DTOC and retail presence were identified as critical pillars for sustainable growth.
- An exclusive partnership with Target was pursued to enhance retail distribution, aiming to complement Amazon sales and reduce channel dependency.
9. 🏆 Achieving Milestones and Exiting
9.1. Team Building and Talent Acquisition
9.2. Product Line Expansion Strategy
10. 💭 Reflecting on the Exit and Adjusting
- Company reached over $100 million in revenue, prompting the decision to sell.
- The decision to sell was influenced by the need to pay back growth investors who sought returns.
- The co-founders had an early intention to exit when the company hit the $100 million revenue mark.
- Exceeding $200 million in revenue could have reduced the pool of potential buyers due to high valuation expectations.
- The company was sold to Church and Dwight for $630 million, chosen for their cultural fit and global capabilities.
- Church and Dwight expanded the brand to 50 countries within two years post-acquisition.
- Post-sale, founders must emotionally detach from the company to avoid 'founder depression.'