Weekly news and teardowns on trending startup companies
The most relevant Twitter threads of the week
Product of the week brought to you by ProductHunt
Detailed stats on the companies that raised venture capital
We link Jessica Alba with Hollywood. But she’s more than that. The proof is Jessica Alba is the founder of Honest Company. Here’s the history behind this startup that wanted to change everyday products.
Coauthor: Elle Leemay Chen
Many of us know Jessica Alba today. She's a beautiful actress, a business mogul, and she does not seem to age. And today, in 2021, she's known as the founder of The Honest Company. It offers safe, eco-friendly products like diapers, a natural line of bath, skincare, home cleaning, etc.
It's a go-to place for household products focused on safety and ethical consumerism. But back in the 2000s, Jessica Alba was an up-and-coming actress. Plus, her image differed from traditional Hollywood starlets. Thanks to her tan skin and complexion, she appealed to fans from other demographics.
Unfortunately, she didn't have the best critical reception. However, she knew there was more out there for her than being a Hollywood star.
The early 2010s weren't like today. Now, a celebrity announces a company or raises a fund, and people are banging down their doors to give them money.
Back then, you had one lane, and you did not stray. People didn't take celebrity-sponsored companies that seriously. So how did this Hollywood actress breakthrough and come to IPO a company? Let's find out.
The story goes that, in 2008, after Alba's baby shower for her first daughter, Honor, she washed some of her gifts with a mainstream detergent brand. She immediately broke out into ugly red welts. After that, she grew worried about what such exposure would happen to a baby with even more sensitive skin.
This experience shook Alba. She spent the next few years researching the consumer goods market. The list of ingredients in everyday items was worrying. These had petrochemicals, formaldehyde, and flame retardants, many of which are toxic. She even ended up in Washington, DC., to lobby for updated legislation to reform the 1976 Toxic Substances Control Act.
After feeling impassioned to make a change in the industry, Alba decided to start her own business. She teamed up with Brian Lee, who had former startup experience with LegalZoom and ShoeDazzle.com.
The two invested $6m of their personal wealth to get it started before major VC players believed in them. Finally, after the heavy investment, the company was incorporated in 2011.
Later on, Sean Kane and Christopher Gavigan joined the team, a wise decision. They had experience with Pricegrabber.com and Healthy Child Healthy World. It was a perfect match: the co-founders' experiences supplemented one another's expertise. Plus, Jessica brought in her mainstream audience and appeal.
The Honest Company started with four co-founders. But, it still needed money. Raising money for a CPG brand is not easy. There's less investment in CPG brands because the scalability and VC-level returns are hard to come by for the amount of risk.
So to tailor their pitch to VCs, they doubled down on the idea of creating safe, chemical-free, nontoxic consumer goods from scratch. But, they required a lot more capital without the infrastructure of, say, a Procter & Gamble.
To garner interest from VCs, they specifically targeted the diaper business. Co-founder Brian Lee stated, "That's the only thing we pitched," "It was very strategic as we knew that was the way into your home."
Their strategy saw success, which lured name-brand VCs. General Catalyst, Lightspeed Venture, and Institutional Venture participated in a $27M Series A in 2012.
The diapers were successful, and the company raised ~$128 million through 2014. After proving themselves in one category, they expanded their product offering. It included soap, kitchen cleaner, detergent, nipple balm, multivitamins, and even nursery furniture.
It's not every day that CPG brands can get so much VC conviction and backing. But the team showed they knew how to market a product and replicate that strategy to other products within the "nontoxic product universe." After all, as a committed founder, Jessica Alba was better publicity than any marketing team could buy.
The Honest Company capitalized on consumer trends. It was a first mover in the now popularized concepts of conscious consumers and influencer marketing. Back in 2014, this was not yet table stakes.
Jessica Alba went on late-night talk shows like Jimmy Kimmel to promote the Honest Company. She also took the responsibility of alerting consumers of the dangers of existing products.
The Honest Company didn't arbitrage an opening in the market for "safe" and natural home goods. Instead, they helped expose the gap to which they could immediately slide in and provide solutions.
There was a lot of competition from brands like Johnson and Johnson and Jergens etc. But, still, the Honest Company was able to carve out its own niche.
The brand's foundation was that home and kids products should be "safe, affordable, and eco-friendly." The company laid it out in its guiding manifesto, called the Honest Standard.
In fact, Jessica Alba published the NYT best-selling book The Honest Life, and she became synonymous with the brand. That's a type of marketing that even money can't buy. Plus, the brand was also successful in educating and creating more conscious consumers.
Parents were willing to pay higher prices for the peace of mind of having safe brands. Still, the products weren't outrageously out of most consumers' price range. But if you promise to be honest, people will take you up on that.
The Honest Company saw consistent growth. They even began to explore an acquisition by Unilever. Eventually, Unilever went for Seventh Generation for a rumored $600 million buyout instead.
But the Honest Company didn't slow down. After their Series D, they had a $1.7B valuation, gaining its unicorn status. While the company seemed invincible, it raised a down round in 2017 and lost its unicorn status. What happened?
Unfortunately, what brought them immense success also made them vulnerable to scandal. As a result, the company placed a huge target on themselves: calling themselves Honest. Unfortunately, living up to this promise is quite a challenge.
Tests of the startup's liquid detergent found SLS, sodium lauryl sulfate, a cleaning agent common in many mainstream brands. In fact, SLS was a chemical that The Honest company previously criticized. This goes to show: don't start a witch hunt unless you're entirely innocent.
While the company disputed the claim, it still couldn't catch a break with Honest Sunscreen. Accusations surged of it being "ineffective in preventing unhealthy exposure to harmful UV rays." So, it couldn't do its only job.
The lawsuits targeted the claims that Honest misrepresented its products as natural. In particular, they called out some of their most profitable items, like their soaps, diapers, and cleaners.
After detecting mold in some packages, the company recalled baby wipes "out of an abundance of caution." In January, the company also recalled its baby powder over concerns it could cause "skin or eye infections."
That goes to show that labeling yourself as "honest" creates enormous hurdles and consumer expectations.
After the scandals and down round in investment, many wanted to write off the Honest Company as a failure. To the media, it was another story of a failed celebrity company. So, to regain customer trust, the company had some major rebranding to do.
In March 2017, there was a big shakeup to leadership. The Honest Company replaced Brian Lee with Clorox veteran Nick Vlahos as CEO.
The company needed a seasoned corporate executive taking the helms as it grew. Also, it made internal changes by bringing in in-house R&D and quality assurance. This way, The Honest Company had complete oversight of the manufacturing process.
Vlahos, the new CEO, was honest about the changes. To grow, they had to be consistent, which meant ditching businesses they couldn't win. So the Honest company focused on their most significant revenue drivers. These included diapers, baby products, and beauty product lines.
While all this was good and great, Jessica Alba's squeaky clean image was a major differentiating factor. Throughout the scandals, the company managed to divert blame from Alba herself.
It was Jessica Alba who ultimately saved the brand. Alba hasn't graced our silver screens in a significant role for a long time. But, for years, she built her brand as the beautiful, honest, and authentic girl next door actress.
All the women who grew up watching Jessica Alba started to have families of their own. Thus, they regarded her as a trustworthy source. So, the brand image remained positive, and the scandals began to subside.
The image has played an essential role in other aspects as well. Since its origin, the world has seen The Honest Company as Alba's get-rich scheme. But, instead, it came from Jessica struggling to find safe products and even going to Congress to try and make a change. As a result, people perceive Alba's intention as honest.
The Honest Company wasn't a faceless corporation. Instead, consumers asked themselves: can they trust Jessica? And that answer proved to be "yes."
After rebounding from seemingly a slew of nail-in-coffin scandals, The Honest Company filed for IPO in April 2021.
During the lead-up to the IPO, Jessica Alba launched a Youtube Channel and a Tik Tok account. She also made the media circuits putting her again at the forefront and as the face.
The company saw immense growth. Their S1 stated that they grew revenue 27.6% from $235.6 million in 2019 to $300.5 million in 2020 during the Pandemic.
The company went public in May 2021. While it had a $16 / share price, the stock price has jumped around in the last couple of months. It dipped to almost half its original value the week after we shot this video.
The markets have not been kind to the Honest Company. But the company has proven to be in a position to overcome difficult times.
It's easy to dismiss the Honest Company as a fluke success and Jessica Alba as a pretty face to the company.
But The Honest Company did succeed when so many celebrity-backed companies failed. One big reason is that Alba was a compelling and intelligent founder that lived and breathed the company's core values.
She understood market trends and then worked tirelessly to build the Honest company. So yes, Jessica Alba has a pretty face, but she also created a legacy that extends way beyond the silver screen.
