Disrupting the hair color business, with Madison Reed CEO Amy Errett
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Amy Erritt is the founder and CEO of the hair color brand Madison Reed. But just before she struck out on her own, she found herself in a hotel lobby in total disbelief. I walked out and I had a convertible car and it was a Monday morning at 930. And it was a beautiful day in the Bay Area. And so I put my top down.

And I was driving and the first thing that I thought of was, oh my God, people walk around at Monday at 9.30. They're not in offices like you are as a maniac. And I came into the house and I told my wife, Claire, what had happened. And I said, we must tell Madison. Now, why I wanted to tell a four-year-old is, you know, you're not rational. And so Claire, in her wisdom, grabbed Madison and said, Madison, good news now, mommy works at home.

And Madison took me by the hand and took me up the stairs to my office and took her hand and signaled to the chair and said, Mommy, welcome. After the firing, Amy leveraged her decades of experience and set out to be her own boss. Now she has disrupted the lucrative hair color industry. You've got to have incredible talent at every position. It's like this huge push. There are fires burning when you're going out. Can you believe it? Such an idiot. And then you go back to, this is totally going to be amazing.

There 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. This is Masters of Scale. I'm Jeff Berman, your host. More than 5 million people have tried Madison Reed's hair color products since Amy founded the company in 2013.

She has excelled by finding innovative ways to create quality products with cleaner ingredients and by listening to clients about the features they really want. Amy says her business is all about empowerment. She's laser-focused on creating more opportunities for women to thrive.

Amy, welcome to Masters of Scale. Thank you for having me. I'm thrilled to have you. You and I have known each other a long time, longer than either of us probably cares to acknowledge. But one thing I did not know until I was prepping to sit with you today is that part of the reason that you are the founder of Madison Reed is you got fired from a job. I'm imagining that most of the people who are watching or listening have been fired or have felt like they've been fired. And

And it can knock you on your butt. Yes. And it can take a minute to get back up. Did you need to take a minute to reset? Yeah. I got myself into therapy and I tried to understand why it was so big. What was the trigger? And it took me down a path of understanding a lot of things about myself. And was there a particular lesson or set of lessons that came out of that or learnings that came out of that that inspired what was next for you? Yeah. So I really suck at working for someone. Yeah.

Like that was the big thing that came out. It was like the therapist was like, okay, let's go through that again. And so I learned very quickly that putting myself in that position is setting me up to fail. Everybody has a genius inside of them. And I think life's path is,

might be to find what that is and then have acceptance about the things that don't work for you and what are the things that work for you. So the first thing, it was really clear, like going back to work for somebody was not going to be a good thing for me. Did you also identify what your genius was? Yeah. I love taking really juicy, hard, almost impossible problems and

and figuring them out and building a group of people that has a mission and a purpose to do that. And for me, it was important to have a product. It was important to do something, um,

that spoke to something that matters to me, and we'll get into it, which is women's empowerment. But what I also knew, and this will be interesting as I talk about my VC journey and about why that didn't work, is I don't like to do things solo. Yeah. Right? Like, I'm not a great individual contributor. I like teams. I like building teams. I like rallying teams. I find that whole team experience of taking a group of people through an impossible journey together

and understanding those dynamics and figuring them out to be so, they just fascinate me. Yeah, and you light up when you talk about it. Yeah, I'm obsessed with the fact that, you know, Madison Reed today has over a thousand people, right? And in my mind, what we have is a huge social experiment.

There's a business, but it is a social experiment of 1,000 people with all their lives coming together who have to embrace a single mission and accomplish that every day. That is really hard, and I find it just completely fascinating, which is why I spend 25% of my time on culture. Yeah.

So I want to come back around to that because you referenced your time as a venture capitalist. That's when you and I met. And it's not obvious that that's where you would go and what you would do when you're so passionate as a team leader, a team member, as someone who wants to be a part of a team to build and solve problems. VCs talk about that a lot. They don't always do that. Why did you choose to become a VC and what was that experience like? Yeah.

The truth is that I had an association through the place I got fired from, Mavron. Seattle-based venture firm. Yeah, Seattle-based. Howard Schultz. And they had wanted to invest in the company that I had just gotten fired from. And so they were sort of reaching out to me saying, what the heck happened? And then said, hey, we really liked you. Why don't you come hang out with us? And the theory was I'd be in EIR, which is an entrepreneur in residence, and

And then start something. Right. And then Maveron would likely invest in it. Yeah, exactly. But as I started to do it more, I did become intrigued by the problems I was seeing and the juicy. It's really hard to be a great VC. It's like almost virtually impossible. So that was a hook. Because why?

We did early stage investing. So you have to see things around the corner before other people do. You have to have a great read on people. And the biggest element is that what people don't understand is there is an element of luck that you could never replicate. So it's right place, right time, right people. Now, what was great was they never had a Bay Area office. So if you think about it, it was like I

I was given a task to do a startup of an established brand already within a region that they weren't represented in. And that was really fun. When that was over and the office was running and we were getting deal flow and the brand was established was when I started to have an itch again. And then I did incubate Madison Reed in their office. How long were you at Maveron? So

Six and a half years. And while you were there, Dollar Shave Club came in and pitched. Yeah. And Maveron did not invest. No. Why not? Well, first of all, I don't think that this qualifies for bad judgment of anybody at Maveron. I think it's just was a moment in time. And you have to remember, you know, the irony is Mike Dubin is now on my board, which is and we stayed close.

As friends. And he's been a mentor to me. He's a wonderful guy. Founder of Dollar Shave. Yeah, founder of Dollar Shave Club. And we passed for all of the reasons that one might think at that time didn't make sense about shaving, you know, size of the prize, how do you take Gillette on, who's going to buy this stuff direct to consumer. Right.

But the irony of it, it was the sort of seed of what happened with Madison Reed. Yeah. Because after we passed, and I stay close to Mike, I had a summer GSB intern do a analytical scan.

of what would be the women's analog to shaving. Wow. What a great summer internship project. And what came up to the top of the list, and I kept saying to her, go back, these numbers can't be right, was hair color. Because the numbers were huge. They're huge and repetitive. Right. Like shaving. And we couldn't find anything online that owned the space. Wow. Yeah.

So Dollar Shave was in some ways an inspiration to explore. Yeah. And so when the summer intern, what's their name? Rebecca. Rebecca. When Rebecca came back and said, no, no, no, Amy, these numbers are real. Like this is the addressable market. This is not a...

washing machine, which people are going to buy every 10 years. This is a frequent repeat. Sorry. I love you guys. Right, right, right. No, I think you just triggered some PTSD for some investors out there. Yeah, exactly.

But that's one of the things about consumer products is a high repeat purchase or subscription product has so much more value. And consumable. And consumable, right. So when Rebecca presented this to you and you're sitting there and you're getting her on the numbers, are you starting to get the itch now? Are you really? Yeah. No, I have the itch now, but I had also been intrigued a lot that we were incubating things. So I was sort of thinking, well, I'm going to find a great entrepreneur who's going to know how to do this and I'm going to help them and I'll be the board member and put the money in. That was the first...

iteration. And then I remembered one important thing as I was going through this. I kept thinking, well, they're going to have all the fun. Now that is an incredibly crazy thought process for pain and suffering in the future. But I remember that all the boards I was on when I was at Maveron, I used to be jealous of the CEO. I used to want to be in that seat and

definitely control my behavior because the investor that wants to be in that seat is quite dangerous, by the way. I don't think any of my entrepreneurs would say that. I was there to be helpful. But all the other board members, Jeff, would get in their car and get the heck out of there when the board meeting was done. And I just wanted to chat with the CEO and see if I could understand how to help, right? So that started to get me to kind of scratch the itch.

And again, Claire, my wife, who knows nothing about business but is right all the time, damn it, said to me, I don't really understand why you're not doing this. Now, the second part of the story is that Claire started to go gray when she was 22 years old. So in order to be, I think, create a great set of products, you have to understand a pain point. Mm-hmm.

And this consumer pain point was this person was going to get their hair colored every two and a half to three weeks, sitting in a chair for three hours, and is one of those people who cares about ingredients and could not get the stylist to even begin to tell them what was in what was being put in her hair every two and a half to three weeks. Yeah.

Yeah, and probably not spending a small amount of money to do this in the process. No. Right. Yes. So you saw the problem. I saw the problem. You saw the opportunity. I saw the opportunity. What happens next? How do you get Madison Reed off the ground? So the first place was could we make hair color with better ingredients and enough shades and could we color match people without seeing them? Mm-hmm.

And those are juicy, real problems. So because I was a VC, I had access. And I got somebody that was running something large at L'Oreal to talk to me on the phone for two hours. And at the end, I was asking enough questions. The person said, are you thinking about doing something? And I said, well, I'm not sure I may fund it. And this person stopped and said, if you do, count me in. I'll put money in. Wow.

That's how big this problem is. Wow. From L'Oreal. From L'Oreal. This is not some small. Yeah. Yeah. And he was running something adjacent to a hair color brand, right? And then I said, well, do you know scientists or do you know people I can talk to? And he said, here's three consultants that do this for people who knew. Right. And I connected to all three, picked one, and we went on an adventure to Italy together. Wow.

Why Italy? Because it is where most private label hair color is made. And the EU has very strict regulatory environment where basically you can't put certain things in personal care products. Yeah. So I knew we had a chance.

It was a hard problem to solve to take all of the nasty stuff out and put good stuff in. And so we went to Italy. We met with 13 private label providers.

The first 10 just completely laughed at me. I mean, it was, you know, just... Because their business is basically like, you pick our formula, you put your label on it, your brand on it, and it's the same as anyone else's. And it's on somebody else's shelf. Right, right. Or making it for European distribution, Middle East distribution, or, right? Selling hair color online as a D2C company with enough shades, and you want us to take the ingredients out...

And you're going to devise a way to color match somebody. They thought you were off your rocker. Yeah. Lucky number 11. And what happened in that last meeting? The owner, who is still our partner today, just was listening and listening and listening. And he stopped me and he said, I don't know why I'm going to say yes to this.

But I'm going to say yes, but here are the two criteria. You have to pay me all the money for the first run up front, and it's got to be in euros. Wow. And I, without even pausing, said, okay, no problem. Do you remember how much that first run cost? Yeah, that first run cost about, I don't know, maybe $80,000, and I funded it myself. You funded it yourself, right? I put in my suitcase.

19 shades of the color and brought them to the person that used to do my hair, who's the most famous stylist in San Francisco. And I said to him, listen, if I bring a bunch of women in on a Friday night and buy the wine and cheese, will you get 19 different shades put on people? And let's see in reality. And I'll give you some part of the company to do it. Wow. And he did.

Wow. So 18 of the people were thrilled. It was like nothing I had ever seen in my life. And one, my ex-college best friend, was screaming at me. So I also learned, she's like, Amy Aaron, I'm going to see my effing husband in 45 minutes. You better effing fix this.

Let's be clear. She's not your ex-best friend. No, she's still a really close friend. And we knew how to fix it. Well, I didn't, but the stylist did. But I saw the elation and I saw the absolute sheer terror. And that was an important moment for me. More with Amy about her incredible story of disruption and scale in just a minute.

We've grown exponentially since we opened 10 years ago. We initially started with, I think there were 10 of us, maybe, total, which is just completely ridiculous. That's Jillian Field, Capital One business customer and co-founder of Union Market, a popular neighborhood market and cafe in Richmond, Virginia. With her growing success, now with 45 team members, Jillian has always kept sight of what really matters.

We felt since we opened that having some sort of employee appreciation event was really important to us. Every year, Jillian holds a company-wide celebration to show her staff how vital they are to the success of Union Market. Recently, she used points from her Capital One business card to host her employees at Busch Gardens Theme Park for a day of fun with family and friends.

We buy all of their tickets as well as their plus ones. It's a lot of fun and definitely a great team bonding experience. Capital One really has been great over the years. It's so easy. We could apply these points to supplies, masking tape and Sharpies and ticket receipt paper, but we like to retain them for our employees. That's been really important. To learn more, go to CapitalOne.com slash business cards.

Welcome back to Masters of Scale. You can find this conversation and more on our YouTube channel. You know that you've got a massive market. Yes. You've tested it on a group of humans. Yes. And you've got a 90 plus percent satisfaction rate in your first shot. That one was really not good. But lessons from that one. Yes, exactly. You've got to figure out funding. Yes. And then you've got to figure out distribution. Yes. So what do those look like? What happens next? So the first place we then started was sizing the price. Right. Right.

Because I remembered again, I had a playbook from being an early stage investor that it's TAM. So total addressable market. Yep. It's product differentiation. Bingo. And it's team. Yeah. And I knew that I could put together a team. I'll talk about a big mistake. I did not have a technical co-founder. And it cost us, I would say, about 18 to 24 months of time.

really good digital product and commerce experience. Did you hire like an agency to do that work for you? No, we did it internally. I'm an internal person. I use very little agencies, just kind of a little pet peeve. I think when you're obsessed about your brand, when you outsource that, somebody else can't care as much as you care. That's just the truth. So what happened was we had hired a VP of engineering and he

It just was clear that I should have had a co-founder that was a technical co-founder. There were too many co-founders. There were four of us. That was a dire mistake. Why were there three other co-founders? Because I was generous and somewhat naive and kind of fell into the trap that multiple of the people had very good Silicon Valley sort of credentials. And they're very good people. I'm still close to them.

But what you start learning is when you start something from ground level, the ability that you need to have people have to do two important things. Get at 30,000 feet at any moment and go what I call subterranean at any moment. Yeah. Right? So you need to be the one that knows how to code. You need to be the one that knows how to get your hands dirty and churn mitigation. Right?

Like go down the list of the number of things that the granular and the strategic need to match. So you start really understanding very quickly like who can keep up with that pace. Yeah. So as the company scaled, those people eventually left all courageously and nicely and still friends. Yeah.

But I learned a couple of lessons in that that I think were worthwhile. Lesson number one for me is a blind spot. So that's the other part that I come back to when I talk about your genius.

Everybody has a genius and everybody has massive numbers of blind spots. I was going to say, it's not just one for me. So, yeah. And once you learn what they are and are curious about them, but don't blame yourself. And once you learn what other people's are and don't blame them, but you're actually curious, then you can just make decisions from a place that's not overly clouded with all of your trip ups. Right. Yeah.

So big thing for Amy that's been something that's plagued me my whole career has been when I know I know and then I take too much time to let someone go. And it's out of a kind place, but it ends up being something that over time, I love you, I love you, and then you're dead to me. And so I don't have to get to the you're dead to me place. I've learned that. So yeah, going back to it. So we have the product, we have the digital product.

And then once we had a team that was working and knowing the product differentiation, it actually wasn't hard for us to get funded. I'm thrilled to hear it wasn't hard to get funded. We've had a number of women founders on who founded companies that are creating products disproportionately for women. Tracee Ellis Ross with Pattern and Lauren Wong with Flexco and others who haven't had the easiest road. What was your journey like? I think I had an immense...

advantage having been a VC. I won't even chalk it up honestly to that it was a better idea than anybody else's. Remember the luck word. And it was a time when DTC was exploding and it was a unique thought process. And so I had competing term sheets and I had an advantage of knowing who I wanted around the table. Mm-hmm.

You also had a product at that point, even if it wasn't. We had a product that was tested already. Yeah. Not at mass. So we didn't have boxes, but we could show a demo. We could show how to color match that was kind of sexy then. So, yeah. And the trope, Amy, is that the male VC would say, well, I need to ask my wife or daughter about this to understand it. Well, before I let anyone do the Series A, I actually told them to do that. So I went and I said, listen.

You guys may think this is a good idea. You actually don't know. So I want you to go home and either your wife, your partner, your kids, your cousins, your aunts, and I want you to ask them about this problem and how big the prize is. How many times a year do they do it? Because here's what I don't want. I don't want a yes.

And then it's a half-assed yes. Because misaligned goals around the boardroom are a cluster. And I've been there on the other side, and I don't want to be there on this side. So I actually force the hand. And in each case, in the A and B, they did it. Their wives have been early adapters to the product and love it now. Some of them have moved to our stores instead of doing it themselves. And I have to say that I have had the blessing of...

the most supportive and to some extent, not always agreeing, which is good. Disagreement is good, but I have a very supportive board. That's fantastic. How much have you already so far? $240 million. That's a lot of money. Yes. The company has scaled to, you know, magnitudes that are meaningful. We are a $200 million top line business that's profitable and growing 20 plus percent every single year. And

We're an omni-channel business, so we have a lot of distribution. Okay. So you're growing. You are building your customer base in D2C. You're starting to go into retail. We're starting to put our toe into the retail market at Ulta. And then a pandemic hits. We were selling a box of color during the pandemic every five seconds for months. You close the stores down. Ulta closes their stores, but online goes crazy. And our online site goes nuts. Wow.

So how did you manage that growth and keep quality consistent and keep your culture, which I know is so important to you and to the company, keep your culture consistent? Five values that we had day two in the business, love, trust, responsibility, courage, and joy. And cultures can be words or they can be actions. And we take actions.

So there's so many things that happen in the company that reinforce those words. So the first place I start is it's all about traditions. And it's all about creating a community that has consistency, that can believe in what you tell them, and then you deliver. And if you don't and you screw up, you apologize.

So the first thing is that from the first week we were in business, I had lunch with a company at 1215 Wednesday Pacific every Wednesday. And there's only been a handful in 10 years I've missed. Zoom's helped that a lot. But the truth is I have lunch every Wednesday. It's mandatory. Pacific 1215. Yeah.

And the same format has evolved some has happened every Wednesday. It starts out with welcoming new people to truth and the lie. Everybody in the company votes on what the lie is. People go crazy. There's balloons on Zoom. You know, there's there's a way to welcome somebody that's saying, come in. You're here. Right.

Your teams want to be seen. They want to be seen for their contributions. They actually want to be seen for where you think they need to improve. They want to be seen as human beings that make a difference. And if you see them,

The productivity is insane. So it's like, I don't understand when businesses don't want to see their people. And the same thing, there's a ritual within the hair color bars of how, so the whole key to a store is the general manager. Full stop. You get a great general manager, the store goes through the roof.

The most important factor in our business, we have a supply and demand business, right? There's demand for hair color and we have product and we have people in stores that can deliver it. Mm-hmm.

The average colorist in the U.S. makes less than $35,000 a year. This is not the person in Beverly Hills. Right. So a lot of people listening just be like, oh, that's – no, no. This is a super cuts person. This is fantastic Sam's or this is somebody coming out of cosmetology school. $25,000 in debt. They are below a poverty line. Yeah. Most of the time it's a woman and a lot of times it's a woman of color that has kids. Yeah.

If people don't believe that that is my mission to solve, they're wrong. Because at the end of the day, if this little tiny engine that could can take women of color and give them jobs that they're making, 80 grand a year, and we pay their medical benefits, and all of a sudden they can buy their first house. And I get slacks all week long of women who slack me. Amy, I bought my first house. I did it. My kid is seeing me work hard. Like-

How people change is because businesses decide they're going to create the Petri dish, right? Now, whether everybody can grow in the Petri dish is a separate issue. When people can't grow or they're cancer to your Petri dish, you get rid of them, right? Because that is the antithesis of the core values. Yeah.

But my mission is as much, you know, I have three customers. I have the customer that buys the product. I have my investors and shareholders, and I have my team. I serve at the pleasure of my team. They are my customer. If they don't buy in, I don't have a business, right? So to me, it's very simple. So living a life that is authentic about that.

And there have been plenty of times, Jeff, where I've done some bozo thing, right? And I'll be on the lunch and I'll start the lunch by saying, listen, you know, I first want to start by apologizing. People are just blown away, right? But

The first place you start is we're all human. Which means we're all going to make mistakes. Yeah. If you'd asked me, you know, yes or no, what are the chances that Amy brought Bain in to help with Madison Reed? I would have said, oh my God, no way. She's an incredible operator. She's deeply experienced. She has relationships out the wazoo. Why did you bring Bain in? A simple reason. Six months into the pandemic, I had no idea who our customers were anymore. So if I went to the board,

Always lead a board meeting with what isn't going well. Your board should be your best allies.

You should never chest pound. You should just be completely authentic with them saying like, by the way, guys, I need your help. Yeah. Right? That's why you're here. Yeah. So I went to the board and I said, yeah, there's good news, bad news. This thing is exploding. We're keeping the, you know, wheels on the bus. But if you asked me what's going to happen in six months, I have no idea. And I don't know who my customers are anymore. And so I, from a strategic standpoint, I don't know where to go. Yeah.

Should I open more stores? Should I still be in retail? You know, blah, blah, blah. And remember, I have two term sheets from

Don't get mad at me, PE friends, masters of the universe. Right. And so, you know, basically we went into Bake Off. I knew the Bain folks. They took 50% in equity in their fee. Yep. So that said a lot. Fantastic. And they came in and they did a complete study of the market and a study of the segmentation of our customer base. And they gave us so many amazing insights, turn mitigation model, like all sorts of stuff that were great.

But the one insight, and so this is the pearl of wisdom that I believe, and so my Bain friends listen carefully, will be a thousand X the value of the company is the following. I had asked them to find who is the hair color bar, our store's customer. Mm-hmm. Because I knew we needed to hit a gas pedal, but it was just instinct. There was no data that suggested I was right. Mm-hmm.

So in the segmentation, they identified the bulk of women were called salon lovers. They like to sit there. They want to schmooze with their friends. They tell the stylist everything. But they were of a certain age group that was elderly. Then they identified an emerging group called salon realists. Convenience, fair price, cared about ingredients, want to get in and out, same day appointments, mobile enabled, bingo. Strong Wi-Fi, USB ports, yeah. No mirrors. Yeah.

Nice cup of espresso. Yeah. Bingo. So what they did was we took that and we said, that is the core. Let's start marketing that message. And that's when we got the stores ramped up. Amazing.

My last question for you, Rebecca, the business student who did that summer project for you, where is she now? She's a very successful VC. Wonderful. And she's one of the nicest people in the world. I adore her. So thank you, Rebecca. I love it. I love it. Thanks for being with us, Amy. I have had such a great time and you do a wonderful job. So thank you for having me. You make my job easy.

I love Amy Aratt's focus on finding your genius and then building a team with genius in complementary forms. It's an important reminder that diverse teams do make us stronger. I'm Jeff Berman. Thank you for listening. The Lobatical is for any employees who have been with us for five years to take a vacation. They get a week of extra PTO. They get to pick anywhere in the world that they want to travel, and we allow that to happen for them.

That's Brooke Wright, Capital One business customer and chief people officer at Local, a change marketing company that works with huge corporations in order to facilitate meaningful communication between C-suites and their frontline. We wanted to celebrate them for the time they had invested with us. We liked the idea of a sabbatical, and so we made it us. It's the Lobatical. Local practices what they preach, caring for their employees with the same rigor they instruct their clients to enact.

My day-to-day is focused on making sure that we're living out the same principles that we're guiding our clients on inside of their large corporations. How you take care of your employees is a direct correlation to your customers' experience with your brand or product. The Lobatical is just one of the ways that local ensures their employees feel appreciated and cared for. And feeling appreciated is a principle that is shared by their partnership with Capital One Business.

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