The Echo-nomist

#3- Women Entrepreneur series

Have you had trouble finding reasonably priced eco-friendly, skin-friendly products? Because Jessica Alba did too. When she was pregnant with her first child, in 2008, she couldn’t find a brand to trust with her everyday needs, which she trusted was safe for her baby. She knew there were other people like her. Looking for comfortable, trusted and effective products at a reasonable price. This gave her an idea to start her own brand, giving life to Honest Company.

Jessica Alba is an actress and the founder of Honest Company. The company has been through a lot of ups and downs, but is now a unicorn (a company with a valuation over $1 billion), and went public on May 5th.

While washing onesies with baby’s detergent in 2008, Alba broke out in a rash. Growing up, she had a history of allergic reactions and had always struggled to find the right stuff. With a baby, she didn’t want to take any chances. So without much delay, in 2009 she pitched her business for safe-to-use, affordable products. But it was without much luck.

Jessica Alba went to Washington to lobby for the registration to reform the 1976 Toxic Substance Control Act. Here, she met her co-founder, Brian Lee. He was refreshed by her knowledge of the market and about the law. Brian was already an entrepreneur, having co-founded LegalZoom.com and ShoeDazzle.com previously. Around the same time, she reached out to Christopher Gavigan, who leads a nonprofit organisation called Healthy Child, Healthy World. They also teamed up with Sean Kane, an executive at e-commerce site Pricegrabber.com.

When these 4 people came together in the same room, a company was birthed under the name Honest Company…

It wasn’t an easy journey for them. There were a lot of bumps on the road to Unicorn status and Nasdaq.

They experienced amazing growth in their first few years, hitting $12 million in revenue in 2012 itself. Within three years, they were doing $150 million in sales. This growth was aided by several successful rounds of funding.

Their brand is centered around beauty and baby products that are safe to use and don’t contain harmful chemicals. While addressing the crowd at Wall Street Journal’s Future of Everything Festival, Jessica Alba said, “We do our own formulas in-house, and then we work with manufacturing partners to make it at scale.” They don’t rely on third parties to co-create formulas to maintain authenticity.

Their initial focus was on e-commerce, rather than Brick and Mortar stores. This was easy since their co-founder, Lee, was experienced in this field. Alba used her experience as a first time mother for developing marketing strategies. She found that she ran out of diapers at the wrong time, and it was tough to go to the store again and again, with a baby to take care of. To make this part easier for mothers, the company started with an eco-friendly, non-toxic diaper delivery service. It was a win-win because it also gave the company an entry point into the homes of their customers.

Alba is also an actress, known for her roles in movies such as Fantastic Four. Which meant she had a fan following on social media. She used her platform to promote the brand and connect with her audience about natural and genuine childcare products. She is still very active on Instagram and has over 19 million followers now!

But all of this was too good to be true…

As the company grew, they introduced new products and categories. It took away there focus from baby and beauty products and led to divided attention. This was not good for a company whose main focus is authenticity. And surely, it resulted in scrutiny.

In September 2015, a customer sued the company for false advertisement by inducing customers to purchase their products under the claim that they only use natural ingredients. The customer alleged that the product contained synthetic ingredients. There were more allegations claiming that they used a chemical called SLS in some of their products, which is known as a skin irritant. Honest reached a $7.35 million settlement for labelling the products wrongly. They denied the allegations, claiming they were false and defended their formula. They even discontinued their baby wipes after a lawsuit over the ingredients in the product. The lawsuits did double damage by harming their image and costing them a lot of money.

They got back on track after 2 years of losing out between 2015-17. Alba Nick Vlahos (the new CEO), slimmed down the company’s product variety to focus on their original idea. It’s mostly been uphill from there. They worked to build a culture of diversity and inclusion at Honest, as Alba is a woman of colour and knows about how hard it is. About half of its employees are people of color, and within the leadership, 53% are women.

The company went public on May 5th after a $1.44 billion valuation. They raised $412.8 and sold its 25.8 million shares at $16 each. Their shares soared 44% on their first trading day and now “the company (and its diaper cakes) are worth ~$2.7B.”

Jessica Alba stayed true to her values on their IPO day as she delivered a speech: “since day 1, as a woman of color, it has been my goal to build a diverse, inclusive, and ethical company based on the values of transparency, trust, sustainability, and a deep sense of purpose in all that we do”

This journey hasn’t been easy for her. She took her doubts as a new mother and turned it into a business venture to aid others in their journey with motherhood and bring to them safe, trusted products inline with the Honest Standard. She overcame the challenges in the way and emerged a successful mother and entrepreneur of a 🦄