How Jessica Alba Built A $1 Billion Company, And $200 Million Fortune, Selling Parents Peace Of Mind-2
Alba at Honest HQ in Santa Monica, Calif. Photo: Jamel Toppin for Forbes.
She went back to Brian Lee in 2011 armed with data on the rise of childhood diseases and a much more concise ten-page pitch deck. Lee’s mind had changed — not coincidentally, he had recently become horrified when his young son was banned from bringing that classic, all-American lunch the PB&J sandwich to nursery school. Too many kids had severe nut allergies. “Autism, Tourette’s, chronic allergies and asthmas and celiac disease — all of this stuff is on the rise,” Lee says. “I almost had this moment of awakening. Why aren’t we doing something about this?”
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ONE WALL OF THE HONEST Company’s L.A. office showroom best represents its roots. On it you’ll find rows and rows of diapers, mounted, matted and framed. Each has a whimsical design on the butt. There’s one with a purple-and-green leopard print; there are juicy pink strawberries and a stars-and-stripes print perfect for baby’s first Fourth of July.
These are the diapers that gave The Honest Company its start and indeed still account for a large proportion of sales: About 75% of revenues still comes from online commerce, and the majority of that is from the company’s $79.95 monthly bundles of diapers and wipes.
During Alba’s days scouring supermarkets for safe baby detergent, she often wondered why no one in the retail or fashion world had yet come up with seasonal designs for diapers. “I kind of want them to be cute,” she says. “And the natural diapers: Why do they have to look like your baby’s wearing a brown bag?”
After having her first daughter, Honor, in the summer of 2008 (in 2012 she had another daughter, Haven), Alba also found herself routinely running out of diapers in the middle of the night. She was toying with the idea of a subscription service for nontoxic household essentials — cleaning products, maybe diapers, too. But this was long before monthly cosmetics-sampling startup Birchbox launched, and that business model didn’t really exist.
Creating safe, chemical-free, nontoxic consumer goods from scratch without the infrastructure of, say, a Procter & Gamble or a Kimberly-Clark was a prospect that would cost way more than even the $6 million seed fund. So they went looking to get venture capital into the diaper business. “That’s the only thing we pitched,” says Lee. “It was very strategic as we knew that was the way into your home.”
Lee was a known quantity among the venture capital firms of Palo Alto. Even so, The Honest Company took a gamble approaching backers without having made even a dollar of revenue. “They hadn’t shipped yet when we invested, so it was a leap of faith we don’t normally take in e-commerce businesses,” says Neil Sequeira, a managing director at General Catalyst Partners.
He was a big believer in online-only models, having backed pioneering eyeglasses e-tailer Warby Parker. He also liked the subscription aspect of the business: It took much of the pain — and expense — out of acquiring new customers. “Assuming they like it, the big Super Bowl ads and stuff become less important,” he says. Early on Honest relied on Facebook for efficient advertising instead of traditional campaigns. General Catalyst joined Lightspeed Venture Partners and Institutional Venture Partners in a 2012 Series A that raised $27 million.
That turned out to be just the start. As the diaper business proved its efficacy, Alba and her team — Lee serves as the CEO — reverted to the original concept: a single brand that carried its credibility across all products in the nontoxic universe. Raising a total of $127 million through August 2014, The Honest Company has been able to create more products in different categories — dish soap, kitchen cleaner, detergent, nipple balm, multivitamins and even nursery furniture.
Lee, Alba and their team intended for The Honest Company to remain online, where its revenues grew steadily thanks in part to the actress “trying to yell from the rooftops,” as she describes her marketing efforts. (She has over 5 million Instagram followers on her own account.)
But almost as soon as they launched, high-end mommy-and-baby boutiques with cutesy names (The Pump Station in west L.A. and The Upper Breast Side in Manhattan) cottoned on to The Honest Company, asking whether Lee and Alba had considered selling the brand in brick-and-mortar stores. Stock in these mom-and-pop shops sold out so quickly that when Costco came calling in 2013 wanting to sell baby shampoo in family-size packs, the Honest team relented. Since then Whole Foods, Nordstrom, Buy Buy Baby, Destination Maternity and even discount behemoth Target have started selling The Honest Company’s wares.
Two things stand out on their short-term agenda. First, international expansion. Honest products will debut in South Korea later this year and in China possibly in 2016. And then, most likely next year, a public offering, according to people familiar with the company. Such a move provides a war chest, though that doesn’t seem to be an issue at present. “The company’s outperforming,” says General Catalyst’s Neil Sequeira. “They have pretty much unlimited access to capital and a very strong balance sheet.” Liquidity, then, would seem to be the key driver.
With a big payday in the offing, Alba remains an active presence, much to the delight of her venture capital backers, who had built-in celebrity endorsement from a cofounder. “I think they realized they got a lot of bang for their buck,” Lee says. Alba still makes the occasional film, but she makes quick work of it. She shot her scenes for the upcoming movie adaptation of hit series Entourage in three hours. In 2016 she’ll appear in a sequel to crime-caper mainstay Jason Statham’s The Mechanic. “It took ten days in November and ten days in January, and I got to be in a fun action movie,” she smiles.
Such efficiency is important when you have 130 customer service representatives to train in all things Honest. All told, there are now 350 employees at two offices.
While Alba doesn’t have the time to travel the country educating retailers, she now has the next best person on her staff: her mother. A year ago Cathy Alba came on board at The Honest Company, spending two weeks a month telling store managers at Whole Foods and Buy Buy Baby outposts across the country about her daughter’s struggles with childhood illnesses. Cathy came out of retirement to take the gig. “I’m very much like Jessica,” she says. “All or nothing.”
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