SPEAKER_01: How I Built This is pleased to have Upwork as our presenting sponsor. Visit Upwork.com to get hiring. Upwork has a message for you. Everything you know about business? It was made up by a bunch of guys 100 years ago. Don't stay bound to their antiquated rules like the 9-5 workday, commuting to an empty office building, or only hiring full-timers. Embrace a new way of working with Upwork. It's a portal to the future of business, and it's disguised as a website. Go to Upwork.com. There, you'll see the light and also find talent for projects of any size, from simple deliverables to complex projects, from short-term help to full-time hires. You can finally let those old business titans and their tired ideas rest in peace. This is how we work now. Visit Upwork.com to get hiring talented professionals today. Here's a little tip for your growing business. Get the new Venture X business card from Capital One and start earning unlimited double miles on every purchase. That's one of the reasons Jennifer Garner has one for her business. That's right. Jennifer Garner is a business owner and the co-founder of Once Upon a Farm, providers of organic snacks and meals loved by little ones and their parents. With unlimited double miles, the more Once Upon a Farm spends, the more miles they earn. Plus, the Venture X business card has no pre-set spending limit, so their purchasing power can adapt to meet their business needs. The card also gets their team access to over 1,300 airport lounges. Just imagine where the Venture X business card from Capital One can take your business. Capital One. What's in your wallet? Terms and conditions apply. Find out more at CapitalOne.com slash VentureXBusiness. You know, we hear a lot about pivots on how I built this, how a simple change in perspective can create a whole new opportunity. And this made me think of a conversation I recently had with Kenan Thompson, who's the longest-running cast member of Saturday Night Live ever, 20 seasons. And I asked him, what if one day, instead of performing on SNL, you were given the keys to run SNL? You will definitely want to hear his answer. Check out my interview with Kenan Thompson over on my other podcast, The Great Creators. Just search for The Great Creators with Guy Raz wherever you listen to podcasts. And now, onto today's show.
SPEAKER_00: We tried to convince them that we were legit. And then we committed to buying a million razor blades, which for them at the time was a meaningful number. But I mean, when you made a commitment to buy a million razors from these guys,
SPEAKER_01: did you have millions of dollars at that point to give to them? Nope.
SPEAKER_00: Nope.
SPEAKER_01: Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Raz, and on the show today, how two friends took on one of the biggest companies in the world to launch Harry's, a shaving brand that started online and is now a leader in the category. Sometimes being David can be a huge advantage, especially when Goliath isn't paying attention. Airbnb is a great example. They kind of just snuck into the hotel and hospitality industry without any of the big players noticing. Can you imagine if Marriott or Hilton came up with a similar model when Airbnb was just a three-man operation? They'd probably have crushed it. But the reality is, big corporations don't always have the flexibility to move quickly. And under the right circumstances, a savvy entrepreneur can strike just at the right moment. This is sort of what happened in the shaving industry. For most of the past few decades, there was really only one player, Gillette. At one point, Gillette had about 70% market share. And to be fair, Gillette is still pretty dominant. Close to 50% of all razors and cartridges sold globally have the name Gillette on them. But the reason its market share has dropped over the past decade has to do largely with two upstart brands, Dollar Shave Club and Harry's. Both of these brands pioneered a direct to consumer model that made it easy to order razors and shaving cream online. And they did it sort of under the nose of the big players, who still prefer to sell their products in retail stores. Now, this is not an anti-Gillette episode. In fact, I love their razors. They're pretty great. But for a long time, Gillette had no competitors and their profit margin on razors was massive. But in 2012, two friends, Jeff Rader and Andy Katz Mayfield, thought they might be able to offer an alternative, a high quality razor for maybe up to half the price of a Gillette. Except there's one massive challenge. Making a razor that literally shaves a layer of skin off your face or legs or underarms and does it deftly and precisely is really hard. So hard that there are just a handful of factories around the world in very specific countries that have the technical know-how to do this. For starters, you need specialized steel. And that steel has to be milled and ground with such precision to make sure it doesn't cut someone's face off. And another thing, most of those factories are either owned by Gillette or they have no capacity to make razors for a new brand. And when Jeff and Andy decided to enter this industry, they had no idea the obstacles they were about to face. And like all great founder stories, these guys were, well, pretty naive, which may have worked to their advantage. So much so that they soon realized that in order to make their idea work, they had to figure out how to buy their own razor blade factory. Jeff Rader and Andy Katz Mayfield grew up three towns away from each other in the suburbs of Boston, but they didn't meet until around 2004 when they were both still in college and wound up in the same internship program at the consulting firm, Bain & Company. I literally remember
SPEAKER_00: the first day sitting there and like business casual. I think I was like literally wearing a Brooks Brothers shirt that my mom had bought me, like just kind of looking around, like trying not to screw this up. And like, I really need a friend. And seeing Andy and being like, yeah, it's interesting being like, hey, we're kind of in the same experience together. What's up? I'm Jeff. And we just kind of got to know each other then. And then there were 10 people in our intern class and a bunch of us became like pretty good friends. Yeah. I mean, Jeff's habits when he was
SPEAKER_04: particularly stressed out was like about a three or 4 p.m. McDonald's run to the Times Square McDonald's around the corner from our office. Yeah. From time to time, I'd be like, Andy,
SPEAKER_00: I just need like a walk. Come take a walk with me. I was like, what meal is this, Jeff? It's 3.30 in the afternoon. It doesn't matter. I need a cheeseburger. It's always a good time for chicken
SPEAKER_00: McNuggets. Yeah. Yeah. Agreed. All right. So you guys become friends and your career paths kind of
SPEAKER_01: merge. I mean, you both were at Bain for a while. You worked there for a while. And then you both go to another like a private equity group called Charles Bank in New York. And then you both go to business school, different ones. Jeff, you went to Wharton and Andy, you went to Stanford. And
SPEAKER_01: did you guys keep in touch while you were at different business schools? Yeah. We talked a bunch. I remember seeing Andy back in New York when we were both back on break. And I remember
SPEAKER_00: actually sending him, you know, when I was at Wharton, we started working on Warby Parker. And in the early days, I was just looking for advice. And I remember sending him like a very early version of our business plan from Warby Parker. Literally, like I said, Andy, this business plan, and I get like a markup red pen version back being like, not sure about this, this one, here's a question I'd have. So yeah, I think we were always kind of in touch. All right. So let me let me kind
SPEAKER_01: of dive into this with you, Jeff, because as you mentioned, you were part of the founding team of Warby Parker. And we told the story on the show many years ago, Neil Blumenthal and David Gilboa were on the show talking about, you know, founding the company, which was started at Penn, they were all you were all business students. It was like, yeah, I think four of you, four of you guys, you were all students at Penn. And tell me how you like how I mean, from your perspective, how did it? How did it start? Yeah. So for me, the journey at Warby started when I was sitting around after
SPEAKER_00: class with Neil one day. And Dave walked up to us and said, What do you guys think of the idea of selling glasses online? And at the time, I was wearing prescription glasses that I'd had for many years. And I was like, that I would love, you know, a pair of glasses that, you know, sort of well made that spoke to who I like the sort of fashion statements that I would want to make kind of, you know, were a representation of who I am, and that I could get at a much better price. And Neil was just sitting there being like, you could totally do that. Like the reason that glasses are so expensive is because yeah, the industry has been dominated by a couple companies. And there's a significant markup between sort of the cost to make the products and then the cost that they're sold for. Pretty quickly, four of us and Neil and Dave, our other co founder, Andy Hunt, and I got together and started working on Warby. This really became business school for you. Totally. You guys
SPEAKER_01: launched, you started, you pulled some money together. I think you presumably you had some money from your time at Bain and... Yeah, I had an interesting situation. I worked at Charles Bank,
SPEAKER_00: as we mentioned, they had paid for me to go to business school. And then I had agreed to come back afterwards for a couple of years. And so I had business school paid for it. So what we did, what I did was took out loans that otherwise I would have used to pay for business school, and then use whatever extra capital we had to start to fund Warby Parker. Wow. So you guys pulled some money together. And from what I remember, Neil and Dave, when they were on the
SPEAKER_01: show a few years ago, I mean, you guys had all these great resources on campus, you had business school professors and people with experience starting businesses. So you were asking lots of people for advice. Yeah, it was awesome. I mean, we would get to go to professors at the end of
SPEAKER_00: class. I know we just did a case on Coke and Pepsi, but we really need your help in terms of like, how do you price eyeglasses? You know, like, how do we think about like, what the right price is and how we make margin and how we deliver people great value and how we could sell glasses online, but also give people the chance to try them on. And I remember one of our professors being like, why don't you just do Netflix? Like Netflix for eyewear? Yeah. Like when Netflix was sending DVDs back and forth to each other, like, ah, that's an interesting idea. And David kind of come up with the idea independently. And we both got together in a meeting and we're like, we should do Netflix. And he's like, I totally think we should do Netflix. And that ended up becoming a really important part of Warby Parker. Today, we have a home try-on program where you can try on five pairs of glasses for free. And that enabled, I think, people to feel comfortable, you know, getting to try them before they bought them online. Do you think you would have stayed at Warby
SPEAKER_01: Parker had you not had made the commitment to go back to Charles Bank? You know, I don't, I don't
SPEAKER_00: know. It was never like a thing that I actually had, never a real life scenario that I had to contemplate. Charles Bank's main offices are in Boston, where I grew up. And I always thought I'd moved back to Boston. And I think only after having the Warby Parker experience, did I realize that I actually might be happier doing something else professionally. Warby Parker like changed my life in that way. Yeah. All right. So you are at, you know, working back at this private equity
SPEAKER_01: firm. And Andy, you are, this is now 2011. You've graduated from school. You're living in LA. Were you guys, I mean, were you in touch just generally to kind of shoot the breeze about ideas? Yeah. You know, we would talk occasionally. He came out and visited at Stanford when they did
SPEAKER_04: this Warby Parker, you know, trunk show. And I did think that what Warby was doing was interesting and unique. So I kind of had that in the back of my mind that the idea of building a brand, launching it direct to consumer, obviously, that's not such a novel idea in 2023. But it was a pretty novel idea in 2010, 2011. Yeah. I remember we had lunch, I think in Boston, like 2010, early 2010.
SPEAKER_00: And I think at that point, it was kind of like a year into Charles bank. And I think I was like, hey, I think I'm going to do something else entrepreneurial at some point. I think you may have just graduated. I'm probably don't have the dates totally right. But you were like, yeah, I'm thinking about stuff too. So October, 2011, Andy, you get an idea for what would become
SPEAKER_01: this business we're about to talk about. Tell me, tell me how that would happen. Yeah, so I was driving home from work, I stopped at a drugstore, actually right around the corner
SPEAKER_04: from where I'm sitting right now on 14th and Wilshire in Santa Monica. And I knew I needed to buy razor blades because I needed to shave the next morning, I think at a meeting or something like that. And I had run out. And I went into the drugstore. The product was locked away. And still to this day, oftentimes, razor blades are locked away. And they're locked away because they get shoplifted all the time. And they get shoplifted all the time because they're extraordinarily expensive. So I'm wandering around the store looking for an associate to come open the case, which I'm kind of like, this is sort of an absurd experience. I'm not buying a $5,000 diamond bracelet or something like that. I'm buying razor blades. And as I'm waiting for this associate to come and unlock it, I'm looking at the packaging and the brands. And I think there was literally a picture on one of the packages of a razor blade getting shot into space, flying over the moon or something like that, which I understand what this brand was trying to communicate to me, which is like, yeah, you should pay an exorbitant amount because there's a lot of technology in this product. But it felt not resonant, a little bit inauthentic to me as a consumer. And then I get my razor blades. I go to the cashier. I check out. I pay $25 for four cartridges effectively, which I knew I was getting ripped off and getting taken advantage of. But you're sort of trapped is a pretty negative reaction. I could have bought sort of a cheap disposable product. But I'm taking a knife to my face. I care about quality. And so the light bulb sort of clicked for me that, hey, you know, there is a single player that really dominates this industry. And that was also true of Warby Parker. And one of the reasons why prices were so inflated is that there was effectively a monopolist. And so I immediately drew some similarities to in my mind from an industry standpoint to Warby. And, you know, I was thinking about it that night and sent a note to Jeff and said, hey, like, I just had this experience last night. Like, what do you think about, you know, shaving or grooming as another category that might, you know, be ripe for disruption? But that was the beginning of the dialogue and the idea. Jeff, what do you remember about that
SPEAKER_01: conversation about when you first heard this idea? Yeah, I was sitting at work and Andy G chats me.
SPEAKER_00: And it felt to me like the early days of Warby Parker when I was like, oh, I just want a pair of glasses, you know, that are great, that don't cost very much. And so I think like his experience resonated. And I was like, let's go look into this. Like, this is exciting. And I think, you know, the first conversation we had was I think about the brand and being able to deliver high quality product at good value. And then a lot on like direct to consumer. Like, we felt like that was an exciting channel and opportunity to go and get to engage with people. Like the one thing that I learned at Warby, or one of the things I learned at Warby was like, it was an amazing place to have direct dialogue with customers. And the cool thing about shaving is that it was going to be a repeat purchase. And so you're going to have multiple bites at the apple to get to know people and try to sort of tailor an experience to them, which at the time was exciting and I think would enable us to bypass at least to start a lot of the existing industry dynamics so that we could build something that was a little more consumer centric, at least as we defined it. When, when, so when Andy sort of
SPEAKER_01: brought this idea up to you this October of 2011, how quickly before you, you were like, let's, let's dig into this. We started digging into it pretty quickly, if I remember correctly. And I
SPEAKER_00: think we did a couple of things. I think one, we started to like truly understand the industry, you know, what is the structure of the industry? Who makes razorblades? How big are these companies? How profitable are they? And what was cool, what was interesting is like, you know, Gillette who had dominated the industry had sold to Procter & Gamble for like over $50 billion. And before they sold, they would report their, you know, kind of financials. They were like one of the most profitable CPG companies ever built. And so we kind of looked at that like, huh, they're making a lot, a lot, a lot of profit. Like, you know, the reason that they're up charging so much is because they're, they're so profitable. Like they, they really truly have figured that out in this market, how to just dominate and dominate. And then we started talking to a bunch of our friends about it. And I think they had the same feelings that we did. And so all of those things were kind of science to like, hey, there is an opportunity here. If you could make really high quality blades at good value, that was kind of like the, if. Andy, you were in LA and Jeff was in New York
SPEAKER_01: and you guys were just both kind of doing research from, you know, from, from where you were, and then you would kind of reconnect every couple of days. Yeah. You know, we, well, Jeff had access
SPEAKER_04: to like, you know, analysts and industry stuff through Charles bank. And I actually had access to some of that stuff through like the Stanford library database that I still had access to as a business school student. So we could get some of that stuff. Um, I remember we ran a consumer survey and, you know, we spent a lot of time just trying to sort of network to people that knew something about the industry and then just talking to, you know, our friends, guys in general and, and to, to what Jeff said, I think in some ways that last thing was the most confirmatory because when you talk to guys, everybody was like, yes, I have had that experience. I hate it, but yeah, this was like nights and weekends. I mean, as Jeff mentioned, I would probably spoke every night. I could never, I had, I had like a job, but it wasn't, you know, an all consuming job. And I was doing this, Jeff had like a really serious job plus warby plus this. I was like, I don't know when this guy sleeps, but, um, we, uh, we, we spent a lot of time on it very quickly because I think we were really excited about the idea. So it would be, I mean, it would be a year of research and kind
SPEAKER_01: of digging into this before you would launch Harry's, which we'll get to in a bit, but I want to, I want to spend some time on, on this sort of nine months to a year process, because you had a lot of questions that you needed answered. Why is it so expensive? How do you make this stuff? Um, and, and so first of all, I mean, the expensive part makes sense, right? If one company has such a huge dominance in the market, they can make slight alterations and changes to their razors and just charge a lot of money and people are kind of stuck. But there's another component here, which is from what I understand, making razor blades for shaving is very complicated. It's not actually as easy as many people might think super hard. Yeah, that's totally right.
SPEAKER_04: Right. And that was, that was the biggest thing that we didn't understand immediately going into this. Cause we're like, okay, Gillette's Monopoly, they charge all these prices, like, you know, and, and most consumer packaged goods are reasonably commoditized. There's probably a hundred manufacturers, you know, throughout the world that can make, or, you know, thousands that can make soap or hairstyling products or whatever. And razor blades, not so, uh, there is a ton of
SPEAKER_04: really sophisticated technology and intellectual property that goes into the design. And then even if you had accents to all of the IP and, and kind of design know how the manufacturing process is really complicated as well. And so we could build a brand and a, and a, and a customer experience that would be different and superior. But then we started trying to figure out how to make this product. Cause obviously you need a product to go with your brand and, you know, trying all these, you know, non-branded alternatives and researching manufacturers. And we were like, Oh, like these products are really bad. There's not a lot out there. Like this is going to be a real challenge. When we come back in just a moment, Jeff and Andy use Google translate to partner
SPEAKER_01: with a razor factory in Germany and come up with a name Harry's because well it's friendly. Stay with us. I'm Guy Raz and you're listening to how I built this. One of the reasons I love this time of year is that more and more fruits and vegetables are coming in season. And it's an opportunity to prepare fresh meals in my own kitchen. In fact, I learned so much about choosing seasonal ingredients when I took a class with chef Alice waters on masterclass with masterclass, you can learn from the best to become your best anytime, anywhere, and at your own pace, annual membership start at $10 a month, and you get unlimited access to every instructor, thousands of online lessons, exclusive content insights, and much more. There are over 180 classes to pick from everything from jazz with Herbie Hancock to self-made entrepreneurship with Sarah Blakely and new classes are added every month. The Alice Waters class, for example, teaches the art of home cooking with amazing insights on building a home pantry and essential tools for the kitchen. Get unlimited access to every class. And right now, as a how I built this listener, you can get 15% off when you go to masterclass.com slash built. That's masterclass.com slash built for 15% off an annual membership masterclass.com slash built. Once a company knows what they do best, where do they go from there? Well, if you're Burrow,
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SPEAKER_00: mentioned pretty quickly that like there's a significant difference between, you know, kind of high performing products in this market and lower performing products in this market. And in order for us to build a brand, we had to be in that kind of high performance tier. Otherwise, it just wouldn't work. And were most razors made? I'm assuming probably China, Germany, Korea? No,
SPEAKER_00: there's a significant concentration, probably relative to lots of other industries of manufacturing in North America and in Europe. And the reason is, one reason is because a lot of this stuff is highly automated. You're talking about machines that have to make little grind a perfect edge on little blades, millions and millions and millions of times over with like zero deviation. Otherwise, you're going to feel it in your shave experience and then slot them into cartridges with like immense precision. And so I think where the industry grew up was in places with really, really strong engineering cultures. And the dynamic in the industry, which is interesting, is that most of the brands are fully vertically integrated. They do everything. Yeah. Gillette owns all their own manufacturing. It's harder to find like a co-packer, as you would say in the
SPEAKER_01: food industry. It's very, very hard. And so when we started, that was our biggest concern. And then
SPEAKER_00: the other thing we were really concerned about was even if we could find quality razor blades, how could we make sure that they were unique and distinct to Harry's? Because our concern is like, let's say we scour the earth and we find the one place that could make amazing razor blades for us, which we ended up thinking we actually did. Then we have to make sure that those people don't just turn around and sell the exact same razor blades to Larry's and Barry's and whoever, because then what's going to be unique about us? And what about you, Andy? Was it also just all-consuming?
SPEAKER_01: You became really convinced that this could work. I mean, you mentioned that there were a few moments where you thought, okay, we've hit a roadblock and maybe this isn't going to work. Yeah. I mean,
SPEAKER_04: it was all-consuming. And I think there was kind of a trifecta of factors as I was getting increasingly excited about the idea and also trying to make a rational decision of like, all right, do I want to make this jump? Do I want to spend all my time and energy on this and take that level of career risk? But in Jeff, I had somebody who I respected tremendously. Obviously, he had the Warby Parker experience and we'd worked together, but we were also close friends. It felt like almost the perfect match for somebody who you would want to start a business for. And yeah, the thing that really the only thing that was giving me pause was this, hey, can we make a product that actually works and performs and is sufficient quality? Yeah. Given the stakes involved, you're literally taking a knife to your face and it's a pretty important experience, probably the most important grooming experience for guys from sort of a both practical and emotional standpoint that if the product doesn't perform, nobody's going to come back and buy your product again. They're going to be resigned and go back and spend $25 on Gillette. And that's the model that had worked for Gillette forever.
SPEAKER_01: All right. So you guys are digging into this and you're looking for some partner that could manufacture blades that would be somewhat different. And so how did you identify what that would be? I was reading like a shave blog one night written by like real shave enthusiasts who tend to use
SPEAKER_00: double-edged blades. That's single-edged blades that you can blade that you can...
SPEAKER_01: A single blade that goes into a safety razor.
SPEAKER_00: And you can use both sides.
SPEAKER_00: Yeah, use both sides. Exactly. And they were talking about this factory in Germany called Fine Technique that they said made some of the best double-edged blades in the world. And I was like, huh, that's interesting. German factory. I wonder if they make anything else. And so I literally just like a Google, you know, look them up online. And they made more advanced razor blade products. They made three blade and five blade razor systems. So you have a cartridge and it connects into the handle. The next step was for us to try to get in touch with them. We ended up just like literally reaching out cold. And I think maybe sent them an email and I was like, hey, I started this company called Warby Parker and we've had some success in eyewear. And we think there's an interesting opportunity to apply a similar model to shaving. But in order to do that, we need to find a partner who can make us an amazing product. And then we said, OK, before we move forward, send us, would you just send us some to try? And so I think I literally remember getting a box sent to New York. I got home, immediately drive the product, walked to the bathroom, like saw my wife. I was like, these are good. Like these will work. These are good. All right. Let me just ask you about the razor blade technology for a moment. You mentioned
SPEAKER_01: that you first heard about them because you heard they made a great double-edged single razor, right? Which is like that old school, like my grandpa used to use. And some people still use them, especially people who get irritated skin. Totally. And then over the years, these three blade systems and then four blade systems and now five blade systems were introduced, which is what many people use. These cartridges you attach to a handle and it's got literally four or five blades. And so it like shaves under the skin. It shaves so close, right? It like actually takes a micro layer of skin off, basically. Yeah. It also just covers like more surface area. So they're absolutely superior products in terms
SPEAKER_04: of shave performance, like quality and comfort relative to an older style. And so in the grinding process, which is really where the secret sauce of razor blade manufacturing comes in,
SPEAKER_04: it's the actual grinding of this very thin steel to get that edge and get that shape is a very hard process to perfect. And to get billions of these things made at very, very high velocity in a consistent way is really where the complexity of the process comes into play. Were they using like special steel, for example?
SPEAKER_01: I think ours comes from Sweden. Mm-hmm. Yeah. So very sort of technical manufacturing of the steel itself that we sourced.
SPEAKER_00: Yes. There's special steel. There's a process effectively to heat and cool the steel,
SPEAKER_04: which is what kind of makes it malleable first, which has to be done at extremely high temperatures, extremely low temperatures. And a ton of precision in how that happens in these giant ovens that are literally like the length of a football field. And then the thing that kind of blew my mind when
SPEAKER_00: it went to the factory the first time is through this heating and cooling process that Andy mentioned, you actually change the metallurgical composition of steel. You liquefy it in the heating process, and then you cool it to harden it. And you actually need a harder form of steel to put the edge on that Andy just mentioned. And so we actually change the steel itself, even if someone was going to source the same exact steel. The manufacturing process, the first step of the process actually is to change the steel itself such that you can then grind this edge in a way that's going to sort of work well. It's like using a diamond to cut a diamond. You kind of have to do this. Yeah. Yeah. I guess so.
SPEAKER_01: You guys get these samples from Feintechnik, this factory in Germany, and I guess you decide we got to go there. We got to go check it out. Yeah. I think the first time we went was January of 2012.
SPEAKER_00: Yeah. I think we got the product right before Christmas or maybe right around Thanksgiving.
SPEAKER_04: What was the goal of that trip? Well, as Jeff mentioned, for us, what was going to be important was they had sort of a catalog and they would have just sold us off the shelf product, but we wanted to build a brand that looked and felt very different, that had a more elevated aesthetic. And so it was going to require some level of customization. So we needed them to buy into doing that for us. Sorry. When you say customization, like that the cartridges would connect with your
SPEAKER_01: handles? Cartridges would connect with our handles, that we could make our own handles that had a very
SPEAKER_04: different look and feel and design, that we wanted the head to bend in a specific way that we thought was going to be best for the consumer. We wanted different colorways, different colors, different different colorways. So things that would make our product look and feel and in fact, be unique and different. Tell me about your impressions. I mean, you get to Germany. It's a tiny town. It's like,
SPEAKER_01: I looked at it on the map. I think is it in the former East Germany? Yeah. Yeah. It's very rural.
SPEAKER_04: It's this very small town where there are a few manufacturers there, but Fine Technic was kind of the biggest employer and biggest came in town. And yeah, I remember getting there. It was little bit cold. It was cold. It was cold. It was cold. It was cold. It was cold. It was cold. It was cold.
SPEAKER_00: We were like, what are we doing here? And I remember we got there and it was so cold.
SPEAKER_04: I mean, the name of the town where the factory is, is, is Icefeld, which literally translates to Icefield. If it gives you any, any sense for the, for the environment there. So when you get
SPEAKER_01: there and you talk to them about this vision, what's their response? I mean, you guys were, you know, a couple of young guys out of business school. They probably had no idea what Warby Parker was. I don't know if that impressed them. And they were happy to just sell you razors or,
SPEAKER_01: but you wanted something a bit more complicated. Yeah. I think it took us time to try to build some
SPEAKER_00: credibility there. In the early kind of days, they would, we'd be emailing with them. They would email to each other in German. And then we would obviously look at the, all this German back and forth between them and put it into Google translate. Like, what are they talking about? And like, they would literally like in their emails being like the American internet boys would like to order, you know, XYZ from where they'd like us to customize the razor cartridge in this way. And we're like, Oh my gosh, they're calling us the American internet boys. But, you know, I think, I think that through a set of, a long set of interactions, again, like over many months, we tried to convince them that like we were legit. And then we committed to buying a million razor blades. Like we signed a contract to buy a million razor blades, which for them at the time was like a meaningful number. And that I think also indicated that we were legit and we gave them a forecast based on kind of some of our early trajectory, Warby and some kind of modeling that we did that said, yeah, the million could turn into many millions pretty quickly if we can get this thing moving. And so I think that was helpful for us in terms of building credibility, but that definitely took time. What, but I mean, when you made a commitment
SPEAKER_01: to buy a million razors from these guys, did you have millions of dollars at that point to give to them? No, no, no. Because at that point you had not raised money yet. Right. So we had
SPEAKER_00: to come back to the States pretty quickly. And yeah, at that point I told the folks at Charles bank, I was leaving, we were on the hook for a million razor blades. So we needed to make this business come to life. Yeah. It was $300,000. I remember that it was like 30 or $350,000,
SPEAKER_04: like 35 cents a cartridge, I think. No, it was more. It was like 500 or more. Was it 500? Oh,
SPEAKER_04: I guess our prices came down over time. Yeah. The Euro cents versus dollar cents. And so we had to
SPEAKER_00: figure that all out and we were like, you know, what do we do? Like, how do we figure this out? And so, yeah, we wrote a business plan. We had a contract, like literally a physical contract and we had good investor relationships with early stage venture investors, you know, because of Warby Parker. Warby Parker at that point had raised a couple of rounds of capital and had great investors. And so I knew some of them and some of them I got introductions to, but we had a bunch of Warby Parker investors who, you know, in retrospect, are going to do great on Warby Parker, who invested early at Warby Parker, not invest in Harry's. And so it wasn't like everybody was rolling out the red carpet. Like we still had to, you know, go out and do our best to get that capital. And yeah, we were very fortunate to have a bunch of folks who believed in us enough to want to do it. Before you, at what point do the two of you, I mean, obviously you've got
SPEAKER_01: traction now, you know, it's the summer, you know, almost the fall of 2012. And I think that's when the two of you left your day jobs and you officially founded Harry's in September of 2012. I mean, when, first of all, I mean, when did you decide? Do you remember when the two of you said, we're going to go for this, quit our jobs, and we're going to start a business? Like, it must have been a few months before that. Well, I remember a distinct, so we went back to Germany in May of
SPEAKER_04: 2012. That was our second trip. And that's when we actually negotiated and signed the contract. And so I remember being in the rental car with Jeff driving back to the airport, and kind of looking over at him and be like, we're doing this, right? Because like, I'm going to go quit my job. And so I'm like, yeah, yeah, we're going to do this. So I'm like, okay. So that, and that at least for me, was sort of the point of no return in the moment in time when, you know, it was going to go from a nights and weekend adventure to a full time endeavor. I don't know if that was it for you, Jeff. Yep, that was it. Ride back from the factory in May after we had a deal. Wow. Okay. And the
SPEAKER_00: deal was to buy a million razor blades. Okay. So you were going to buy a million razor blades.
SPEAKER_01: A million razor blades. Okay, so you had to go back and, and, and at that point, did you have a name for this potential business? I'm not exactly sure when we when we had Harry's as the name, but
SPEAKER_00: I think we were at least it was around then. How did you come up with a name? Is there a person
SPEAKER_01: named Harry? Yeah, so there's a grandfather for your mind named Harry, who we liked, we liked the
SPEAKER_00: idea of shaving being passed down from grandfathers to fathers and fathers to sons as like a general idea. So we, we wrote down all of these kind of like, people in our lives who were kind of grandfather father figures as like a beginning of inspiration. Then we kind of saw Harry's like, we really call a shaving brand Harry's and we both kind of laughed. It was like, you know, funny in that way. And then when we started talking to people about it, we're like, you know, what do you think about calling it Harry's? They're like, Oh, yeah, like my uncle Harry, or like my neighborhood bar Harry's like, and we're like, that's what we want. Like, that's the the feeling we want. And then we felt like we could pair it with kind of warm masculine colors, like navy and olive green and burgundy to make it kind of, you know, build this kind of warm, but but sort of design centric world around it. I forget the references we were thinking about at the time, but like, we liked, you know, Barney's or even Fred Segal, you know, they were just like, kind of these like, Fred elevated, but warm Fred and Barney. And so, yeah, we felt like that was a good kind of place. In contrast to the other brands in the category that we felt like maybe we're trying to tell guys to be the best and perfect. And you know, the traditional kind of shaving, kind of like ads of a guy with a six pack looking off into the distance with like a perfect jawline shaving one side of his face is like a woman runs the other like, that was kind of like what was out there and maybe what wasn't as appealing to us. And we just wanted to be like, this kind of like honest, open, warm, approachable, friendly brand that's like, we don't actually we're two guys just like you. And what about I mean, you mentioned colors. I think of orange or
SPEAKER_01: that blue as Harry's colors. Were those colors from the beginning? Yeah, so we were sitting
SPEAKER_00: around with this design agency that we work with. Today, they're called mythology. At the time, they were called Partners in Spade. One of the folks there looked at us and was like, you guys should make razors that look like traffic cones. And we're like, what? He's like, yeah, traffic orange, traffic cones, just try it. It'll be cool. And we're like, okay, like, why not? And so we mocked up a sample of an orange razor that we looked at, like this looks cool. And then we started to meet with people and everyone would be like, what's up? This orange one looks awesome. Like I love the orange. And over time, we're like, huh, there really is something to orange. Orange was our number one handle when we started and it totally surprised us. All right, so you've got the name and you've got this commitment to get the razors made,
SPEAKER_01: but you've got to raise the capital to pay for them and also to make the handles and then to start this business. So you, Jeff, had had obviously experience raising money with Warby Parker. How much initially did you guys need to raise? I think we ended up raising $4 million
SPEAKER_00: in our first round. Now it sounds quaint, you know, there's like $10 million seed rounds,
SPEAKER_04: but at the time it was actually a pretty big seed round. And people were like, well, you know, what's minimum viable product MVP? We're like, oh, there isn't really like an MVP here. Like, we need this thing to work out of the gate. Like it's a razor. We need the product to be good. We need the inventory. Yeah, I think we set out trying to raise three and wound up raising four, something like that. And how did you guys split the company between the two of you? Was it just,
SPEAKER_01: you know, 50 50? Simple. I think that's actually been really important for us too. Like having the
SPEAKER_00: same economic incentives all the time, same ownership, like it's just good, you know, equal partnership. That's, I'm really glad we did that in retrospect. All right. So you guys have
SPEAKER_01: this money to launch. And did you, um, I mean, by the end of 2012, you've, you've, you've raised the money and you've got a plan here. So what was the plan? What was the idea? I know you launched in 2013, March of 2013, but what did you do to prepare for that launch? Did you hire people? Did you, what happened during that time? We, so we raised money over the summer
SPEAKER_04: of 2012. I quit my job like around Memorial day. Uh, and I think Jeff stayed at Charles Bank through labor day. We had all these designs. We had to go manufacture the product and ensure that and ensure that, you know, we needed packaging, we needed the handle, we needed the cartridges, we needed to assemble all this stuff. We needed a website. Um, and we needed some people to help us do those things. Neither Jeff nor I had really operated before. You know, Jeff had a little bit of experience with Warby Parker, but you know, and actually one of our, our, our biggest, earliest investor, they were like, look, we'll back you guys, but you need to find somebody that actually knows what they're doing. Like from an operational standpoint, you guys seem smart, but, but you've never done this before. And so, um, they introduced us to this guy, will who's still our COO to this day. I would say that, you know, Jeff spent more of his time and energy and what he's really, really good at, you know, sort of brand and design and consumer and marketing. So he was really leading the charge on a lot of that work. And a lot of those decisions, I spent a lot more time and energy, uh, on the operations and setting up the manufacturing partner. And so that was sort of how we divided and conquered things. Um, through that, I guess it was about a nine month period from when we raised capital to when we launched in March of 2013. I mean, the, and the idea was, was what at the beginning it was to just, it was to,
SPEAKER_01: was it to be like a, a monthly subscription? Was it to be, uh, selling, you know, just razors and blades a la carte? What, what was, what was it going to be?
SPEAKER_00: We always thought of Harry's as a brand first. And so the way that we started, uh, was not on subscription actually. Um, but we, we made these shave sets. Um, they were a razor. We still have them today. A razor with a handle on it, plus two additional handles and a, and a shave cream for $15. And were you, were you making the, what was it branded Harry's shave cream from the beginning?
SPEAKER_01: Okay. Yeah. Yeah. Harry's branded shave cream. So, um, what we did is we tried to find the labs
SPEAKER_00: that made the most prestige products that we could and the chemists. And then we were like, okay, can you just make us that, but we're not going to charge $20 for it. We're going to charge eight, um, and try to make that kind of part of the Harry's brand identity, which is like, we can deliver you kind of great value across the line, prestige products at mass prices.
SPEAKER_01: I mean, so it's not like one product, one co-packer, one manufacturer. There's a lot of different suppliers here. That's right. And as Andy mentioned, kind of while I was dreaming up
SPEAKER_00: ways to sell stuff, he was diligently with our team, figuring out how to bring all that together.
SPEAKER_01: And by the way, where were they all put together? Were they, were they all brought together to like a central warehouse somewhere and packaged? We actually had the razor blades shipped from
SPEAKER_04: Germany to China, where they were assembled onto the handle and put into the packaging there. So there was like an assembly operation in China. Then those were shipped over to this 3PL in Connecticut. Our shaving cream and shaving gel were manufactured at a facility in New Jersey. We had another supplier in New Jersey that was making the, these boxes and these inserts that the initial kits would be assembled into that would ultimately be shipped to the customer. So yeah, it was a crash course in supply chain. Yeah. So basically, and when you were ready to
SPEAKER_01: launch, how many people did you have full-time as full-time employees?
SPEAKER_00: Yeah, we had like 12 people as full-time employees and turned the website on, got a bunch of great press right at the start and kind of, we were off to the races. How did you do that? Did you, did you hire the same PR firm that, that Warby Parker had used?
SPEAKER_01: Yep. Yep. We hired the same PR. We actually worked with two PR firms and leveraged every
SPEAKER_00: personal relationship we had just to try to get, yeah, we were like literally running around New York for the few weeks before launch, just trying to meet with as many people as possible to tell them about Harry's before Harry's actually launched. In that process, we were getting incredible feedback from people on the brand and how they thought about it, how we should talk about it. And that was great. And so what happened, I mean, when you launched,
SPEAKER_01: you already had press. And so did your, I mean, did you guys have tons of traffic right away? Yeah, we were kind of blown away. There was this great, still is this great men's blog called
SPEAKER_00: UnCrate and I'd reached out to the guy who ran it. I know that blog. Yeah. And he never responded. So I was like, Oh, I guess he didn't, you know, didn't want to talk about Harry's. And then all of a sudden, right after we launched, we sent him a sample right after we launched. I just got an email from him that says, hope you have a good server, son. And then he posted the link to the UnCrate article and like our whole website like blew up. I was like, Oh gosh, we immediately just started to see like a ton of demand. And I think what within like a couple of weeks
SPEAKER_01: or maybe a month you sold out of everything that you had bought that you ordered. Yeah, we had more coming, but for a little while we were sold out and we started this thing
SPEAKER_00: internally that we weren't going to shave until our customers were shaving. So we were like walking around three weeks after launching this stuff with like, you know, 10 day beards with people being like, what's wrong with you? Well, we're trying to get in stock, you know, and once we do, we'll shave ourselves. Now this manufacturer, Fine Technique, I mean, who is the
SPEAKER_01: manufacturer? I mean, were they able to, I mean, given the demand, right? And you had ordered a million blades from them. But each kit was coming with three to five blades, I guess. Three, yeah. I mean, were you confident that they could ramp up production for you? In the short term? Yes.
SPEAKER_00: In the medium to long term, we knew that we were going to need many millions a month.
SPEAKER_04: Moreover, while the product when we launched, we thought was really good, we immediately, I mean, we were already, but one of the beauty of, you know, having direct relationships with customers is that we immediately started getting all sorts of feedback, which like, oh, we I like this, but could you add that trimmer blade thing on the back? Could you, you know, make the thing more flexible? It's, it would be really difficult to meaningfully inflect product improvement without actually owning the manufacturing process. So from even before we launched, we're like, we're gonna, we're gonna have to own this thing at some point, maybe not the whole factory, but we need to own like, we have to be vertically integrated. So, so it was clear to you that one solution could be
SPEAKER_01: to build a product line in their factory that would be dedicated just to Harry's. And, and that was an op, that was a potential solution. Did you propose this idea to anyone?
SPEAKER_04: Yeah, in some ways, that would have been the logical place to start. So we did have that conversation with them. And what what wound up happening is the conversation moved from, well, we could, you know, try to have some sort of joint production line. Or, you know, we could buy this thing outright. Wow. I mean, this is like two months into your business where you're having
SPEAKER_01: this conversation. I think some something like that. Yeah, it was a little bit crazy. And, you
SPEAKER_04: know, I actually remember one of our investors who invested personally in our seed round, his name's Lee, you know, we were talking about this, the idea of vertical integration with him in the seed round, he was like, well, how much money would it cost to buy the factory? And I was like, I don't know, probably like $100 million. And he was like, well, you should probably launch the brand first and see if it works. But if it does come talk to me. So I think Jeff and I sort of like took that to heart. And yeah, we we said, well, you know, probably didn't intend to try to go find $100 million to buy a factory two months into our company's existence. But the time is now. So let's, let's go see if we can make it happen. When we come back in just a moment, how Jeff and
SPEAKER_01: Andy deal with the inevitable angst of marrying an old school German company with an upstart American one. Stay with us. I'm Guy Raz and you're listening to how I built this.
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SPEAKER_04: legs cut out from underneath us and particularly, you know, the risk of, you know, Gillette or somebody like that buying this thing and basically putting us out of business. And so we did not want if we could avoid it, like a full blown competitive sales process. So time was of the essence to try to preempt that. Yeah, so we started talking to them and outletting what a deal,
SPEAKER_04: you know, could look like and then had to go figure out how to find $100 million to finance it. So how did you, I mean, how did you do that? How did we do that? Yeah. Well, we called Lee,
SPEAKER_04: who, as I mentioned, had invested personally in our seed round. And he was at a hedge fund, Tiger Global, and called him and said, Hey, Lee, remember about that factory thing we chatted about back in December? Well, we launched like the business is doing well. And there might be an opportunity to actually go buy that. And he said, Well, okay, cool, come up next week and talk to me and my partner about it. So we went up to midtown to meet with him and his partner and pitch them on this idea. And we had a bunch of other great existing investors. And so I think with like,
SPEAKER_00: you know, Lee's excitement and support that helped us to start to build like what, you know, a syndicate essentially of, of investors who who would want to do this with us. And so we were able
SPEAKER_04: to get commitments for $65 million of equity. We then went to Germany to raise $35 million of debt, which was a whole different challenge to convince these like very conservative German bank lenders to lend us the money to go buy this factory. The funniest thing about the negotiating process
SPEAKER_00: was that we we didn't have a conference room in our office. And so Andy was sitting in like with like a makeshift table in the stairwell next to our office doing all of this, you know, on the phone with Germany with papers are everywhere like for for months on end.
SPEAKER_01: All right. So now, I mean, once this is, this is done, I mean, you now own a razor blade company, I want to ask you about so many things about it. But just I mean, essentially, this makes you what you know, it's a term we hear a lot on the show and elsewhere, it's vertically integrated. Now you own, you're not dependent on a supplier to make your, your product, you make it yourself.
SPEAKER_04: Yeah, we went, you know, from a, you know, you know, a sort of technology enabled startup, you know, that was doing, I don't know what we're doing at the time, Jeff, you know, five or $10 million of revenue on an annualized basis to like a fully vertically integrated global consumer packaged goods company overnight, which was both exciting and daunting. I distinctly remember, you know, they put us up effectively on like milk crates on the factory floor and gathered all the workers to like announce this and to introduce ourselves and we're looking out there at 300 or 400 German factory workers and it was definitely like an oh crap moment of, you know, like it was exciting, but the other time was like, what did we get ourselves into here? And now you went from
SPEAKER_01: 30 people who worked for Harry's to having 420 additional people who worked for this company.
SPEAKER_00: Yeah, and we felt a lot of responsibility to them. It felt like the whole town of Eisfeld was there hearing us talk about the future of this factory and like, we better make it work. I think in retrospect, we were slow to really, yeah, say, hey, this is Harry's, you know, we've
SPEAKER_04: got a certain set of values, we've got a certain way of doing things because, you know, they were bigger than us and we didn't want to upset the apple cart and we didn't know, you know, like, we're not manufacturing experts, you know, we're trusting them to run the factory, but we did need to integrate in some way, shape or form. And what about just cultural differences, you know,
SPEAKER_01: what were some of the challenges that you had to work through?
SPEAKER_04: We might need three hours for my German American, you know, cultural adventures. Probably the biggest difference that we had to work through is that, you know, we were a fast moving entrepreneurial culture, like test, learn, iterate, like two steps forward, one step back. And the Germans perceive that as just these guys have no idea what they're doing. It's complete chaos, it's a disorganized, disorganized, but, you know, the Germans are a lot of planning before doing, and the American perception of the German team was they're not doing anything, why they're not working, they're moving slowly. And of course, in a manufacturing environment, like you need to be more planful, you can't just like test and learn things on the fly on a website, you can do that stuff. So it was, it was challenging. Now that you owned this factory, I mean, there were competitors
SPEAKER_01: out there, and there are some competitors who started even before you like Dollar Tree, some competitors who started even before you like Dollar Shave Club. And, you know, obviously the big ones like Gillette and Schick. Now that you owned your own production facility, presumably it puts you in a slightly different position than say, like a Dollar Shave Club, which I don't think owned its own factory. Right. I think that did differentiate us from others. I think we sort of at one point said we
SPEAKER_00: were kind of the only truly vertically integrated company in the shave industry, and that we literally grind steel and make razor blades and deliver them to your door visa vr own kind of ecommerce platform. And having that whole loop from the customer back to the factory was like an area of advantage for us, I think at the time, as Andy mentioned, we had all these ideas from customers and how we want to improve the product. And now we actually had the capability to go back to the very source and do that directly. I wonder with respect to your competitors, I mean, you know, sometimes people in the
SPEAKER_01: show say, Well, I didn't I don't pay attention to my competitors. I don't. But I'm not sure that's necessarily a good thing. I mean, I think that sometimes it's important to look at what your competitors are doing and to have a competitive sensibility to feel like you really want to beat them. And did you guys have any of that? It was an interesting dynamic because Gillette globally had, you know, 70% market share, like
SPEAKER_04: truly insane. And, you know, some people looked at that and said, My gosh, like, you know, that's crazy to take those guys on like how you know, and they're owned by Procter and Gamble, the biggest baddest CPG company on the planet. And I think for us, it was always helpful to sort of have this, you know, there was like a David and Goliath narrative that I think played into our brand, and that played into, you know, customers getting behind us. And I think we paid a lot less attention to Dollar Shave Club or, you know, other upstarts, like what everybody else was doing was sort of immaterial at the end of the day relative to what Gillette was doing. Tell me how you, I mean, so essentially, you got this, you've got your production facility, and
SPEAKER_01: I think you guys really went, maybe aggressively isn't the right word, but you really went for it in terms of raising capital for the next, you know, couple years. And there's debate about this right now. A lot of people, there are lots of people who are saying, Well, you know, the last 10 years, this idea of growth, growth, growth, growth, maybe you're not the best approach. Other people say, Well, but that's, that is the best approach. You've got to raise a lot of money and grow because otherwise, you won't be able to establish a foothold. Tell me, talk to me a little bit about the strategy of raising money and raising more capital. What I mean, I'm assuming it was to fuel faster growth. Yeah. So one of the things that happened at Harry's really started
SPEAKER_00: beginning in late 2013. So call it six months after we launched, and then through 2014, was that we started to really learn how to market to people online and get them to come to our website and started to grow in ways that we had, you know, not anticipated. And so, you know, in 2014, I think our plan was to do like $10 million of revenue or something. And by like June, we'd already done $10 million revenue, and we were going to on the way to 20 or more. And then at the same time, we were recognizing we were running out of factory capacity. And, you know, the industry was starting to change, like, as you'd mentioned, Dollar Shave Club and Launch Gillette was out there changing, like, it was just a dynamic picture. And so we're like, Okay, we think this is an important time for us to actually continue to grow to really establish ourselves as a strong brand in the space. And as a result, we ended up raising a fair bit of capital, I would say at least half of that capital, those kind of early rounds of capital went to Germany to, you know, sort of build out the factory, the plan, I remember sitting there, gosh, this is probably 2016, 2015, with a reporter, who's asking us the same question. And I was like, look around, there were like cranes, building new buildings and dropping in heavy equipment, like everywhere, I was like, this is where all the money's going. So as you mentioned earlier, getting people to
SPEAKER_01: try something once is one thing, but then getting them to, to try it again and again is another thing. And part of that was, obviously, the quality of the product, and the design and the price point. But did you also see, you know, Gillette lowering its price to start to match what you guys and some of the other competitive companies were offering at lower rates? Yeah, I think actually, when we really started to sort of have competitors take notice,
SPEAKER_00: was after we launched a retail. Yeah, 16, you weren't Target, right? We launched a Target. We met Target in 2014, we spoke at their design, like design month, and we liked them. I mean, I think that what struck me when we first met them was that they talked about their customer as a guest. Like, we feel like if, I don't know, we're not sure about Harry's, but if the guest tells us they want Harry's, then we should be serious about giving the guests some Harry's. And with Target, and then we launched at Walmart in 2018, and then we had to kind of work with Target to try to bring Harry's to life in their stores in a way that would be unique and sort of exciting and compelling to us and in an aisle that, you know, was a source of frustration for lots of guys. It was one of the reasons why we started the company. And so we didn't just want to kind of do the same thing as everybody else. And so when you started to sell in Target,
SPEAKER_01: you started...this is when you started to see Gillette change your response. And what did you see? Yeah. When we launched in Target, we took over 50% market share of the category at Target
SPEAKER_04: overnight. And so whoever was sitting in Cincinnati at Procter & Gamble when that report came through probably fell out of their chair. Yeah. That's crazy. I mean, it blew all of our expectations. I mean, it blew Target's expectations away. It blew, you know, our own personal expectations away. It certainly sent us into a bit of crisis mode as it related to supply chain and manufacturing razor blades. And I think it was that moment probably that some of the traditional CPG players got religion that like, hey, these aren't like e-commerce startups. Like these are serious consumer brands that are threatening our core franchises. And yeah, that's when you start to see much more aggressive responses in terms of price action. Yeah. And I honestly feel like that was one of like the greatest victories that we've had since we started
SPEAKER_00: Harry's. Like we got one of the biggest companies in the industry to drop their prices, to be more consumer centric, to try to sort of engage with us. And on the marketing side, I think the place where we went public the most was they created a campaign. It was to the song, Welcome Back. And it said that most of the customers who try Harry's leave Harry's. And that just wasn't true. Like we had all the data of our direct to consumer business. And so we sent them back a letter with literally all the data. We're like every cohort of customers since the beginning of Harry's, the majority of customers who try Harry's stay with Harry's. They didn't really respond. And so we eventually just took that letter and made it public. It was written by our lawyers, but it was kind of funny tongue in cheek. I think that's the point when our customer base really came to our defense and said, okay, like it's kind of messed up that these guys are picking on you. And did Gillette back off or? They just stopped running the campaign. Yeah, they stopped. I think they realized that them as the Goliath picking on the David was
SPEAKER_04: not a good strategy. One of the things that I'm curious about, something that you did, you know, around 2018 is
SPEAKER_01: you establish an incubator, you called Harry's Labs. And I know it's changed somewhat a little bit from what it originally was designed to do. But essentially, it's an accelerator, right? You've developed products in house, and then you've purchased kind of small brands and made them bigger. But before we talk about the details, what was the idea here about diversification? Because at some point, right, there was going to be more competition in this space, and your market share might, you know, might have stalled out. So was that the idea behind creating an internal incubator?
SPEAKER_00: Yeah, I think that was part of it. You know, Harry's was doing great, but we were kind of looking at this thing, okay, how big could Harry's really, really be over time, even if we got to, you know, huge market shares everywhere, like, there's going to be some cap on our growth and shave. And so if we thought about it, we thought, hey, like, you know, if we could increase our addressable market, not just to kind of men's grooming and personal care, but to all of CPG, that's a pretty significant sort of shift in the opportunity set that we have. And then we're starting to build good relationships with some of these great retailers like Walmart and Target and, you know, later Kroger and grocery and Meyer and Costco and CVS and Walgreens and all these places. And they're excited about this. They're excited about us building brands online that are kind of modern brands that have interest and awareness around them and then coming to retail eventually. Yeah, you know, the vision really evolved from, hey, we're going to build, you know,
SPEAKER_02:
SPEAKER_04: a next generation Gillette or a next generation Old Spice, you know, from a Harry's brand standpoint to, hey, we're going to build a next generation, you know, Procter and Gamble. Like we want a family of brands. We had, you know, an idea for a woman's brand in the space. So that was kind of a logical place for us to start. So while you're, you sort of launched the lab and begin to incubate ideas, I think the first one was
SPEAKER_01: Flamingo, which is a woman's razor skin care brand. You are approached by, you know, Edgewell, which is a company that I think that owns Shick and tons of other, you know, Banana Bode and Hawaiian Tropic, a bunch of different brands. Essentially, they decide, they offer to acquire you. In 2019, it's announced that they would buy Harry's for close to $1.4 billion in stock and in cash. I'm assuming that, you know, now you're, you know, roughly
SPEAKER_01: six years in, your investors may want to return. And was that the thinking behind the acquisition, agreeing to it? It was certainly a benefit of doing the deal, but it wasn't. It was a little bit more
SPEAKER_04: serendipitous than that in that Edgewell, as you mentioned, owns Shick. And Shick historically had been the number two to Gillette. And Gillette is the 300 pound gorilla. And we thought it was potentially compelling to combine with Shick and have a more formidable competitor vis-a-vis Gillette. And, you know, we were actually, you know, Jeff and I were talking about like, hey, could we buy these guys? I actually talked to a couple of private equity firms about, because Edgewell was a public company, but a reasonably small public company, about trying to buy them, take them private and fold it into our business. That was actually how it started. And we could never get the math to work, to take them private, but it's a small industry. And so we got to know them a little bit through that process. And yeah, at some point they turned around and said, well, why don't we buy you guys, but we'll just give you the keys. You guys were going to be the co-presidents of Edgewell.
SPEAKER_01: Yeah, in North America.
SPEAKER_00: Yeah, it was very much fine technic all over again in that sense.
SPEAKER_04: Wow. Because while they were acquiring us, it was a reverse merger in practice. And yeah, it was the same level of skepticism of like, hey, do these guys, you know, Jeff and Andy, do they value, you know, what we bring to the table there? You know, they've got their young, fancy New York, you know, startup workforce, and we're out here in suburban Connecticut, you know, doing things more traditionally. And so there was a lot of, you know, trust building and, you know, the same as Jeff mentioned, we were going to need our team to stick around to make this work, but we were also going to need their team to stick around and make this work and figure out how to do that. And so, you know, we're going to need to make this work and figure out a way to bring these cultures together.
SPEAKER_01: So you were really investing a lot of time and energy into this because, I mean, obviously, you wanted it to go well. Yep. But ultimately, the merger got blocked. And not by you or Edgewell, but by the Federal Trade Commission. They basically said that it was like, if you guys were one company,
SPEAKER_01: it would stifle competition, like it would be an antitrust thing. Yeah. So do you remember the moment when you heard about that?
SPEAKER_04: Yeah, the actual moment was not a surprise because as things continued to progress, it got clearer and clearer that we were fighting an uphill battle. And so, you know, while it wasn't a surprise, it was certainly still, you know, a bit of a gut punch. And, you know, we felt like we had sort of let our team, you know, down this path and on this journey and, you know, kind of had to then mea culpa and pick ourselves up and get everybody remotivated around, you know, a standalone vision and path.
SPEAKER_00: It started, I think, with Andy and I apologizing. So as Andy mentioned, we had to do this mea culpa, which was important for us to say both to each other and to the team, like, hey, you've trusted us on this journey. We're really sorry that like this happened the way that it happened. We didn't think it was going to happen this way. And we know that it's caused you all a lot of work. We still believe that we have a really compelling and exciting vision for the future. This whole thing about NextGen CBG, in some ways, it's going to be easier and better for us to just build these brands and scratch ourselves or buy them. And actually Andy and I were talking about this the other day. I remember a couple of folks coming up to us. Like people have been at Harry's for a long time and being like, just so you guys know, we're in. Whatever you need, we're in. We got you. Like, we're going to make this thing awesome. And for us, that was like so uplifting and inspiring. And investors too, just calling us and be like, we got your back.
SPEAKER_01: And then three weeks later, COVID starts. Nice one-two punch for us, huh?
SPEAKER_00: In some ways, COVID was a good thing for us. And in some ways it was a hard thing. On the good side, all the people who are like, oh my gosh, Harry's like, this business isn't crisis. This deal got blocked. What are you going to do? Now everyone was in crisis. And so we're like, welcome to our world. That was a good thing. Also, our business did really well during COVID. So people stopped buying razorblades in stores so much, but they started buying lots of stuff online. And Flamingo, which is a brand we mentioned, has an amazing at-home wax product. And people stopped going to salons to get wax. And so that product totally took off. And then our online business, DTC, also started to grow in a significant way because people weren't going to stores. And so I think we also turned the business to profitability. We were EBITDA positive. And I think that underlying business momentum then helped us to start to give into the team that, hey, this is going to be awesome. We have a great standalone business and exciting future vision.
SPEAKER_00: Let's all do this together. Yeah.
SPEAKER_01: So when you think about where you are today, right now, what are we, about 11 years in to the company, 10 years into the company? Yeah, a little over 10. That makes us feel old, by the way.
SPEAKER_01: You're both still pretty young. You're both in your 40s, right? How much of where you are today do you attribute to the work and the strategy, and how much do you think it has to do with luck? First to you, Jeff. I think that there's certainly been a lot of serendipity and luck in my life. Having
SPEAKER_00: been sitting with Neil after class one day when Dave walked up with the idea for Warby Parker, having gotten to know Andy at Bain, gosh, I could have made 100 different decisions in life where I wouldn't have gotten to know him. And I think in making the ideas come to life, I think we've worked really hard to go do that, and I think made a lot of conscious decisions over time. Some days I'm like, oh, gosh, I just wish we could get a break, and then we get a great break, and it's awesome, and we learn something new. But I think that's probably a function of the fact that we have a team that's continuing to iterate and innovate. And so I guess in that way, we do kind of manufacture our own luck or success. I think Jeff's being modest because I would find he'd be a really lucky guy to have started two multi-billion dollar brands and just
SPEAKER_04: gotten lucky. So there's probably 15 or 20 people on the planet who can say that they've successfully started two multi-billion dollar companies. I would ascribe the lucky part to be like situation and circumstance. I was lucky in having access to amazing education and a network where fundraising was easier than it might be for somebody who was born into a different environment. I think the adversity along the way and determination to push through that adversity is not luck at all. It's just hard work. It's me and Jeff that have to steer the ship there. So I don't think that part is easy. I think it's hard work. I think it's hard work. So I don't think that part is luck. A lot of that's hard work.
SPEAKER_01: That's Andy Katz Mayfield and Jeff Rader, co-founders of Harry's. So Jeff, are you excited to teach your 11-year-old to shave one day?
SPEAKER_00: Oh yeah, totally. At Harry's, we made these razors in our very early days that were kids razors. So they had kind of toy heads and you could just shave with them, not actually have blades in them. We used to sort of stand there next to the mirror and shave together him with his little razor and me with a regular Harry's razor. It was great.
SPEAKER_01: Alex Chung, Elaine Coates, John Isabella, Chris Masini, and Carla Estevez. I'm Guy Raz and you've been listening to How I Built This. Hey Prime members, you can listen to How I Built This early and ad-free on Amazon Music. Download the Amazon Music app today or you can listen early and ad-free with Wondery Plus and Apple Podcasts. If you want to show your support for our show, be sure to get your How I Built This merch and gear at wonderyshop.com. Before you go, tell us about yourself by completing a short survey at wondery.com slash survey. Hey, it's Guy here. And while we're on a little break, I want to tell you about a recent episode of How I Built This Lab that we released. It's about the company TerraCycle and how they're working to make recycling and waste reduction more accessible. The founder, Tom Zaki, originally launched TerraCycle as a worm poop fertilizer company. He did this from his college dorm room. Basically, the worms would eat trash and then they would turn it into plant fertilizer. Now, his company has since pivoted from that and they recycle everything from shampoo bottles and makeup containers to snack wrappers and even cigarette butts. And in the episode, you'll hear Tom talk about his new initiative to develop packaging that is actually reusable in hopes of phasing out single-use products entirely and making recycling and TerraCycle obsolete. You can hear this episode by following How I Built This and scrolling back a little bit to the episode, Making Garbage Useful with Tom Zaki of TerraCycle or by searching TerraCycle, that's T-E-R-R-A-C-Y-C-L-E, wherever you listen to podcasts.
