Madison Reed just raised another $25 million to open hair color bars across the US – TechCrunch


You get to a certain age, and if you’re remotely vain (and let’s face it, you are), you need to have your hair colored fairly frequently. You’re hardly alone. Roughly 75 percent of women in the United States color their hair, which today adds up to an $18 billion opportunity for brands like L’Oréal and Clairol.

It used to look that way, anyway. Eating into a growing percentage of these giants’ market share is Madison Reed, a four-year-old, 85-person, San Francisco-based maker of affordable “prestige” hair products. These include 45 shades of permanent hair color, 8 shades of hair “gloss,” 6 shades of liquid-based root touch-up (for in between coloring sessions), and 6 shades of powder for root touch-ups. The company also more recently began making shampoos and conditioners for color-treated hair.

Now Madison Reed is working on what could become its biggest product of all: a chain of real-world “color bars” that it expects will accelerate its business further. Toward that end, the company just raised $25 million in new funding led by Comcast Ventures, an earlier investor, with participation from other previous backers, including Norwest Venture Partners, True Ventures and Calibrate Ventures.

Today, we phoned CEO and founder Amy Errett in Hawaii, where she’s attending the high-wattage, low-flying Lobby conference. We asked her about the company’s newest round of funding, its color bars, and much more. If you care about consumer packaged goods more generally, keep reading.

TC: You’ve quietly closed on $25 million that brings your funding to $70 million. Why go with Comcast, which is already an investor?

AE: Comcast was a very small shareholder previously and they just kind of watched our progress. Also, for us, Comcast adds enormous value; our investors there have been super helpful with TV and connections into other media.

TC: How much are you spending on TV? And how else are you marketing Madison Reed?

AE: We spend money on marketing four ways. First, Facebook and Instagram continues to be great for us and we work hard at [cultivating our image on both]. Radio is the fastest-growing channel, including satellite, local, and more recently national. We measure ROI by asking people how they’ve heard of us and through promo codes. The third is TV, which has been super effective. Fourth are referrals, which is an important part of our business. We put referral cards in boxes, and a lot of people give them out to friends who then get their first box for free. We’ve been doing it long enough to measure that it’s not just that first box (that they use).

TC: What percentage of your business is recurring, and are people buying one-offs or subscriptions?

AE: Seventy percent of our business is recurring. And yes, we sell two ways. You can buy a single box of color, or you can subscribe. Our hair color kits are only available at our site online; we want to control the user experience. Offline, we sell 12 of our hair colors at Ulta because 50 percent of the [chain is about] hair, so if you’re going to pick the one retailer that you believe women visit for their hair needs, that’s the one.

TC: Now you’ll also be selling your products at your own color bars. Tell us about these.

AE: We had a pop-up in New York for four months earlier this year that we created as a kind of experiment, and it was great. So we opened another color bar in San Francisco in June and beginning in September, we’re opening 25 more, all over the place.

TC: How uniform will these be? How many people can they accommodate?

AE: We’re targeting around 1,500 square feet for each, and they’ll have eight chairs, with four chairs facing each others with mirrors in between. [The sessions are] $60 dollars for 60 minutes. We’ll use our own proprietary product.

We’ve also developed tech around scheduling, merchandise processing, about [tracking and help our customers] who take color quizzes first.

TC: Who will be working at these locations? 

AE: Certified licensed colorists. Even our online staff have to be licensed. So these are people who’ve worked for salons, gotten licensed, then they go through three weeks of training by our master colorists, who educate them about our line and how to use it. After that, we let [them do a test run] with friends and family for a week, who we don’t charge. This is a business that’s won and lost over quality; we aren’t just selling anything to anyone.

TC: Are you profitable? Can you give us any rough estimate regarding your revenue?

AE: We don’t discuss either publicly, but I can tell you our business has continued to double on a yearly basis, and those are getting to be significant numbers.

TC: Would you ever make a colourant for men? Something like 20 percent of men get their hair colored, too. 

AE: We’re running a beta test now.

TC: I’m guessing you’ve been approached by bigger CPG companies.

AE:  We have a lot of folks that are interested in the company. This is an interesting story, and all these [products you see being developed] like hair color are real businesses. People need to get their hair colored.

The company is named after my daughter, so you can imagine that this is personal. I’m dedicated to [this company] and if we do our job well, both [going public] and other options are available to us.

As a former VC, I can attest that anyone who tells you what’s going to happen doesn’t know what they are talking about.