How a skin condition and not pivoting led to a million dollar beauty biz

 

A self-proclaimed beauty-addict herself, then-financier Victoria Tsai ended up giving herself acute dermatitis by testing too many beauty products on her own face. It was so bad that she needed topical and oral antibiotics in addition to antihistamines to treat it. With all the bleeding and blistering she was limited to using Vaseline as a moisturizer and subsequently looked greasy all the time.

 

Her experience made her take a more serious look at what she was putting on her skin and the chemicals that all these products contained. When she became pregnant with her daughter, she became even more dedicated to looking for non-harmful alternatives.

 

Tatcha Founder & CEO, Victoria Tsai
Tatcha Beauty Founder & CEO, Victoria Tsai

 

The trip that started it all

After getting her MBA from Harvard, she was working for Starbucks to help launch its consumer products business in China. Every two weeks she flew from headquarters in Seattle to China with a layover in Japan. While on a layover she discovered Japanese blotting papers – a lightweight paper women use to blot the oil off their skin. With her skin condition they were the only thing that didn’t irritate her skin and unable to find them anywhere in the US, she wrote to the small company in Japan that made them and told them she was interested in bringing them to the U.S.  The owner wasn’t interested but agreed he would meet with her next time she visited Kyoto, the city where they were based.

 

 

Going to the source

During her visit she learned that blotting papers were actually a by-product of the gold-leaf beating process and it was geisha who actually figured out that they could use the paper as a beauty tool. She wondered if Geisha were even real and was soon introduced to a real geisha, Kyoko.

 

Victoria Tsai of Tatcha skincare and her muse Kyoka
Victoria Tsai of Tatcha skincare and her muse, Kyoka, a geisha in Kyoto. Photo credit: Miki Chishaki.

 

She says in an interview with Inc. that recalls thinking, “Kyoko had no makeup on yet her skin was flawless.” She asked what she uses and geisha proceeded to show her various “jars of powders and waxes” which Victoria immediately bought and took back home to the US along with 10,000 packs of blotting paper. After four weeks of using the products under the instructions she’d received from her new geisha friend, the smoothness of her skin returned, and after eight weeks her skin was almost back to normal. The doctor had told her this would never happen.

 

 

Launching Tatcha Beauty

 

She soon went back to Japan with a translator to learn more launched Tatcha Beauty (more on the name) later the same year. But it wasn’t easy. As for the 10,000 packs of blotting paper, to buy them she had to sell her car and work several jobs. She also sold her engagement ring which fetched a much needed $30k.

Victoria Tsai at the airport
Victoria Tsai at the airport in Japan on one of her many trips. Photo credit: www.butterboom.com

 

She started sending samples to editors, celebrities and the TV shows etc. After getting some press and meeting with a number of potential retail partners she was eventually rejected by all of them and was told her product was not ‘hi-tech’ enough from a retail angle.
At that point she thought it was over. She thought about doing a pivot but what made her product great is that it was simple, pure and natural – there was nothing about that that fit with what the market was telling her it wanted. She didn’t think it made sense to pivot but she was quickly running out of money without a retailer.

 

 

Not pivoting was the right answer

Based in San Francisco, she tried to meet with all the VC’s she could get a meeting with but they weren’t interested and she was too small at the time for private equity funding from a bank.
A meeting with an angel investor turned out to be the big turning point. One of them believed so much in her and her product that they went to her dream retailer and asked them to give the product a chance and told them they would buy them all back personally if no one bought them. ‘I will never ever forget that, it’s the only reason we got our chance, and I’m glad we stuck to our guns and didn’t pivot’.

Tatcha blotting papers
Tatcha Beauty blotting papers – what started it all.

By 2014, Tatcha Beauty sales were $12mm+ and the company was #21 on the Inc 500 list of fastest growing companies in North America. Tactcha Beauty products are sold at Barneys New York and Sephora stores across the US, Joyce Beauty stores across Asia and online on QVC and their own website at www.Tactcha.com.

 

 

What can we learn from Victoria’s story?

When asked what her goal for Tatcha Beauty is, Victoria tells CNBC:

 

“The ultimate dream is to have a brand that is around for the long haul, a brand that in 100 years outlives me.”

 

What’s interesting is that if you believe you have a good product and believe in what it can do for people, changing it to meet ‘market demands’ is not always the answer to making it a success. Tatcha Beauty is an example of this in practice. Why change something that has worked for hundreds of years? maybe it just needs a fresh introduction.

 

More with Victoria Tsai:

 


Success stories are great but they often leave out the information we really want to know. The How They Did It series is dedicated to stories about entrepreneurs that have succeeded but with a focus on the failures they experienced,  the obstacles they overcame and the tough decisions they had to make along the way.

 

Presentation tips from one of Silicon Valley’s most successful VC’s

The best thing about being part of WeWork Labs is being surrounded by super smart people with great ideas. You also get a chance to see way more presentations than you’d ever wish for. Some presentations are better than others but it’s sometimes hard to put your finger on why. A great idea and ‘entertainment value’ are certainly factors that might get you hearty applause but these alone doesn’t guarantee you’ll get an investor. You know you’ve got a great idea but how do you convince someone else that it’s worthy of their cash?

 

 

WeWork Demo Day
Another really good way to figure out what makes a great presentation is to go watch a few…hundred? Demo day at WeWork in Chelsea, NYC.

An idea is not enough (no matter how good you think it is)

 

A great idea is not enough, you have to have a plan.

“My idea is so awesome! I’m going to focus on my product right now and when it’s good enough to get out there, then I’ll work on my plan*.”

*plan = how the idea will actually make money

 

If that sounded familiar, read on.

 

 

Don’t forget that you’re trying to start a business

 

By the time you build whatever you’re building, you’ve already put yourself in a very risky position. It’s possibly you do end up having a viable business on your first try but it’s very likely that you won’t.

 

Bright lights startup city is blinding. Knowing what I know now and having spoken to so many people in similar positions, we all had wished we’d had that simple checklist of things to cross off so we knew we were on the right track and what to do but alas, the hard things are supposed to be hard right?

 

But it turns out someone must of hear our calling and we came across exactly what we needed, a checklist of all the ducks you need to have in a row before going to pitch for that check. This is courtesy of Khosla Ventures, a VC firm that’s invested of several startups you’ve might have heard of such as Instacart, Scribd, DoorDash, Everlane and Wattpad to name just a few. (check out their full portfolio here).

 

Khosla Ventures companies
Some startups in Khosla Ventures portfolio.

 

Good read –> Why startups fail, according to their founders

 

There is no magic, you have to do the work

 

Yes I’ve seen all those articles, the ones that go like ‘The only thing you need to say in your pitch’, ‘The 4 steps to getting funded’, ‘Pimp power poses VC’s love’ etc. If it seems a bit far fetched, it probably is.

 

There is work to do and you have to do it.  Rather than spending time looking for shortcuts or tricks, spending time doing the work and putting in the time (no 4-hours work week here) is the magic.

 

poo on a presentation
Not want you want your audience to see (or smell) when they see your presentation. This presentation actually wasn’t a pitch, this is actually the head of product at Giphy – the ONLY person who could pull off this slide.

 

The questions you need to be able to answer, in no particular order

So thanks to Vinod Khosla we have a ‘Checklist’ of the questions you should be able to answer when going to ask for funding. Note that there is no reference to ‘crushing it’, ‘tres commas’, or ‘cashing out’.

Vinod Khosla
Vinod Khosla, Founder of Khosla Ventures and oh yeah and also Co-Founder of Sun Microsystems. Photo credit: TechCrunch

 

Before reading the list just pretend for a moment that you are the one with the money and you’ve never met you (the person with the great idea) before. What is the info you would want to know that would give you the green light to say “I am guaranteed to get my money back with this person”. Guarantee? whoa that’s a lot of expectation you say?  Well why would anyone give anyone money expecting to lose it, I don’t think any investor invests knowing they might lose it, they only pick what they believe will be winners.

 

Now if i haven’t discouraged you too much, here’s the checklist!

 

Problem/mission/vision

  • What’s the big vision?

Product

  • What does your product do today?
  • What is your value proposition?
  • What is your unfair advantage?

Market opportunity / size

  • What’s the opportunity?
  • What’s the market size?

Team

  • Tell us about the executive team
  • Why are you uniquely qualified to solve this problem?

[UPDATE: tips on getting your ‘Team’ slide right from Phin Barnes @firstroundcapital]

Proof of product / market fit

  • Growth to date: sign-ups, weekly or monthly active users, paying customers (if relevant)
  • To the extent it’s relevant, do you have quantitative evidence that you’re better than competition/incumbents?

User engagement + retention

  • Engagement metrics for core product features
  • Monthly or weekly cohort retention (depending on the kind of product/company); churn (for subscription products)

Customer acquisition

  • What are your customer acquisition channels?
  • How much does customer acquisition cost (per channel)?
  • How will you make this money back and how long will it take?
  • How scalable are these? How big can you get with your existing product + customer acquisition channels? At what point do they get saturated or become too expensive, and what do you do if/when that happens?

Business model / monetization

  • Do you make money today?
  • How will you make money?

Competitive landscape

  • Do you have competitors? Who are they?
  • If no one else is doing this, why not?
  • What are others doing in adjacent spaces?

What’s next / fundraising ask

  • How much money are you raising?
  • Use of Proceeds: What will you do with the money you raise?
  • What are the milestones you will accomplish to get to the next phase of your business?
  • How does this tie into achieving your big vision?
  • Are there any gaps in your team you need to fill?
  • What are you looking for from an investor?

 

In case you’re a more ‘visual learner’ here’s an illustrated version,

 

Pitch the way VC's think visual illustration
Pitch the way VC’s think – the illustrated version. Image credit: Khosla Ventures

 

If you find that you can’t answer most of these questions THAT’S A GOOD THING. Now won’t waste your time, or a potential VC’s by looking like an idiot when you go to ask for money and have no answers to their questions.

 

If this list has got you feeling a bit humbled or discouraged just ask yourself this question, “Would I give myself the money to do this?”. So many people who want to have a startup think it should be easy to get money and there’s so much of it to go around. But would you give someone who doesn’t have a plan or doesn’t care to come up with a plan any money? Yeah ok. no.

 

It seems that saying ‘If you fail to plan, you’re planning to fail’ can be applied in this case as well.

 

If you want a PDF of the list you can download it on Khosla Ventures’ website here