How honest is the Honest Company? | Sidebean

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1:01Gemini and Chrome is here for it. Ready to make anything online makes sense? There's no place like Chrome. Check responses set up require compatibility and availability varies 18 plus. The main trait Jessica Alvin and I share is that we both age well. And more recently we're also both entrepreneurs. But the story of the honest company is very much a roller coaster and right now we seem to be on that not so fun part of the ride. But that might change while this video is in the editing room. Now you may have noticed a pattern in the stories and the founders that we cover in this series. With only a couple of exceptions and one of them being a social path, you don't see a lot of female founders with success stories. Just like you don't see a lot of female viewers in our stats. Funny enough, the majority of our production crew is actually made up of women. They just rarely get to stand on this side of the camera. Anyway, I met Elle a couple of months ago. Elle is an early stage investor with Miami Angels and is passionate about underrepresented founders in tech. So she flew all the way to our studio in Costa Rica to be a guest in our channel and to

2:02tell us a couple of startup stories that I'm not really qualified to cover as well as she does. Thanks for the intro, and thanks for the team for having me. So many of us know Jessica Alvin today. She's a beautiful actress, a business mogul, and she just does not seem to age. And today, in 2021, she's commonly known as the founder of The Honest Company. This consumer products brand offers safe, eco-friendly products like diapers, a natural line of bath, skincare, home cleaning, etc. Essentially, it's a go-to place for household products focused on safety and ethical consumerism. Back in the 2000s, Jessica Alba was just an up-and-coming actress. On screen, she looked different from traditional Hollywood starlets, and I admired her for that. For full transparency and journalistic integrity, I am a fan. Unfortunately, she didn't have the best critical reception. I was feeling the girl knew there was more out there for her than just being a Hollywood star.

3:02The early 2010s weren't like today. Now as celebrity announces a company or raises a fund and people are banging down their doors to give them money. Back then, you had one lane and you did not stray. People didn't really take celebrity-sponsored companies that seriously. So how did this Hollywood actress break through and come to IPO company? Welcome to Company Forensics, The Honest Company Story. The story goes that in 2008, after Alba's baby shower for her first daughter, honor, she wanted to watch some of her gifts with a mainstream detergent brand. She immediately broke out into ugly red waltz. Naturally, this worried her about what such exposure would happen to a baby with even more sensitive skin. This experience shook Alba. She spent the next few years researching the consumer goods market and uncovered that many detergents and everyday items included petrochemicals from aldehydes and fling retortents. To even ended up in Washington, DC, to lobby for updated legislation to reform the 1976

4:07Toxic Substances Control Act. After feeling impassioned to make a change in the industry, Alba decided to start her own business. She teamed up with Brian Lay, who had former startup experience with legozoom.com and shudazel.com, one of Kim Kardashian's first companies. And reports say that the two invested 6 million of their personal wealth to get it started before major VC players believed in them. And they were officially incorporated in 2011. Later on, Sean Kane and Christopher Gavin joined the team. They had experience with pricegrabber.com and healthy child's healthy world, respectively. This proved to be a wise decision. The co-founders experiences supplement on one another's expertise and Jessica brought in her mainstream audience and appeal. Looking for investment. The honest company started with Borko Founders, but it's still needed money. And raising money for a CPG brand is not easy. We haven't historically invested in CPG brands because the scalability and VC level returns

5:09are pretty hard to come by for the amount of risk. So to tailor their pitch to VCs, they doubled down on the idea of creating safe, chemical-free, non-toxic consumer goods from scratch. But without the infrastructure of say, a proctor and gamble, they required a lot more capital. To go on their interests from VCs, they specifically targeted the diaper business. Co-founder Brian Lee stated, that's the only thing we pitched. It was a very strategic as we knew that was the way to get into your home. And their strategy saw success, name brand VCs, general catalyst, lightspeed venture partners, and institutional venture partners got involved as part of a $27 million Series A in 2012. The diapers were successful and the company raised about $128 million through 2014. After proving themselves in one category, they expanded their product offering to everything from soap, kitchen cleaner, detergent, nipple balm, multi-bindermens, and even nursery furniture. It's not every day that CPG brands can get so much VC conviction and backing.

6:12But the teams showed they knew how to market a product and replicate that strategy to other products within the non-toxic product universe. After all, Jessica Alba as a committed founder was better publicity than any marketing team could purchase. Rise to success. The honest company capitalized on consumer trends. It was a first mover in the now-popularist concepts of conscious consumers and influencer marketing. Back in 2014, this was not yet table stakes. Jessica Alba went on late-night talk shows like Jimmy Kimmel to promote the honest company and alert consumers of the dangers of existing products. The honest company didn't just arbitrage in opening in the market for safe and natural home goods, instead they helped expose the gap to which they were immediately able to slide in and provide solutions. There was a lot of competition from brands like Johnson & Johnson and Jurgons, but still, the honest company was a-

7:12When you need to build up your team to handle the growing chaos at work, use indeed sponsor jobs. Use your job post the boost it needs to be seen and helps reach people with the right skills, certifications, and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a $75 sponsor job credit at andd.com slash podcast. That's indeed.com slash podcast, terms and conditions apply. Need a hiring hero? This is a job for indeed sponsor jobs. Propel Fitness Water With Gatorade Electrolites, Zero Sugar, and Vitamins, Propel hydrates better than water to help you get the most out of your workout and get back to your best self. What propels you? Propel with Gatorade Electrolites

8:17Check responses set up required compatibility and availability vary 18 plus. The company discovered that parents were willing to pay higher prices for the peace of mind of having safe friends. Still, the products weren't out free justly out of most consumers' price range, but if you promise to be honest, people will take you up on that. Scandal and lawsuits The honest company saw consistent growth. They even began to explore an acquisition by Unilever. However, eventually Unilever went for seventh generation for a rumored $600 million buy out instead. But the honest company didn't slow down, and after their Series D, they had a $1.7 billion

9:21valuation gaining its unicorn status. And while the company seemed invincible, it ultimately raised a down-round in 2017 and lost its unicorn status. What happened? Unfortunately, what brought them immense success also made them vulnerable to a series of scandals. As a result, the company placed a huge target on themselves, being known as Honest. They failed to live up to the promise of being Honest. Test of the startups liquid detergent found SLS, sodium laurel sulfate, a cleaning agent common in many mainstream brands. In fact, SLS was a chemical that the honest company previously criticized. This goes to show, don't start a witch on unless you're completely innocent. While the company disputed the claim, it still couldn't catch a break with Honest sunscreen. It was being accused of being ineffective in preventing unhealthy exposure to harmful UV rays, which is kind of the purpose of sunscreen. Most damaging was that the lawsuits targeted the claims that Honest Misery presented its

10:24products as natural. In particular, they called out some of their most profitable items, like honest hand soap, honest dish soap, honest diapers, and honest multi-surface cleaner. The company also recalled baby wipes out of an abundance of caution after it detected mold in some packages. The company also recalled its baby powder in January over concerns it could cause skin or eye infections. That goes to show labeling yourself as Honest creates enormous hurdles and consumer expectations. The rebranding process. After all the scandals and the massive downright investment, many were ready to write off the Honest company as a failure and another story of a failed celebrity back company. To regain customer trust, the company had some major rebranding to do. In March 2017, after a big shake up to the leadership, the Honest company announced that Clorox veteran Nick Vlachos would replace Brian Lee as CEO. This move showed the company choosing to go in a direction with a seasoned corporate executive

11:25taking the homes as the company grew. Also, the company stated that it made internal changes by bringing in in-house R&D and quality assurance. This way, the Honest company would have complete oversight on the manufacturer of their products. Vlachos, the new CEO, was honest about the changes. To grow, they had to be consistent, which meant ditching businesses they couldn't win. So instead, the Honest company focused on their most significant revenue drivers, including diapers, baby products, and beauty product lines. While all this was good and great, Jessica Alba's squeaky clean image was a major differentiating factor. Throughout the scandals, the company mostly managed to divert blame from Alba herself. And Honest survival. It was Jessica Alba who ultimately saved the brand. Alba has engraced our silver screens in a significant role for a very long time, but for years she built the brand as a beautiful, honest, and authentic girl next door actress. All the women who grew up watching Jessica Alba started to have families of their own,

12:27and regarded her as a trustworthy source. So association with the brand remained positive, as it waited for the storms of the scandals to subside. Heck, the Honest company's origin hasn't been marketed as Jessica wanting to make a quick buck, or having a lifestyle that's impossible to achieve. Instead, it came from Jessica's struggle to find safe products and even going to Congress to try and make a change. Alba received Alba's intention as Honest. This wasn't a faceless corporation. Instead, consumers ultimately asked themselves, can they trust Jessica? And that answer proved to be yes. IPO in today. After revounding from what might have been a slew of nailing the coffins scandals, the Honest company filed for an IPO in April 2021. During the lead up to the IPO, Jessica Alba launched a YouTube channel and a TikTok account. Follow me, the media circuits again, putting her once again at the forefront as the face. The company saw immense growth. Their S1 stated that they grew revenue from $235 million in 2019 to over $300 million

13:31in 2020 during the pandemic. The company won public in May 2021. While its price at $16 a share, the stock price has jumped around in the last couple of months. It did to almost half its original value the week before we shot this video. So the markets have not been kind to the Honest company, but they have proven to be in a position to overcome difficult times. It's easy to dismiss the Honest company as a fluke success and Jessica Alba as just a pretty face to the company. But the Honest company did succeed when so many celebrity back companies failed. One big reason is that Alba was a compelling and intelligent founder that lived and breathed the company's core values. She understood market trends and then worked tirelessly to build the Honest company. So yes, Jessica Alba has a very pretty face. But she also created a legacy that extends way beyond the silver screen. I could go on and on about how much I admire Jessica Alba and appreciate the story of the Honest company. But can the Honest company bounce back again?

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