Hero Cosmetics: Ju Rhyu and Dwight Lee

Summary

How I Built This with Guy Raz: Hero Cosmetics – Ju Ru and Dwight Lee

Episode Release Date: December 30, 2024

In this compelling episode of How I Built This, host Guy Raz delves into the inspiring journey of Ju Ru and Dwight Lee, co-founders of Hero Cosmetics. This episode unpacks the challenges, innovations, and strategic decisions that propelled Hero Cosmetics from a simple idea to a $630 million acquisition within five years.

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1. Ju Ru’s Background

Early Life and Education

Ju Ru, born in Korea in the late 1970s, moved to Seattle at the age of three. Her father worked as a log broker, managing the intricate process of sourcing and transporting logs for construction projects back in Korea.

[07:31] Ju Ru: "My dad is a log broker, so he's working in the log industry... He started his own log broker business."

Growing up in a Korean household, Ju was deeply immersed in Korean culture, often spending summers in Korea and maintaining strong ties with her heritage.

Despite her parents' expectations for her to pursue a traditional and stable career, Ju gravitated towards creative and analytical fields. She graduated from Brown University with majors in History and International Relations and later earned an MBA from Columbia. Her educational path was unconventional, blending creativity with business acumen.

Early Career

After college, Ju spent a summer volunteering in Kenya, reflecting her desire to give back to the community. She then worked at Epiphany School, a nonprofit, where she handled fundraising efforts. This role planted the seed for her entrepreneurial aspirations, leading her to pursue an MBA to better leverage business skills for societal impact.

Ju's corporate journey continued at Kraft Foods (now Mondelez) in the snacks division, where she gained valuable brand management experience. This role honed her skills in marketing, consumer behavior, and retail strategies.

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2. Discovering the Pimple Patch

Experiences in Korea

While working at Samsung’s credit card division in Korea, Ju observed young Koreans wearing hydrocolloid patches on their faces to treat acne—a practice not widely known in the US at the time.

[23:08] Ju Ru: "I just noticed a lot of people walking around with these patches on their faces."

Hydrocolloid technology, traditionally used for wound healing, was ingeniously repurposed in Korea for acne treatment. Ju, battling her own sensitive skin, experimented with these patches and was amazed by their effectiveness.

Initial Idea and Attempt

Recognizing a gap in the US market, Ju saw an opportunity to introduce these patches as a dedicated skincare product rather than a DIY solution with ordinary band-aids. She began researching manufacturers to create a branded product tailored for the American audience. Despite her initial efforts around 2013-2014, financial constraints and self-doubt led her to chicken out from launching her idea at that time.

[31:59] Ju Ru: "I chickened out, got cold feet."

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3. Founding Hero Cosmetics

Meeting Dwight and Andy Lee

In 2017, while consulting for Peach and Lily, a Korean beauty startup, Ju met Dwight Lee and his brother Andy, who were running a digital agency called Division of. Their collaborative projects sparked an entrepreneurial synergy.

[39:05] Dwight Lee: "We were just always building things in the agency. But the Acme patches seemed like a really good product."

Together, the trio decided to pursue Ju's pimple patch idea, combining Ju's marketing expertise with Dwight's technical skills and Andy's creative prowess.

Launching the Product

Hero Cosmetics officially launched Mighty Patch on Amazon in September 2017 with an initial investment of $50,000. Their strategic approach included:

• Standout Packaging: Designed to resemble medical OTC products with a playful twist, making them appealing and trustworthy.

• Influencer Marketing and Press: Securing a feature in Into the Gloss significantly boosted visibility and sales.

[49:25] Ju Ru: "We gonna do a lot of updates to the product... set us up for bigger retailers later."

The product resonated quickly, selling out their initial inventory within 90 days, validating the market demand.

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4. Growth and Expansion

Retail Breakthrough with Anthropologie

In early 2018, Hero Cosmetics secured a pivotal retail partnership with Anthropologie, a respected lifestyle brand. They introduced a special $7 sampler SKU in approximately 700 stores, which facilitated widespread product adoption.

[52:30] Ju Ru: "The first retailer to say yes was Anthropologie."

This move not only increased sales but also established Hero as a credible brand in the beauty sector.

Strategic Marketing and Sampling

Hero’s growth strategy heavily relied on:

• Sampling Programs: Distributing samples through college ambassadors and beauty box subscriptions to generate word-of-mouth buzz.

• Social Media Engagement: Leveraging platforms like TikTok and Instagram to normalize acne and promote the patches as a self-care essential.

[58:36] Dwight Lee: "The key with this product is that once you get it in someone's hand and they try a patch and it works, that person is a customer for life."

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5. Overcoming Challenges and Scaling the Business

Navigating COVID-19

Despite the global pandemic, Hero Cosmetics thrived by:

• Maintaining Essential Retail Partnerships: Continued sales through Amazon and Target ensured steady revenue streams.

• Inventory Management: Implemented a strategy to stockpile inventory, ensuring they never went out of stock despite supply chain disruptions.

[73:17] Ju Ru: "The main strategy was just never going out of stock."

Seeking Investment and Acquisition

By 2020, Hero Cosmetics achieved $6.5 million in revenue. Facing cash flow challenges due to rapid growth, they explored investment options. Despite receiving term sheets during the pandemic, unfavorable terms led them to decline offers.

In 2022, after reaching over $100 million in sales, Hero began acquisition talks, ultimately partnering with Church & Dwight for $630 million. This acquisition ensured the brand’s longevity and allowed Ju and Dwight to transition into evolving roles within the larger company.

[78:45] Ju Ru: "We felt like Church and Dwight was the best place for it."

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6. Reflections on Success: Work vs. Luck

Both founders attribute their success to a blend of hard work and fortunate circumstances. Ju emphasizes the importance of being a category creator and timing their market entry perfectly, while Dwight highlights the critical role of teamwork and serendipitous opportunities.

[80:22] Ju Ru: "There are a lot of happy accidents that I attribute to luck."

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Conclusion

Ju Ru and Dwight Lee's story with Hero Cosmetics is a testament to innovative thinking, strategic marketing, and resilience. From recognizing a niche product opportunity in Korea to scaling a global brand and achieving a significant exit, their journey encapsulates the essence of entrepreneurial success.

[79:58] Dwight Lee: "Work is the baseline for any sort of success... but also, I think we're all just floating or being carried really in a river of randomness that sometimes we call luck."

Their experience underscores the delicate balance between dedication and opportunity, offering valuable insights for aspiring entrepreneurs aiming to build impactful and lasting brands.

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Notable Quotes:

• Ju Ru on Initial Doubts:

  “I chickened out, got cold feet.”
  [31:59]

• Dwight Lee on Partnership:

  “When you're starting a business, finding a good partner is sort of like 90% of the battle.”
  [43:06]

• Ju Ru on Brand Philosophy:

  “We are a category creator in the US... normalized acne.”
  [60:09]

• Reflection on Success:

  “Work is the baseline for any sort of success... but also, I think we're all just floating or being carried really in a river of randomness that sometimes we call luck.”
  [80:22] Dwight Lee
  “...I think we were so lucky in many, many instances.”
  [81:01] Ju Ru

---

This detailed summary captures the essence of Ju Ru and Dwight Lee's entrepreneurial journey with Hero Cosmetics, illustrating the pivotal moments and strategic decisions that led to their remarkable success.

Transcript

[Guy Raz]

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[Ju Ru]

So, yeah, I went down the rabbit hole of launching this. This was probably 2013, 2014. And then in the end, it's a lot of money. It's a lot of work. Do I know that it's going to work out? I don't know. So, yeah, I chickened out, got cold feet.

[Guy Raz]

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 Ju Ru was inspired to create the acne treatment Mighty Patches and grew them into a $630 million business in just four, five years. There's a concept in psychology called functional fixedness. Basically, it describes a fixed or limited way of thinking about how to use something. So, for example, if I gave you a shoe, you might try to put it on, but you might not think about using the shoe to hammer a nail into a board. The most famous example of this concept was an experiment where researchers gave people a candle, a matchbox, and thumbtacks, and the participants were then asked to attach the candle to the wall. Now, understandably, many people tried to push the thumbtacks directly into the candle wax to attach it that way, but they soon discovered that wouldn't work. But they tried it anyway because that's what they were asked to do anyway. The point of the study was to see if people would think differently, you know, outside the box. So, for example, maybe they would melt the candles onto the cardboard matchboxes first and then attach the matchboxes to the wall with thumbtacks. The idea here was to figure out if people can overcome functional fixedness with training. And by and large, the answer is yes, because this is a path to creative thinking. So what does this have to do with today's story? Well, actually, a lot, because the product we're talking about, Mighty Patches, by a brand called Hero Cosmetics, were designed for a different purpose. It just took another way of looking at them to figure out that there was a whole other opportunity. Now, if you don't know what I'm talking about. Mighty patches are small, round bandages that cover up zits. You can find them on the faces of thousands of adolescents on TikTok. And how do they work? Well, they basically trap, seal, and absorb moisture from the pimple to help heal up the acne spot faster. And the thing about them, the technology has been around for decades. In fact, you could have gone to the drugstore in the 1980s and picked up a box of something called hydrocolloid bandages. These are bandages used to heal regular wounds. And it turns out that there was a secret tribe of people who for many years, would buy those bandages and cut them up into squares and use them to get rid of zits. But it would take a very observant entrepreneur named Ju Ru to realize that there was a business opportunity here. See, these hydrocolloid patches had been popular in Korea as acne fighters for years. And because Ju is Korean American and spent a lot of time going back and forth as a kid, she had a hunch that these patches could be popular in the US as well. And so after years of working in marketing and dreaming of starting a business, Ju linked up with two brothers, Dwight and Andy Lee, to try and launch Hero Cosmetics. This was in 2017, and they did it with just $50,000 all in. And just five years later, Ju, Dwight, and Andy sold the business for $630 million. It's an incredible, incredible story, and we'll hear from Dwight a little bit later. But first, to Ju. She was born in Korea in the late 70s, and her family moved to Seattle when she was just three years old. Her dad worked as a broker in the logging industry, sending American wood back to Asia for construction projects.

[Ju Ru]

My dad is a log broker, so he's working in the log industry. And he was with this Korean conglomerate, but they sent him over to grow the business in the US And a few years after doing that, I think he realized it was better for him to start his own business. So he actually left and then started his own log broker business.

[Guy Raz]

And log broker is literally the guy, like, the middleman between the people who chop down the logs and then the people who buy it and then, I guess, sell it on to people who build houses.

[Ju Ru]

Right. So a lot of my dad's customers were based in Korea, and they needed logs for. Yeah, Construction furniture. I mean, Korea itself doesn't have a lot of natural resources, so they had to source from other parts of the world. So my dad was actually a buyer's broker. And, you know, he would source the logs. He would negotiate, arrange the transportation, you know, book the containers and all that.

[Guy Raz]

And tell me a little bit about you as a kid. I mean, did your parents speak to you in Korean? Was their culture, the culture, their birth country, something that they really was important for them to transmit to you growing up?

[Ju Ru]

Yes. So I still speak to them in Korean, even though My Korean has progressively gotten worse, but culturally, yeah, I mean, we were very much a Korean household, ate Korean food. A lot of their friends, therefore our childhood friends were Korean. And there was still a lot of sort of community, you know, amongst other Koreans who had immigrated around the same time in the Seattle area. So when I was young, we went back every summer and we spent a good month to two months in Korea. I remember staying at my grandparents house and it just being so hot and me hanging out with all my cousins. So Korean culture was still a big part of my upbringing.

[Guy Raz]

Yeah, I guess from, from what I read, you were kind of thinking maybe in high school or as you were getting ready for college of like becoming a doctor one day. And I was surprised to learn that your parents actually discouraged that. And this is interesting because I come from an immigrant family and so many people who've been on the show from immigrant families, like that's what your parents tell you to do. Be a doctor, be a lawyer, an engineer.

[Ju Ru]

Yeah, I thought I wanted to be a doctor. And my parents, they said don't do it, it's way too hard. It's going to be years and years of study. Also they're probably biased because my dad's a businessman, so he doesn't come from like a science or medical background. But for him there were better ways to make a living that didn't involve, you know, eight years of grad school and hours and hours of training. But I do remember they told me, well, if you do want to be a doctor, you should be an ophthalmologist because there's no blood and it's going to be a lot like the hours will be a lot more bearable. So for them I think it was sort of more lifestyle.

[Guy Raz]

Yeah. Ju.

[Ju Ru]

Were you.

[Guy Raz]

I know that you went to Brown University and from what I read you studied history and international relations and that those are usually majors like to set you up for like. Cause that's what I did, you know, like a career in like law or I went into journalism originally or like publishing or you know, that kind of. But even, you know, marketing and other things. I have to imagine maybe I'm wrong that like when you went into college, you didn't really have a plan. Right. You didn't know necessarily what you would do after it was over.

[Ju Ru]

No, I had no idea. My dad was not happy with my concentrations. He was like history and international relations. What is this? You should be studying Economics, you know, But I don't know. I just remember in college always being drawn to Creative things, but then also liking analytical and business oriented things. And so for me, it was always sort of, how can I do both? So I remember, I think it was like my sophomore year in college. I was like, you know, marketing might be the thing that helps merge those two elements.

[Guy Raz]

All right, so you finish college, and this is, I think around 2000, 2001. And this was sort of the dot com kind of mini recession. I remember that time. I had just recently graduated too. I got lucky an internship, but it was a tough time. Yeah, but I guess you got this opportunity to go work for a private school for low income students called Epiphany, which was. And tell me what you did there.

[Ju Ru]

It was in development, which is a fundraising role. So if we go back a little bit, right after college, I actually spent that summer in Kenya. And so I did some volunteer work there. And there was always kind of that part of me where I wanted to do something sort of giving back to the community. And one of the reasons why I took this job at Epiphany School is because I thought, okay, well, maybe this is a way that again, I can impact community is by actually working for a local nonprofit and sort of leveraging my interest in marketing and sales to help out fundraising for the school.

[Guy Raz]

So you were there for a few years, but I think that, that, I think it actually introduced you to the idea of your next step. Right. Because you would from there you went to business school, but that idea didn't come to you until you were doing this job for the nonprofit. How did that happen?

[Ju Ru]

Well, actually, the woman who preceded me at Epiphany School, she actually went to business school. And so I left.

[Guy Raz]

Oh, she left. She left to go to business school.

[Ju Ru]

Right, right. And so I took her job. I basically took her job. And so that was sort of the first seed. Like, okay, well, that could be a path for myself as well. And then having worked there, I mean, I enjoyed it, but there was an aspect of, well, I feel like I could do so much more. And also there are other ways to, I think, positively impact the community or society. It doesn't have to be directly working for a charity or a nonprofit. And I started realizing you could do things in business and really make more of a, I think, positive impact that way as well. So I started thinking about it kind of earlier on, and then I started applying to business schools, and then I ended up going to Columbia.

[Guy Raz]

So, all right, you get your mba, and I guess while you're there, you got an internship with Kraft, which you would Go and that after you graduated, you would go and work for Kraft, working at food brands.

[Ju Ru]

Right. So I did my internship at Kraft Foods, which actually is now Mondelez, so I worked at the snacks division on the Planters brand. So Mr. Peanut and you know, all the nuts that they have, it's amazing.

[Guy Raz]

That's a Planters Peanuts is like a billion dollar brand. It is. And it's been around forever.

[Ju Ru]

Yes.

[Guy Raz]

It's unbelievable.

[Ju Ru]

Yeah. I mean, they have in house commodity people who. Because, you know, you're buying commodities, really? So I always thought those meetings were fascinating because you're tracking, like, the commodity prices and, like, you know, the weather patterns and how it's going to impact the farmers and whether that's going to increase the prices of peanuts and cashews and things like that.

[Guy Raz]

It's amazing because even a sort of marginally fractionally lower price could be millions and millions of dollars for them if they're buying peanuts at that scale.

[Ju Ru]

Right, exactly. Yeah. But I mean, that experience is. I mean, it really was very found. You know, I had a very traditional brand management experience. They. They train you in a very specific way. So it was, you know, it was really great training grounds for me. Just learning about retail. And back then, like, D2C didn't exist, so the only sales channel was selling into retail.

[Guy Raz]

Yeah.

[Ju Ru]

And learning about thinking about the consumer and, and forecasting and marketing and brand and all that was. Was really critical to our success.

[Guy Raz]

Did you think that maybe, you know, this could be the path that I want to take, like in management and then corporate leadership eventually, or already at that point, 2008, 2009, were you thinking, I want to start my own thing one day?

[Ju Ru]

I was always very frustrated because at that time, this was like 2009, 2010, I saw the world changing very quickly around me. So, you know, Facebook had just started and social media was really becoming a thing. And, you know, big companies, they just move slower. I think that's just a fact. And so I didn't really feel like, you know, Mondelez or Craft at that time was really moving as quickly as I personally wanted to. But also, I think even in college, I kind of always had this entrepreneurial bug. Actually, in college, I remember with two other girlfriends, we tried to start a design studio. It was called 3Ps. And so I think that entrepreneurial energy was sort of always there, even, you know, in college.

[Guy Raz]

Hmm. So, all right, so you're at Kraft for a few years, and then I know that you went to work for American Express for a short period of time. But then I guess around 2012. And what would be a pivotal moment, you get a job offer and then you move to Korea.

[Ju Ru]

Right.

[Guy Raz]

Tell me a little bit about why and what happened and what the offer was, what you ended up doing there.

[Ju Ru]

I joined Samsung in their card division.

[Guy Raz]

Card?

[Ju Ru]

Like credit cards?

[Guy Raz]

Credit cards. Okay. Yep.

[Ju Ru]

So Samsung and Korea, yeah, it's a huge conglomerate. Every vertical you can imagine, they probably have a presence there. So one of their verticals, in addition to electronics, which we all know is financial services, and part of financial services is their credit card division, kind of like Amex. So they had overall initiative to diversify the talent pool. And one of the things that they wanted to do was bring Korean Americans to their offices in Korea to bring a little bit more like diversity and experience and thought. So they had recruiters who were based in New York who would actively scout the right profile in all of America to do expat stints in Korea. So I got contacted by one and I remember just taking the meeting, just, you know, why not just have a conversation? And became more and more serious. And then they had me meet certain executives who were in town, et cetera. And then one day I got the job offer. So then, I mean, then it became real, like I had to make a decision and then ended up deciding, you know, why not? If anything, it'll be an interesting experience. And it was a two year assignment. So at the end of two years I can always come back.

[Guy Raz]

So tell me a little bit about life at Samsung. I mean, obviously you are Korean American, but I mean, you didn't grow up in Korean corporate culture, right? Very different than American corporate culture. Just a different level of commitment. And tell me what a normal day was like.

[Ju Ru]

It was definitely for a foreigner. It's a very foreign place. So for example, sometimes, you know, you wouldn't leave the office until like 8 or 9 just because your boss was still there. And so you had to stay because you can't leave before the boss. So they were worried about people staying at the office too long and they instituted something called Family Day. And Family Day was every Wednesday. And you were supposed to leave the office at 6. And it wasn't enough just to have the policy. They literally reconfigured everyone's computers to shut down at 6:00pm, like 6.00. I just remember at 5:59, you know, I would be writing this email and then you get a message that would pop up on your computer. Your computer is going to shut down in 10, 9, 8. And you just you know, try to get that last email out. But. But it sort of, you know, I think the intent was really good. And then the way that they would sort of enforce some of these things were very kind of micromanaging.

[Guy Raz]

So it wasn't like it was. I mean, there were like, enforcers. Like, you were expected to be at your desk on time and focused. And I mean, it wasn't like, we just trust you're going to do your work. Like, people really were literally like, looking out to make sure you were doing that.

[Ju Ru]

Another anecdote related to that is, you know, they had another rule where everyone had to be in their seat at 8am watching what they call Samsung News, because they would have sort of like corporate communications at 8 and they'd have people with clipboards walking the aisle at 8:01. And if you were not in your seat with your eyes on tv, they would like. You'd get a little like, demerit, you.

[Guy Raz]

Know, like in your performance review or something. Yeah. And if you racked them up, what would happen?

[Ju Ru]

You would lose vacation days.

[Guy Raz]

Wow. See, part of me is like, I really admire that. Like, there's a reason why Samsung is such an effective company. I mean, it became one of the biggest electronics companies in the world in a very rapid period of time. I mean, American companies just couldn't do that. You know, kind of put that kind of discipline on their workforce. There'd be. There'd be uproar, there'd be articles, there'd be lawsuits, there'd be all kinds of things.

[Ju Ru]

Totally. I know. So on one hand it's, you know, you kind of admire it in some ways. You're like, okay, well, this is why they've made so much progress. But then on their. On the other hand, I don't know. I mean, culture's changing, you know, work culture's changing.

[Guy Raz]

Yeah. I wonder if it's still the same at Samsung.

[Ju Ru]

Yeah, I don't know. I'd be curious.

[Guy Raz]

Yeah. So, all right, so you're doing this job and in Seoul, which is an amazing city, I mean, even more so now than it was in 2012. It's just such a cool place. I've been there. But one of the things that you, as sort of visitors or expats or foreigners notice when they come to new countries, is you just notice things that people living there just don't notice. Right. You just are like, wow, that's interesting. And people living there wouldn't even see it because it's just part of the wallpaper. And one of the things you noticed was these stickers that people put on their faces.

[Ju Ru]

Yeah, I mean, I just noticed a lot of people walking around with these patches on their faces.

[Guy Raz]

And these were, like, just like flesh colored.

[Ju Ru]

They were pretty transparent. They were round. They were like round circle patches that people wore.

[Guy Raz]

Like band aids on their face.

[Ju Ru]

Yeah. People would have them sort of like, they would have several of them on their faces, and they'd go to the office like that, like, no questions. It was just very normal.

[Guy Raz]

And you quickly inquired or assumed, I guess, put two, two together, realized this was for pimples, for acne.

[Ju Ru]

Yes. And I, at the time, was breaking out. Unfortunately, I've always had a history of sensitive skin that, like, at the tiniest thing, I would just break out. And so I tried it for myself. I went to a pharmacy, I bought some of these acne patches. And I mean, literally, I was so amazed at how effective it was because, you know, even just with the first use, it got all the gunk out of the pimple that I put it on. And that pimple had flattened overnight.

[Guy Raz]

And these patches. Okay, so just to kind of explain and help me kind of. I'm right here. They have an ingredient called hydrocolloid in them. It's basically a polymer, and I guess it extracts, like, liquid from inside a pimple, brings it. So it's basically a way of popping a zit without popping it. Cause that can create a scar, right? That's right. And this material, hydrocolloid, it's been around in, like, band aids and in hospitals for a long time. But I guess in Korea, they realized, hey, this actually works really well on skin blemishes.

[Ju Ru]

Yes. So hydrocolloid, the concept, you know, originally started as kind of a new type of bandage or wound dressing. And what they realized was that if you keep the kind of damaged skin area moist, it actually helps with the healing of the skin. Yeah, like, dryness is not good. So you want to keep it, like, well moisturized in a moist environment. And so that's how it started. And then. And, you know, Koreans, being very ingenious, also realized, well, acne, you know, has inflammatory fluid and pus inside. And, you know, perhaps if you cut it up and make it round and make it a little bit smaller, it could work on pimples. And, I mean, I think it started getting popularized in Korea, you know, probably in the early 2000s.

[Guy Raz]

All right, so you see this, and you're using this, and you're like, wow, these are cool. These really work. They, like, they, you know, get Rid of zits fast.

[Ju Ru]

Right?

[Guy Raz]

And, you know, but you're working at Samsung. Help me understand, at what point does a light bulb kind of go off and say, wait a minute, maybe I can do something with these in the.

[Ju Ru]

U.S. well, I mean, after that first use, I was like, why is this not more available or well known? Like, it works so well, so much better than anything I've used before. And I started doing research and I just saw all these Reddit threads I remember of people talking about these hydrocolloid patches. Oh, you know, I can't get them here. I just asked my sister, who's going to Hong Kong or to Korea, can she pick some up? And, and so for me, like, reading that showed me that there was actually demand for this type of product. And people, you know, people were already talking about it on the web, but, you know, there was no brand really focused on the US market. There was, I think, a Korean brand even at that time. I think they were probably starting to slowly sell in the U.S. yeah, there were some band aid oriented brands that had the big ones. And people would comment, oh, I buy the big ones and I cut them up into small squares and I just put them on my face.

[Guy Raz]

But those band aid companies were not marketing it towards skin blemish, they were marketing towards wound healing.

[Ju Ru]

Correct.

[Guy Raz]

So people would like, just DIY it and be like, oh, I just cut little patches from these hydrocolloid band aids.

[Ju Ru]

Right.

[Guy Raz]

And put it on my skin.

[Ju Ru]

Yeah. And I mean, this is where, you know, I can connect sort of this insight with an experience I had when I was working at craft foods Mondelez. So, you know, the 100 calorie packs.

[Guy Raz]

Of course. Yeah.

[Ju Ru]

So the way that, that got innovated or launched is because they were doing focus groups and they saw women moms buy a whole box of Triscuits or Ritz or whatever and decant them into their own small Ziploc bags for portion control. So when people saw that, they were like, oh, there is an opportunity here. So similarly, when I read that people were buying the big ones and cutting them up into smaller squares and using them for their pimples, I just, I thought, you know, this is it. This is more proof that people want this type of product.

[Guy Raz]

Yeah, there's the Triscuits right there.

[Ju Ru]

Yeah, exactly.

[Guy Raz]

Yeah. All right, so you're, I mean, you get this idea in your head, but you're, of course, you know, doing the corporate thing at Samsung. But I mean, as you start to think, well, maybe there is something here. You go on Reddit boards, chat rooms. You're seeing that there's. People are talking about this, but there's, you know, there's a lot more to do. If you're going to kind of even think about getting something going. What did you start to do?

[Ju Ru]

You know what? In Korea, cosmetic manufacturers are required to list the name of the manufacturer.

[Guy Raz]

Oh. Like if they white label it, which most of them do, they have to tell you. Wow. Because in the US they don't want to tell you that at all.

[Ju Ru]

Right.

[Guy Raz]

They want to keep it secret.

[Ju Ru]

Yeah. So I went to a pharmacy, I bought up, like 10 to 15 different brands. I turned over the box, and I listed the name of all the manufacturers that these brands were using. And I just. I started cold contacting them. I would call them, I would email them, and I mean, most of them didn't write back to me, but there were two or three maybe that did. And I remember there was one where I had to buy some samples. I asked for some samples. And so that was sort of the first step in identifying a potential supplier to kind of figure out how I would get this product created.

[Guy Raz]

Yeah. So tell me what you. You find. One of these companies is like, yeah, we're open to working with you. And what did that mean? I mean, it was just a matter of, like, okay, just buying a bunch of these things and shipping them over. Like, what did you start to do?

[Ju Ru]

So first I got some samples, and then actually one of them, I actually visited their factory. They invited me. They were like, come, come visit. We'll show you a little bit about how we make these products. And then it was just sort of conversations around, like, well, can this be changed? Can that be changed? Can I increase this? Can I change that? To see if the capabilities were there to make something more unique for the American audience.

[Guy Raz]

Okay, so sounds like a plan. And how much. I mean, how much money was it gonna take to do, like. Cause some of these places have minimum buys. Like, you gotta. Well, you know, we're not gonna talk to you unless you spend 100 grand or. What were they saying?

[Ju Ru]

I think it was 10,000 units.

[Guy Raz]

And so that probably would have been.

[Ju Ru]

Probably, I don't know, 15, 20 grand or something like that.

[Guy Raz]

And did you have the cash to do that?

[Ju Ru]

You know, I did. And I went down the rabbit hole. Like, I had a name, I hired a designer. I had, like a sleeve design ready to go. And then I remember I submitted it to the manufacturer, and they were like.

[Guy Raz]

Because they could do everything, they would package it up, they would put your label on the finished.

[Ju Ru]

Good, right? Yeah. And I remember him saying, like, oh, it's not going to work because it has to be in a box to protect the patches. Because the patches, you know, if there's too much weight on them, like the gel it could squeeze out. I remember I had some other colleagues, you know, who are in my social circle who are also like, wanting to do something entrepreneurial. And I kept like pitching the idea to them, like, oh, you know, like, what about this? And, you know, I think it could do well. So, yeah, I went down the rabbit hole of launching this. This was probably 2013, 2014, and then in the end did not do it.

[Guy Raz]

Well, why not?

[Ju Ru]

You know, when it came time to submit that po, I just, I don't know, I chickened out.

[Guy Raz]

This is a lot of money.

[Ju Ru]

It's a lot of money. It's a lot of work. Like, do I know that it's going to work out? I don't know. So, yeah, I chickened out. Got cold feet.

[Guy Raz]

When we come back in just a moment, Ju finds the courage to launch her idea after joining forces with friend and future co founder Dwight Lee, who joins us after the break. Stay with us. I'm Guy Raz and you're listening to How I Built this. This podcast is brought to you by Squarespace. Squarespace is the all in one website platform for entrepreneurs to stand out and succeed online. Whether you're starting your own business or managing a growing brand, Squarespace makes it easy to create a one of a kind website, engage with your audience and sell anything all in one place. You can create a completely personalized website with Squarespace's guided design system, Squarespace Blueprint. Choose from curated layout and styling options to build an online presence perfectly tailored to you and your business. With Squarespace, measure your end to end online performance with powerful website and seller analytics. Plus, Squarespace makes checkout seamless for your customers with their simple but powerful payment tools. I used Squarespace to build out my website, guyraz.com and I love the way it turned out. Head to squarespace.com for a free trial and when you're ready to Launch, go to squarespace.combilt to save 10% off your first purchase of a website or domain. What does the future hold for business? Ask nine experts and you'll get 10 answers. Rates will rise or fall. Inflation's up or down. Can someone please invent a crystal ball? Until then, over 40,000 businesses have future proofed their business with NetSuite by Oracle, the number one Cloud ERP bringing accounting, financial management, inventory and HR into one fluid platform with one unified business management suite. There's one source of truth giving you the visibility and control you need to make quick decisions. Whether your company is earning millions or even hundreds of millions, NetSuite helps you respond to immediate challenges and seize your biggest opportunities. Speaking of opportunity, download the CFO's guide to AI and machine learning at netsuite.com built the guide is free to you at netsuite.com built netsuite.com Bilt who doesn't love saving money? So when Mint Mobile said it was easy to get wireless for $15 a month with the purchase of a three month plan, I called them on it. Turns out it really is that easy to get wireless for $15 a month. Before Mint Mobile, I was paying hundreds of dollars a month for my family's cell phone plan. Not anymore. With Mint Mobile. To get this new customer offer and your new 3 month premium wireless plan for just 15 bucks a month, go to mintmobile.combilt that's mintmobile.comb cut cut your wireless bill to 15 bucks a month at mintmobile.combilt $45 upfront payment required, equivalent to $15 per month. New customers on first 3 month plan only speeds slower above 40gb on Unlim. Additional taxes, fees and restrictions apply. See Mint Mobile for details. Hey, welcome back to How I Built this. I'm Guy raz. So it's 2014 and Ju's contract with Samsung is over. So she heads to New York and lands a job in the Korean beauty industry, which is how she meets the guys who will be her future business partners, brothers Dwight and Andy Lee.

[Ju Ru]

At that time, K Beauty, Korean beauty was really trending and I was doing a little bit of consultancy and then I ended up taking a marketing job at a K beauty startup called Peach.

[Guy Raz]

And Lily and just kind of give me like the sort of the basic description of what is K Beauty, what is what is what makes something Korean beauty.

[Ju Ru]

I mean, I think there's probably maybe a little bit of debate about the definition, but really it's Korean brands, Korean beauty brands that have a Korean approach to beauty and skin care. So that's usually like innovative textures, very interesting ingredients. Like, you know, one of the really popular products is a snail mucin moisturizer.

[Guy Raz]

Snail. Like from a snail?

[Ju Ru]

Right. Wow, that's interesting.

[Guy Raz]

Like from snail shells or.

[Ju Ru]

No, they like the snails will just crawl and they give you like a.

[Guy Raz]

Little trail of that gunk, like stink.

[Ju Ru]

Yeah. And apparently that's really Good for your skin.

[Guy Raz]

Wow, I did not know that I'm going to start collecting snail slime.

[Ju Ru]

So the American audience just suddenly became really interested in products that were beauty products that were Korean, from Korean brands. And it spurred a whole industry in the US where there were these e commerce sites. So Peach and Lily is one where they would bring these Korean brands into the US and create a marketplace for the American consumer to access them.

[Guy Raz]

All right, so you're working for this startup, but meantime, I think you still have this idea in your head, right? Like this idea of these patches because no one had really brought them to the US at this point. And now you're like a year, two years later, since when you first thought of this?

[Ju Ru]

Yeah, I mean, it was still nagging at me. It was still in the back of my head. And you know, now I work at this K beauty startup and I am kind of watching the industry and I see that some of these Korean brands that have these acne patches are doing quite well. And I'm seeing this kind of emerging category take off. And I just kept thinking to myself, like, oh my gosh, someone needs to do this.

[Guy Raz]

And meantime, I guess sort of you're working for this startup for some time, but you also end up starting your own beauty consulting company, doing some consulting work. And this is where I want to bring in Dwight, who's been patiently waiting here on this in this interview, because around this time is when you meet a guy named Dwight Lee. And Dwight, what were you doing at the time and how did you meet you?

[Dwight Lee]

So Andy, my brother, who's the third co founder of Hero, and I, we were running a digital agency called Division of. It was mostly a production studio. We were building, designing and building experiences for screens. So think like, like websites, apps, interactive kiosks, out of home displays, things like that.

[Guy Raz]

Yep.

[Dwight Lee]

And so we had met Ju through Peach and Lily. They were one of our clients. And so we met and we started working on the projects for Peach and Lily and Ju.

[Guy Raz]

I guess at a certain point you tell Dwight about this idea that you had or this pimple patching. Dwight, what do you remember when you first heard, like, what do you remember Drew telling you about it when you first heard about it?

[Dwight Lee]

We'd meet up for dinner and sort of talk shop and spitball a lot of ideas. I think there was a lot of interest on both sides to try to get something going. And I do remember talking about sort of different cosmetic products and hey, maybe we should try this. Should we try moisturizer or like a Cleansing balm or stuff like that. And she mentioned the patches, and it seemed really interesting to me. I remember, you know, sort of later on, Drew gave me the product and I tried it myself and I was sort of blown away. So that really helped the cause too.

[Guy Raz]

So, Drew, did you. I mean, at what point did you feel like maybe Dwight was the person that you. You might want to work with? Did you think that?

[Ju Ru]

So this is where I feel like we were so lucky in many ways, because it was not that I had this idea and it was looking for a co founder. It really was a very organic discussion where, like, oh, gosh, like, someone should do this. I think it's such a good idea. And I just remember Dwight saying, like, hey, if you want to do it, I'll do it with you. And it turns out. So there's three of us, right? There's Andy, myself and Dwight. It actually turned out that we have very complementary experiences and skills. So, you know, I sort of had more of this, like, corporate marketing experience. And then Dwight is a technical engineer, and then Andy is a creative person. And now in retrospect, I'm like, oh, that's a really good kind of cross section of skill sets because we covered big parts of the business just with the three of us. Luckily, it just happened very organically.

[Guy Raz]

Dwight, what was it about this product that seemed interesting to you? Were you selling stuff? I know you'd worked with brands that launched products, but why did you think that this was particularly interesting?

[Dwight Lee]

So in the early years of the agency, we were always trying to launch our own products internally. And I mean, we had like a list of products. I have a list of products that just never took off.

[Guy Raz]

Like, what were you looking at launching?

[Dwight Lee]

Oh, man. I mean, we were trying to do wedding management software at one point, LinkedIn for lawyers. We launched a web hosting platform to some. To some success. We started a wine subscription app at one point. I mean, you name it, we were just. We were just always building things in the agency. But we wanted a product to sell, particularly on Amazon. And the Acme patches seemed like a really good product because of, you know, the size, the entry, sort of low barriers to entry in terms of cost and then. But there was no market in the. In it for the US and it just seemed like a really innovative product. But I think more so than the product, I was really interested also in working with Ju, and, you know, I think when you're starting a business, finding a good partner is sort of like 90% of the battle.

[Guy Raz]

Yeah.

[Dwight Lee]

And so I Think when, when Ju suggested the idea, I was, I was game. I mean, I think if she had suggested vacuum cleaners or something like that, I might be like, well, maybe. Yeah, okay, maybe. But I think that patches were a really good product, but also working with you was one of the draws as well.

[Guy Raz]

All right, so you, Dwight, your brother Andy and Yuju decide to kind of join forces and to try and see if you could sell these products, which you were really excited about. First of all, let's talk about the name that you came up with. Tell me about how you came up with it.

[Ju Ru]

We started with a product name, which is the Mighty Patch. So that's the hydrochloid acne patch that we were talking about. And I just, I remember for me, it was really important that the name be emotional because my insight was that acne, like, it sucks to get acne. No matter your age, you wake up, you have that pimple, you're like, ugh, you know, And I mean, I personally know because it happens to me. And so I knew the power of this product. It was an amazing product with real results. And I wanted a name that was like positive and punchy and emotive. And it's actually Andy that came up with a name. I remember we were like, just brainstorming all sorts of different names and I think when he was like, oh, mighty, mighty Patch. And we're like, that's the one. And then with Hero, again, like, wanted something positive, emotional, and the product, you know, I mean, it's a little bit literal, but it literally can save the day. Because when you again have, when you wake up with that breakout, you know, before an important moment, you panic. And yeah, then it's always like a little bit of like, is it trademark free, Is a URL free? You know, all that stuff. And. But really behind it was more of a emotional motivation.

[Guy Raz]

And in terms of like just startup capital also, I mean, did you, you guys were gonna bootstrap this initially? How much money did it take initially to, you know, to do the kinds of things you need to do, which is order the inventory, get the branding and the packaging being put together and basically import all this stuff and use third party logistics or however you're doing it. Did you need 1000-002000-00300,000 bucks to get this off the ground?

[Ju Ru]

We started with $50,000.

[Guy Raz]

Between the three of you?

[Ju Ru]

Yes.

[Guy Raz]

And did you go back to that same company that you went to in 2014 to order the patches?

[Ju Ru]

Yes.

[Guy Raz]

All right. And by the way, tell me about launching on Amazon. Because there are million millions of products on Amazon, right? Like type anything in and you will just find tons of just obscure brands that you've never heard of that make the same thing. So there's a strategy to getting noticed on Amazon too, right? Like did you set up a store? Did you use other sellers who are influential? Like, how does it work?

[Dwight Lee]

Well, I think the first thing we did was, I mean, we looked at Amazon as a sort of store shelf. So we just thought about it that way and we took a step back and said, how can our product stand out on this digital shelf? And so we designed the package very intentionally to stand out. I mean, the early thesis was that we wanted it to feel like an OTC product. So feel very medical, but also sort of playful. Right. So that's why the early packaging was. It was white with a pop of color. So it was, it felt playful but still medical.

[Guy Raz]

You wanted to be like an over the counter medicine, but something that was fun too.

[Dwight Lee]

Correct. And we also wanted to be unisex. We didn't want it to be solely targeted for females. Acne affects everybody, male and female. And so we want it to be conscious of that.

[Guy Raz]

Okay, so you have packaging. I think you launch it on Amazon in September of 2017. How did you get anybody to be aware of it? What did you do?

[Ju Ru]

We ran ads. I mean that's always kind of the Amazon playbook. But gifted influencers. Press back then was a big one. I remember back then into the Gloss, which is a beauty blog, was really popular and we got a write up into the Gloss and we only had one channel, we were only selling on Amazon. So I remember that article went out and then our sales on Amazon spiked. And so that was a moment where I thought, like, we gotta double down on press.

[Guy Raz]

Did you hire a PR firm? I mean you had 50 grand, so presumably at least a third, maybe half of that went to that first order, maybe more.

[Ju Ru]

So there's a website where it's almost like DIY pr. So you pay for the service and then you log on and they. Because there are a lot of editors who are doing articles and they'll submit their request, they'll say, I'm doing an article on this. So I'm sourcing brands that are in acne or in baby care or in whatnot, you know, and they share their email. So I took that, I took their emails and I would pitch them them.

[Guy Raz]

How many, roughly how many emails do you think you wrote?

[Ju Ru]

Oh, gosh, I mean it was just constant. But every month A good, I don't know, 20 emails or something.

[Dwight Lee]

And I think leaning into PR was that earned media was, was really helpful for us. You know, it saved us from having to dump a bunch of money into Instagram or Facebook or, or even Amazon ads. I mean, you get, you get a press release or an article and what was a big one, like New York Times, like early in the day and that, that can really transform your business overnight.

[Guy Raz]

All right, so you've got, you know, the middle of 2017 or I think September of 2017, you're on Amazon. And how much did that into the gloss or those, those like hits on those websites affect sales? Did it, I mean, did it, did you start to see traction right away?

[Ju Ru]

Yeah, we did. I mean, I think within 90 days we had run out of our initial inventory. So. And I remember before launch we were talking about like, how long do you think it's going to take us to sell through 10,000 units? Would it take us a year? Is it going to take us six months? And ended up taking us 90 days. So the traction was there. Yeah, from early on, pretty quickly. And I think we also benefited from the fact that the category wasn't as saturated as it is today. I mean, today if you go to Amazon and you search pimple patches, you have like pages and pages of search results. But when we launched in 2017, it wasn't like that. We were one of like a handful. So I think that also helped us stand out a bit.

[Guy Raz]

Yeah, I mean, it totally makes sense. And so, I mean, because you sold out your initial inventory so fast and you know, you had experience in the Korean beauty industry, were you kind of thinking that the next big push would be into like the K beauty market?

[Ju Ru]

So I actually did not want it to be K beauty.

[Guy Raz]

You didn't? Okay.

[Ju Ru]

Yeah, just because I thought it should be an American brand for this American audience. And that was actually part of the value prop. Because sometimes when you buy, I mean even today it still happens. Like, I think there's a little bit of a trust issue because the supply chain of sometimes the products that come from one country that end up in another, it's not always clear. And I mean, sometimes there are a lot of dupes or a lot of fakes and things like that. So us being like this American based brand for the American audience and then adjusting our marketing, you also have to.

[Dwight Lee]

Think seven years ago, I mean, it's super popular now, but seven years ago it wasn't as popular. It was just sort of coming into its own in terms of K Beauty and things like that. And so it was really important that we removed all sort of barriers for someone that's maybe not on the coast, that's not familiar with K Beauty, to try that product. And so, you know, if you go and see a product that has a different language on it, you're almost immediately turned off. And so we just wanted to steer clear of that as much as possible.

[Guy Raz]

Right. And so you really didn't want people to. I mean, some people would have been like, oh, I know these, because I went to Korea. But really, you just wanted people to think, oh, that's interesting. What an interesting idea.

[Dwight Lee]

Yep, absolutely.

[Guy Raz]

Okay, so you sell 10,000 units by the end of 2017 entirely through Amazon. And that really proves out this, that there's something there. And I guess at this point, you really want to figure out how to get this onto shelves in retail, how to get this into shop. So what do you do? How do you start that process?

[Ju Ru]

Yeah, I also cold emailed retailers. So I just shot off a bunch of emails to different buyers at different retailers. Some of them, I had had their contacts. Some of them I literally just. I went onto LinkedIn, found the name of the buyer, guessed their email, pitched the product, and why I thought they needed it. And the first retailer to say yes was is Anthropologie.

[Guy Raz]

Wow. And. And it's interesting because Anthropologie, right. It's a fashion retailer, I think. I don't think they. In lifestyle, they. I don't think they sell men's clothing. Right. I think it's mainly women's clothing.

[Ju Ru]

Yeah, I think it's mostly. Yeah. Women's and home.

[Guy Raz]

Yeah. And they, you know, it's. It's a, it's a national chain, but not that many stores, I think.

[Ju Ru]

Right.

[Guy Raz]

About 200. So it's a, It's a great brand. Right. But at the same time, like, it's not. It's not a shop that, like, everyone's going into every day all the time, but also influential. And were they the only ones initially that. That bit, or were there others who were like, yeah, we want, we want to do this too?

[Ju Ru]

They were the only ones at the time. So, I mean, we launched September, probably immediately I started pitching retailers and then, yeah, I can't remember exactly when. Maybe like October, November. Anthropologie said, okay, like, we'll test you in 80 stores. And that started in January of 2018, so just a few months after launch.

[Guy Raz]

And anthropology is interesting because their demographic is right. I mean, let's Just be honest. I'm 50, so it's very rare when I get an acne. Just because your body changes and you just don't develop those things that cause that as much. Right. But you know, between the ages of, I don't know, 12 and let's say 35, you are more likely to develop skin blemishes of that type. Right. And that's who's going to anthropology, particularly women.

[Ju Ru]

Yep, exactly.

[Guy Raz]

So it's a great place to be. Even though it's not huge, it's a pretty good place to be.

[Ju Ru]

Yeah. And I think retailers like that, they tend to be more trend forward too, and they can take more risks versus like a massive chain that has, I don't know, 10,000 stores. And then I think for us too, it was good for us to sort of dip our toe into retail because we weren't launching again, like with a massive retailer. It was 80 stores, you know, and then we expanded to 200. So it was very sort of thoughtfully approached.

[Dwight Lee]

Yeah, we got that call. I think it was a week or two weeks after the buyer called and said we were selling so well that we're going to go full chain immediately.

[Guy Raz]

Wow.

[Dwight Lee]

But I think the size of Anthropologie was just perfect for us to dip into retail. Like Ju said, what we did in those early days with both Anthropologie and Amazon was do a lot of updates to the product. So how you sell a product in retail is much different than how you sell it online. And so the box has to stand upright, the text has to be legible from say 10ft away as opposed to, you know, 3ft from your monitor. And so we did a lot of testing, we updated the packaging, we created display packs. There was a lot of learning that we took and we updated the packaging quite a bit, which set us up for bigger retailers later.

[Guy Raz]

So when you had that success with Anthropologie, presumably you could use that in your pitches to other retailers. I mean, this is like 2018 now. And ju, from what I gather, you were still up until this point, consulting, doing consulting work for other brands just to bring in some income for yourself.

[Ju Ru]

Right, Consulting, full time job. So, yeah, this was basically my side hustle.

[Guy Raz]

But with the success, I guess in anthropology, that maybe prompted you to kind of shut down your consulting business and leave that behind.

[Ju Ru]

Well, I did that when I was able to pay myself a salary from Hero, which I want to say we launched in September 2017. I want to say it was around March or April of 2018. I mean, it wasn't a big salary. It was a small salary. But still, that was when I decided, okay, I'm all in on this.

[Guy Raz]

All right, so once the anthropology thing worked out, where did you go next? Because you want to presumably go into other retailers. Who did you approach?

[Ju Ru]

2018 was a year of specialty retail. So after Anthropologie, it was free people. Neiman Marcus, Goop, Urban Outfitters, like those types of kind of lifestyle fashion retailers that had a beauty assortment.

[Guy Raz]

One of the things that's interesting to me about cosmetics brands, especially if they work, is the margins can be really high compared to other products. Right. Because to make them doesn't often cost that much, but you can sell them at a premium. People are willing to pay for good products that work. And so were you. I mean, I guess your sales were financing the business, Right? There was cash flow.

[Ju Ru]

Yeah. So Amazon for us was a very profitable channel. And the money we made from Amazon, we put towards launching our DTC site, launching slowly in retail. And I mean, we were. We bootstrapped for the first three years. And I think largely the economics of our product and the way we built the business, it lended itself to a lot of efficiency and how.

[Guy Raz]

I mean, marketing is a big part of a success of a brand, but it can take hundreds of thousands of millions of dollars. I mean, were you guys spending a lot on marketing by this point?

[Ju Ru]

No, we spent, I mean, a lot of sampling. Again, gifting, gifting to influencers. Anything free we would try.

[Dwight Lee]

I think sampling for us was really helpful. We got on all these sort of box programs. We had college ambassadors really early on. The key with this product is that once you get it in someone's hand and they try a patch and it works, I mean, that person is a customer for life. And so for us, we sort of realized that early on. And so we got samples made little six packs, and we were just giving samples out to everybody and anybody we could. So that was a big part of the strategy.

[Guy Raz]

Tell me more about these college ambassadors.

[Dwight Lee]

Yeah, I mean, we were trying to find people on college campuses that would be sort of an ambassador for hero. And we'd send them a box with some collateral, little postcards and things like that, as well as a box of samples. And we were, you know, it wasn't too complex of a program. It was kind of an honesty policy where we just give them a box of samples and trust that they would give it out to all their friends and people on campus and things like that. But we were really Targeting. I mean, college, that age group is a big demographic for us. And so we were targeting pretty heavily.

[Guy Raz]

And, you know, Ju, I'm curious, because when you were in Korea, right, in 2012, you noticed people wearing these patches on their faces, which was unusual to you because you hadn't seen it before. And so what's interesting to me is, like, how was this adopted so quickly by young people in the United States? I mean, all of a sudden, people felt comfortable just having, like, a patch on their face. Like, overnight.

[Ju Ru]

Yeah. I mean, overnight, yeah. Probably took a few years to get there, but, I mean, we did a lot of the education. I consider us a category creator in the US and, you know, sampling and talking about the benefits. And then also a big thing that we did with Hero was really kind of what we call, like, normalized acne, because I think there's a lot of shame associated with having that breakout or having acne. And so just being a brand that says you break out, you have acne, it's okay. Like, we understand. We have it too. And I think that's communication that resonates with people. And so we're seeing, I think, a whole generation that is okay now with that occasional breakout. And sometimes, you know, they kind of flaunt the fact that they have that breakout and they wear the patch on their face and they just. They don't care. And I think it's great.

[Guy Raz]

When we come back in just a moment, Ju and Dwight deal with the challenges of a growing business, whether to expand into new products, take on investors, and ultimately sell their brand. Stay with us. I'm Guy Raz, and you're listening to How I Built this. And now a word from our sponsors at Betterment. Do you want your money to be motivated? Do you want your money to rise and grind? Do you think your money should get up and work? Don't worry. Betterment is here to help. Betterment is the automated investing and savings app that makes your money hustle. Their automated technology is built to help maximize returns, meaning when you invest with Betterment, your money can auto adjust as you get closer to your goal rebalance. If your portfolio gets too far out of line and your dividends are automatically reinvested, that can increase the potential for compound returns. In other words, your money is working like a dog. While you can be sleeping like one and snoring like one too, you'll never picture your money the same way again. Betterment, the automated investing and savings app that makes your money hustle. Visit betterment.com to get started. Investing involves risk. Performance is not guaranteed. As a B2B marketer, you know how noisy the ad space can be. If your message isn't targeted to the right audience, it just disappears. But with LinkedIn ads, you can precisely reach the professionals who are more likely to find your ad relevant. Using LinkedIn's targeting capabilities, you can reach professionals by job title, industry company, and more. Now, if you've been listening to this show for a while, you might know that I'm a small business owner myself. And LinkedIn has been a huge asset for my production company. In fact, when I look for new hires, LinkedIn is one of the first places I go. Start converting your B2B audience into high quality leads today will even give you a $100 credit on your next campaign. Go to LinkedIn.com BuiltThis to claim your credit. That's LinkedIn.com BuiltThis. Terms and conditions apply. LinkedIn, the place to be. To be. Hey, welcome back to How I Built this. I'm Guy raz. So it's 2018 and Hero Cosmetics is making more and more retail deals and their online sales are growing. Ju, Dwight and Andy want to capitalize on this and they think that new product lines might be the answer.

[Ju Ru]

We had one of those sort of like pivotal moments that really, I think in my opinion, changed the trajectory of the business. But we had this product, the Mighty Patch. It was doing really well. And so logically you think, well, you know, you're going to launch a new product, offer something else in your product portfolio. And we were talking about doing a wash off mask. It was going to be like a clay mask that you mix with water, you apply it to your face and you rinse off. And then I had a coffee chat with this investor in the space, showed her Mighty Patch. I said, I want to do this new product. I think it's going to be a wash off face mask. She said, no, you should not do that. You should stick to patches. You should dominate this category. Do them in every shape, every size, for every need. Just go all in. And I just remember thinking, she's right. And so we shelved the face mask product and then we came out with Mighty Patch Invisible plus Surface Variety Pack.

[Guy Raz]

It was just go all in on focusing on kind of dominating this category of blemishes patches.

[Ju Ru]

Yeah, one for daytime, one for nighttime, a bigger one for larger surface areas. Any type of like acne problem that we could solve with our patches, that's what we try to do for a good like two years.

[Guy Raz]

Okay, so you are focused on doing this. Meantime, around this time when the business is really starting to take off, Ju you do something quite unusual, which is you moved to Paris with your husband because in the meantime you were married. You got married. I guess he's French and he wanted to go to France. That's. I mean, how are you gonna do like, my question to you at the time would have been like, well, how are you gonna run the business from France? Like, how are we gonna do this?

[Ju Ru]

A lot of travel, a lot of frequent flyer miles.

[Guy Raz]

Dwight, were you worried about that when she was like, oh, I'm moving to Paris?

[Dwight Lee]

I wasn't worried because shortly after I moved to Seattle.

[Guy Raz]

Okay, wow. And you know what? Let's have a nine hour time difference between us. Let's make it even more fun.

[Dwight Lee]

Yeah. Poor Andy. We left him with the office and all the employees and we're like, good luck.

[Guy Raz]

So how did that work? Were you working at like 2 in the morning and. I don't know. And ju, you were working until like 11:12 at night?

[Ju Ru]

I would structure my days where my meeting started at 2pm my time. Yeah. Cause it's a six hour difference with New York and New York was really the hub because that's where the team was, the office was. So my meetings didn't really start until 2. But you know, in the mornings I would do all my catch up work or my thinking work. And then I stopped taking meetings at 8pm, which is 2pm Eastern. So I mean, there wasn't a lot of overlap with anyone Pacific time. But I mean, at the time, like really, Dwight was the only one who was on the west coast.

[Guy Raz]

How often did you guys meet given that 9 hour time difference?

[Ju Ru]

Once a week.

[Dwight Lee]

And then whenever we would overlap in New York, we would, we would get together, but we were on slack and zoom. I mean, just all day long.

[Ju Ru]

The good part of it was that it meant like when Covid happened, we were set up because we were already a remote office and we already had people, you know, dispersed and on all the communication systems. So I mean, of course there were other difficulties, but I think we were pretty used to remote working situation.

[Guy Raz]

Yeah. Meantime, 2019, you guys get into Target and I think it did like 700 targets right? Now here's the thing about Target again, like you have a product and now there's awareness around this product. And if Target just puts you on the shelves, people still have to discover it. Was that an issue for you or did you already have enough awareness where you could just send people to Target now to get it.

[Ju Ru]

I mean the dilemma that I think the buyer had was they were intrigued, but we didn't have a lot of skus at the time. And then also she didn't know where to put us. And so what we decided together was, was they had this new beauty mini section which kind of acts like a discovery cash wrap type of thing. And they were like, we had this new thing, it's doing really well. Can you do a mini SKU version of your mighty patch for it? And it'll be in around 700, 800 doors. So that's what we did. We created a special SKU. I think we priced it at like $7 and, and it was kind of a sampler and I mean, yeah, the worry was, well, it's one thing to get in and then it's another thing to get people to buy it. So I remember we had queued up some. I mean this was 2019, so we didn't, I mean TikTok wasn't even a thing, but we had hired someone who had the foresight to tell us we should be on TikTok. So I remember we made a big TikTok push, Instagram push. Just letting everyone know, I mean every channel we had control over, we pushed them to target because we knew it had to be a success.

[Guy Raz]

Yeah. So I guess heading into 2020 this is still pre Covid and I mean you've made like six and a half million dollars in revenue, which is pretty amazing. And you've been entirely self funded up until this point. So like, was that when you thought that you might need. Need investor money to scale up?

[Dwight Lee]

Yeah, you have to remember, I mean we were profitable early on, but the problem with the business was we were always chasing growth in terms of we were growing so rapidly and the POS were getting bigger and bigger that even though our top line was really high, I mean at the end of the day we had so little money in the bank because we're always just cutting bigger POS to have more inventory on hand to fulfill these orders for targets.

[Guy Raz]

So the money would come in and go out right away.

[Dwight Lee]

Oh yeah, 100%.

[Guy Raz]

All right, so you start having conversations and did you get any term sheets?

[Ju Ru]

We did, but the term sheets were due the week of lockdown.

[Guy Raz]

Right.

[Ju Ru]

I remember the Dow dropped by a thousand points and then there were a bunch of firms that weren't interested who suddenly dropped out because they had to do triage on their current portfolio companies. But we did get some term sheet.

[Guy Raz]

And did you decide to take some of those offers?

[Dwight Lee]

No, we didn't take any.

[Guy Raz]

You didn't take any?

[Dwight Lee]

The term sheets we got were so bad, possibly because they just didn't have faith in the company or because they smelled blood in the water. With everything that was going on in the market, it's tough to say. Who knows, right? But they were just so bad and they seemed so onerous to us, to the point where, I mean, our attorneys at the time, we were on a call and the lead attorney, he said, hey guys, I'm going to take off my attorney hat right now and I'm just going to put on my business hat. And I have to say, frankly, this is a terrible. These are terrible term sheets. I would not recommend taking them.

[Guy Raz]

What were they? I mean, what were some of the. I mean, presumably they were looking for huge percentage ownership and things like that.

[Ju Ru]

Yeah.

[Dwight Lee]

And there were just a lot of. Lot of little tricks, a lot of trapdoors and onerous prep structures so that essentially we could sell the business later on and still walk away with barely anything. I mean, they were just very investor friendly, very founder unfriendly.

[Guy Raz]

So you turned them down?

[Dwight Lee]

We did turn them down, yes.

[Guy Raz]

Okay, so now it's Covid time. And there was a. I mean, around this time there was a real risk that, you know, everything could go south. Of course that wouldn't happen for, certainly for a lot of direct to consumer brands. But, you know, all of a sudden people are focusing on like buying energy bars and hand sanitizer and toilet paper, whatever they are, but hand sanitizer? Yeah. So did you see a brief dip in your business?

[Ju Ru]

No, we didn't. I mean, wow. Luckily we were in the channels that were still deemed like essential retailers. So Amazon was still online. Target was deemed essential retailer. So. So we really didn't see much impact.

[Guy Raz]

What about the supply chain challenge? I mean, with, you know, just ships not being able to come in and you were bringing this stuff from Korea.

[Dwight Lee]

Yeah, it was a. It was a real nightmare. I mean, every day we were trying to just triage an issue. Whether there was delays with, with ships on the water or the ports were shut down because of COVID outbreaks or our suppliers couldn't get the ingredients for something. I mean, it was just every day for probably three years was very stressful, for sure.

[Guy Raz]

So how did you keep your inventory stocked?

[Dwight Lee]

For us, the strategy was to just lean into the inventory, which is risky. So we went, went essentially from one month of inventory on hand with lots of orders to. At one point, we're up to Six months of inventory on hand.

[Guy Raz]

Oh, you just bought as much as you could get?

[Dwight Lee]

Oh, yeah. Oh, yeah. Which is a huge risk, right? I mean, if sales dropped at any point, we would have been stuck with just millions of units in a warehouse that we would have gotten rid of. But luckily, sales kept up and we were able to sort of keep. Keep things moving. But for me, the main thing, the main strategy was just never going out of stock.

[Guy Raz]

Yeah. Okay, so now you get through the first year of COVID 2020, you're in 2021, which is now the second year of COVID and I guess you decide to try and re engage with some of these investors that had originally gave you terms to see if maybe you could negotiate something a little bit better. Is that right?

[Dwight Lee]

Actually, there was one investor that we wanted to work with. So in the first process in early 2020, this guy Trevor, he was just really smart, really engaged. Every meeting that he would come to, every discussion that we'd have with him, he'd leave us thinking about something. And so even in those early days, we felt like he helped contribute and shape the business. The funny thing is, he turned us down the first time around. Not because of COVID or anything. He just said, you guys aren't ready yet. You know, I see a lot of potential in this business, but you aren't ready yet. So maybe we can talk in a couple years or something like that. Which totally baffled me because I was like, look at these numbers. I mean, this. This brand is exploding. But, I mean, talk about discipline. This guy, he basically turned us down. We still wanted him, so we kept talking to him. We kept sort of the relationship warm. And then when it came time, later on, I think it was October of 2020, actually, we went back to him and said, hey, here's some updated information about our target sales. Here's how the business is doing. Do you want to do a deal? And he responded. He came back with a really good, clean, fair deal.

[Guy Raz]

All right, so I guess one of the things that you. I mean, because at this point you must be. I think you start to think, hey, we're getting close to acquisition time, right? I mean, is that fair to say? And if so, what was the threshold you had to reach in order to become attractive to a buyer?

[Ju Ru]

$100 million.

[Guy Raz]

100 million in sales. Okay.

[Ju Ru]

Yep.

[Guy Raz]

Tell me about the process of finding an acquirer. Because, I mean, God, it's amazing. Just two and a half years in, barely three years in, you start to have serious conversations about an acquisition.

[Ju Ru]

Yeah. I mean, the first is sort of, you know, are we at that scale where we would be attractive to people? And I remember, you know, 2021, it was clear we were going to hit that $100 million threshold. So there was a board meeting and then it was a topic, and the question was like, should we start a process? Should we think about this? And then everyone was like, yes, it is time. So we kicked that off in 2022.

[Guy Raz]

You eventually did start to engage in a deeper discussion with Church and Dwight, and I think they own, man, a bunch of brands, Arm and Hammer and Waterpik and even own Trojan Condoms. I mean, they own a bunch of different brands. And so you engage in a conversation with them and they're. I mean, this is going to take a bit of time. Tell me a little bit about that process. Because, you know, when you sign an engagement letter, it's not guaranteed that it's going to go through either.

[Ju Ru]

Yeah, you're right. I mean, signing it is just one step and then there's a whole due diligence process. Yeah, but, you know, for us, when we were selling the company, partnership was really critical. Like, culture fit was a must. So we wanted someone who, you know, we could trust with the culture and the team and someone who also had the platform to continue to grow and scale this business. And, yeah, we got to know the management team at Church and White, and they ended up being the one.

[Dwight Lee]

The acquisition also meant for us that the brand would have a sort of forever home, a place that it could live and grow beyond us. And after us, we were really focused on having a place where this brand could live on for 50 years, where I could bring my kids to Target later on and say, hey, this brand is still here, still flourishing. And so that, more so than anything, first and foremost, it was really important that the brand had a home. And so Church and Dwight was good. We felt like the best place for it.

[Guy Raz]

The acquisition was announced in August of 2022. $630 million acquisition. Amazing for a brand that really launched in September of 2017 on Amazon. So a little under, what, five years after your official launch for just a really incredible exit at that point. What did that mean for you guys? Did that also mean that you were committing yourselves to working for Church and Dwight for a period of time?

[Ju Ru]

Yeah, for three years.

[Guy Raz]

So tell me a little bit about what that means. Now you have this brand that you started and you controlled, really, and now you work for it. So you're not the decision makers anymore. What is that like?

[Dwight Lee]

I think a Founder's role is sort of ever evolving. The three of us, the work that we were doing in 2017 is different than what we were doing in 2019, and it's different today. It changes all the time. I mean, I don't really oversee supply chain and look at the list of ships coming in and stuff like that anymore. It wouldn't make sense for me to do it when Church and Dwight had has vast infrastructure to do that. So the role is evolving, but for us, number one, is to make sure that the brand is safe. The brand is going to continue to grow, and the culture does evolve in a way that we want it to, and it'll be successful. At Church and Dwight.

[Guy Raz]

When you guys think about where you got in the journey, how much of this do you attribute to the work you put in and how much do you think has to do with. With just luck? Dwight, first to you, I think hard.

[Dwight Lee]

Work is the baseline for any sort of success. I mean, you just have to work your tail off and make the sacrifices. But also, I think we're all just floating or being carried really in a river of randomness that sometimes we call luck. I've been blessed with an immense amount of luck in my life, and. And for that, I'm so appreciative and grateful.

[Ju Ru]

Ju, I agree. I mean, I think the hard work is, you know, that's what it takes really, if you're gonna commit to an entrepreneurial journey. Like, you gotta work really hard. But I mean, I think we were so lucky in many, many instances. Like, you know, I think the timing of when we launched, the timing of when we sold, you know, me meeting Dwight and Andy and us turning out to be a really great team. Actually, like, there are a lot of, I think, happy accidents that I attribute to luck.

[Guy Raz]

That's Ju Ru and Dwight Lee, co founders of Hero Cosmetics. By the way, Ju mentioned it earlier in the interview, but a big way that Mighty Patch really took off was through social media platforms like TikTok. I have watched preparing for this interview, so many TikTok videos of young people showing me their skin up close and their zits. I can tell you I should be paid extra just for doing that, but I really understand it now. Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never, never miss a new episode of the show. And as always, it's free. And if you're interested in insights, ideas, and lessons from some of the world's greatest entrepreneurs, sign up for my [e-mail] or on substack. This episode was produced by Chris Masini, with music composed by Ramtin Erloui and Sam Paulson. It was edited by Andrea Bruce with research assistance from Olivia Rockman. Our engineers were Gilly Moon and Robert Rodriguez. Our production staff also includes Alex chung, Karla Estevez, J.C. howard, Devin Schwartz, Katherine Cipher, Kerry Thompson, Neva Grant, John Isabella, and Elaine Coates. I'm Guy Raz and you've been listening to How I Built this. If you like How I Built this, you can listen early and ad free right now by joining Wondery in the Wondery app or on Apple Podcasts. Prime members can listen ad free on Amazon Music. Before you go, tell us about yourself by filling out a short [e-mail] survey American scandal is a podcast that brings to life some of the biggest controversies in US History. Presidential lies, environmental disasters, corporate fraud, you name it. In their latest series, NASA embarks on an ambitious program to reinvent space exploration with the space shuttle. By 1985, they announced plans to send teacher Christa McAuliffe into space aboard the Challenger alongside six other astronauts. But just moments after liftoff, tragedy strikes and the Challenger explodes. In the aftermath, investigators uncover a series of preventable failures that led to the disaster. Follow American Scandal on the Wondery app or wherever you get your podcasts. And if you want to experience all episodes ad free and be the first to binge the newest season, join Wondery in the Wondery App, Apple Podcasts, or Spotify. Start your free trial today.