Madison Reed: Amy Errett

Summary

Podcast Summary: How I Built This with Guy Raz

Episode: Madison Reed: Amy Errett
Air Date: August 18, 2025
Host: Guy Raz
Guest: Amy Errett, founder & CEO of Madison Reed

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Overview:

This episode delves into Amy Errett’s journey building Madison Reed, a disruptive at-home hair color brand. Amy shares candid stories—from her beginnings in banking and consulting, rising through venture capital, facing a very public firing as CEO, and ultimately launching Madison Reed at age 56. The discussion explores entrepreneurship later in life, the challenges of founding teams, women’s consumer needs, and balancing resilience with self-reflection.

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Key Discussion Points and Insights

1. Early Career & Personal Background

• Transition from Banking to Entrepreneurship
  • Amy started her career in banking, consulting, and then venture capital.
  • She co-founded Spectrum, a successful M&A consulting firm that was "profitable from the first six months and never became unprofitable" ([07:06], Amy).
• Move to San Francisco & Coming Out
  • Experienced culture shock moving from NYC finance to SF in the '90s ("people didn’t put a business suit on to go to work" [07:37], Amy).
  • Felt greater acceptance as a gay woman, both socially and professionally ([08:16], Amy).
• Personal Life & Values
  • Became deeply involved in Glide Church for spiritual support during personal hardship.
  • Emphasizes values, empathy, and community, prioritizing "helping people and the goodness of paying it forward" ([11:46], Amy).

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2. The Experience of Public Failure and Personal Growth

• CEO of Olivia Travel & Getting Fired

  • Joined Olivia, a travel company focused on LGBTQ women, as CEO ([13:00], Guy).
  • Was fired unexpectedly after five years; the event made public through media and resulted in legal disputes ([15:32], Guy).
  • Amy reflected: "It was one of the hardest things in my life. And it was one, in retrospect, the best thing that ever happened" ([15:06], Amy).

• Embracing Responsibility and Resilience

  • Used therapy to process shame and rebuild confidence.
  • "We have 100% responsibility for what does happen" ([16:39], Amy).
  • Realized the importance of following her heart, moving beyond just analytics ([17:35], Amy).

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3. Venture Capital Insights & FOMO

• Time at Maveron with Howard Schultz

  • Learned importance of values in business ("He validated that that could be true and have success through that" [20:17], Amy).
  • Saw Schultz’s legendary ability to spot trends, e.g., warning of economic downturn a year before 2008 crisis ([21:12], Guy).

• Itch to Operate vs. Invest

  • Felt "FOMO" seeing founders pitch ideas:

    "I remember my experience being on boards where I'd be watching the CEO wishing I was that person...I was sitting there thinking, what would I do if I was in their position?" ([22:14], Amy)

  • Driven by desire for a "big outcome" and self-admitted ego ([24:46], Amy).

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4. Idea Creation & Industry Disruption

• Origin of Madison Reed

  • Inspired by wife Claire’s frustration with existing at-home hair color and market research showing a massive gap.
  • Saw opportunity to create a "prestige box" with better ingredients and a tech-enabled buying experience ([29:10], Amy).

• Research and Product Development

  • Traveled to Italy, meeting with 13 manufacturers before finding one willing to develop a less-toxic, prestige hair color ([37:05], Amy).
  • Needed at least 19 shades to be taken seriously; today, Madison Reed offers close to 100 ([39:01], Amy; [69:51], Amy).
  • Tech differentiator: built an 18-question color-matching quiz; high accuracy and customer retention.

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5. Business Model, Launch, and Go-to-Market

• Direct-to-Consumer (DTC) Focus

  • Aspired to do what Dollar Shave Club did for razors ([27:12], Amy).
  • Subscriptions & online quizzes at the core of early model.

• Launch Tactics and Early Setbacks

  • Big PR & influencer push; notable initial partnership with Groupon offering free boxes for trial ([48:03], Amy).
  • The result: huge trial numbers but poor repeat business, teaching the team about the perils of deal-based acquisition.

    "Trial by free, not so good. If I pay for it and I love the results, they stay. And that has been a hallmark of the company. High retention." ([51:18], Amy)

• Fundraising Challenges

  • Despite raising $32M by 2015, raising funds wasn’t always easy:

    "Most people invest in things they can relate to. Yes. So if you are a guy and you know nothing about hair color...it isn't relevant." ([52:18], Amy)

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6. Scaling, Hiring, and Hard Lessons On Co-founders

• Painful Co-founder Exits
  • Started with four co-founders ("all three of them are gone now"), resulting in personal pain and business delays ([02:42], Amy; [58:20], Amy).
  • "The business moves at the rate of the slowest senior person." ([58:20], Amy)
  • Amy reflects on magical thinking and emotional biases in hiring friends ([62:32], Amy).

    "It's not just about like, and I thought I could will it to work and it didn't. And...it cost the company a couple of years." ([62:32], Amy)

  • Each exit involved difficult personal conversations but was ultimately necessary.

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7. Expansion into Physical Retail and Omnichannel

• Color Bars & Retail Partnerships

  • Organic interest from stylists ("hundreds" reached out to use the product in salons [54:18], Amy).
  • Pioneered permanent "color bar" salons, using proprietary tech for consistency ([56:19], Amy).
  • Ulta contacted them after hearing branded radio ads ([57:04], Amy).

• Omnichannel Brand

  • Madison Reed now sells via online, in-home, at own salons, and through retailers like Ulta and Walmart.
  • Emphasizes "the same box of color in our hair color bars that we sell. It is not a different product" ([79:48], Amy).

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8. Technology and AI Integration

• AI as a Differentiator
  • Early adopter of AI/image analysis to match hair color and ensure consistency across locations.

    "If we don't log in the color that the stylist puts on your hair, that wouldn't be possible." ([69:49], Amy)

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9. Pandemic Response & Adaptability

• Aggressive Shift During COVID-19
  • Transformed colorists from shuttered salons to virtual customer service—trained workers in four days ([72:58], Amy).
  • Saw DTC business boom overnight, "16,000 inquiries a day" ([73:18], Amy).
  • Smartly acquired leases at low rates to fuel brick-and-mortar expansion post-pandemic ([74:50], Amy).

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10. The Modern Consumer Brand Landscape

• Profitability and Growth in 2025

  • Madison Reed achieved profitability and sustained growth despite industry-wide consumer slowdowns ([81:07], Amy).
  • Considers brand pandemic and recession-proof.
  • Market for consumer exits has cooled: acquirers expect $100M+ revenue and profitability; IPO window is "non-existent" ([78:45], Amy).

• Legacy, Success, and Self-Reflection

  • Amy doesn’t see herself as "successful" in comparison to peers, but recognizes her privilege and luck ([24:46], [82:20], Amy).
  • Not planning to retire; motivated by challenge and impact.

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Notable Quotes & Memorable Moments

• "When is enough ever enough of anything in life?" [24:21], Amy
• "Sometimes shit happens to you. The key for my life has been a certain amount of resilience and persistence... Important word, heart, not head." [17:35], Amy
• “I don't think of myself as a successful person.” [24:46], Amy
• "We have 100% responsibility for what does happen." [16:39], Amy
• "The business moves at the rate of the slowest senior person." [58:20], Amy
• "As I used to say in venture, great venture capitalists position themselves to get lucky." [82:20], Amy
• "I will have a walker as I ring the bell at the New York Stock Exchange." [83:11], Amy (on her future ambitions)

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Timestamps for Key Segments

• [02:42] Amy on co-founder breakups—painful personal and business lessons
• [13:00] Olivia Travel CEO years and public firing
• [16:39] Therapy, resilience, and taking responsibility after setbacks
• [20:17] Lessons from working with Howard Schultz at Maveron
• [22:14] Desire to operate vs. invest—FOMO for the founder’s role
• [29:10] The Madison Reed origin story: inspiration from Amy’s wife, lack of decent at-home options
• [37:05] Meeting the Italian manufacturer willing to develop clean hair color
• [48:03] Launch partnership with Groupon: trials, errors, learnings on customer acquisition
• [54:18] Stylists start to request Madison Reed color for salon use
• [58:20]/[62:32] Reflections on the difficulty and cost of unwinding the founding team
• [69:51] Near 100 shades—technology and AI tie-in
• [73:18] COVID response—training and redeploying in-store staff as customer service
• [81:07] Achieving profitability and navigating the tough CPG/beauty market

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Takeaways for Listeners

• Entrepreneurship is not linear. Amy’s story is full of highs (successful businesses) and lows (very public ouster).
• Later-life founders have unique strengths: Amy credits experience, network, and perspective.
• Co-founder alignment is crucial, but hard: Friendships do not guarantee business compatibility.
• Disruptive ideas often come from lived, personal needs.
• Resilience and a willingness to learn from failure are at the heart of entrepreneurial success.
• Even with strong credentials, fundraising in unfamiliar categories is tough.
• Technology and omnichannel strategies are keys to modern consumer brand success.
• Adaptability—especially in crisis, as seen with COVID—is essential.
• Despite achievements, self-doubt and drive for the next ‘big outcome’ remain strong motivators for founders.

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End of Summary

Transcript

[Guy Raz]

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[Amy Ehrett]

We had four co founders when I started and all three of them are gone from the company through some of the most painful experiences that I've ever had in my life. These were three people that I care deeply about. Two were personal friends and I thought I could will it to work. And it didn't. And it cost the I would say it cost the company a couple of years in retrospect, and I learned a lot. My series A investor said, amy, four co founders is too many. And I said, no, it's not. And boy, was he right.

[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 Amy Ehrett decided that hair color needed a makeover and how she built Madison Reed into a national multi channel brand. The startup world is full of stories about young people who take huge risks and when they fail, it can actually be pretty great. Because when you're young, obviously you can recover from a significant failure. You have time on your side. Which is part of the reason why I have so much respect for founders who take those risks later in life. Because if you're older, like 45 or 50, the stakes are higher. If you lose everything at that age, you might not have time to get it back. But being older can also have huge advantages. You have experience, perspective, probably a bigger network, and you have to be really deliberate about the kinds of risks you take. Which is exactly how Amy Ehrett had to operate. Amy was 56 when she launched Madison Reed. It's a hair color brand that you can find at Walmart, Ulta, Target and thousands of other locations across the country. The idea for Madison Reed came in part from Amy's wife, who was having a hard time finding a decent at home hair color product. Amy saw an opportunity, the same kind of opportunity that led to companies like Harry's Razors and Dollar Shave Club take an old school product with a frustrating experience and offer a better option. Now, at the time, Amy didn't know anything about hair color. She did know that about half of American women who dye their hair do it at and at first, that's exactly who Madison Reed was built for. Now, before she launched the brand, Amy had a completely different career. She was in banking and finance, consulting, even venture capital. But eventually she realized she didn't want to be the one listening to pitches. She wanted to be the one making them. And as you will hear, Amy dealt with a pretty big setback. Before Madison Reed, she was fired as the CEO of a company she ran for several years. But she took the lessons she learned from that experience and tried to apply them to her new role as a startup founder, including a painful decision to separate from three of her co founders. It's a story I've rarely heard a founder speak so candidly about, and it's worth hearing anyway. Before all of that, Amy Ehret grew up in the 60s and 70s in Philadelphia and Long Island. After college, she did an MBA and then worked in banking and finance before starting her own consulting firm called Spectrum, which specialized in mergers and acquisitions. And so the idea was, we will help these deals go through and you get a cut of the percentage of the sale.

[Amy Ehrett]

Exactly. And it turned very quickly as well, that we would do the transaction, and then the buyer would ask us to come in to consult about how to integrate that business into their business, which then turned into consulting fees that kept us going.

[Guy Raz]

And did you run a pretty lean operation or did you guys start to hire, I mean, hire a bunch of people?

[Amy Ehrett]

We started to hire a bunch of people. I think at the apex, we probably got up to about 40 people in the firm.

[Guy Raz]

Wow. So you guys were doing really well.

[Amy Ehrett]

We were doing well. We were a profitable company from the first six months and never became unprofitable, never needed to raise any more money. So it was a very different thing than raising venture money, which we'll get to. Yeah, we'll get to it.

[Guy Raz]

Yeah. I guess for business and personal reasons, you eventually decide to move Spectrum from where you'd founded it, which is New York City, to the Bay Area. How did you find San Francisco in the 90s?

[Amy Ehrett]

It was exciting. And remember that I had spent my whole career in New York City on Park Avenue or down in Wall street, and it was completely different. The whole fact that people didn't put a business suit on to go to work was like a mind bl. I mean, we had an office and I hired an assistant here, and Halloween happened, and the assistant came in their costume, which was very customary in a place like San Francisco, but in New York, you would never go to work in your costume. And so things like that were just foreign to me.

[Guy Raz]

And what about socially? Did you start to feel like you could breathe?

[Amy Ehrett]

Definitely. It was much more gay friendly. I had told my family before I moved, and I had a lot of acceptance. So I wasn't somebody that was struggling with their family rejecting them, which, you know, I have a lot of friends that's happened to, and it's. For me, it was shocking that it was happening, but it was definitely happening. But, yeah, I met a social crowd, I had a lot of friends, and I had told my business partner, and I was out at work.

[Guy Raz]

And also, like, at that time, the early night, even in the early 90s, there probably just weren't as many resources available for people who were trying to figure out their identity. Right. Like, there just weren't as many books. And obviously the Internet wasn't what it is. I mean, there just weren't as many tools to connect with people.

[Amy Ehrett]

Most people did that through their friend circles. You had a close knit group of people and that's who you sort of did everything with. And you met other people in their circles of people. So really, communities were very tight. Much more than today, where, for instance, my wife and I have an equal number of gay friends and straight friends. Like, it just doesn't in those days, if you had straight friends that was outside of your gay circle.

[Guy Raz]

You mentioned your wife, Claire. You met her?

[Amy Ehrett]

I did.

[Guy Raz]

In San Francisco. And what was she doing at the time?

[Amy Ehrett]

She was a massage therapist. So very different. And we met each other through a place that I had gotten very involved in called Glide Church.

[Guy Raz]

And this is a well known Methodist church in San Francisco.

[Amy Ehrett]

Yeah. Yes, Methodist Church. And has largest set of social service programs in the city. A food program, housing program, recovery program. So I was very involved and had gotten on the board and I was actually chairing the board. And Claire sang in the gospel choir. Right.

[Guy Raz]

And how did you get involved with that in that church?

[Amy Ehrett]

A friend took me because my stepmother was dying of cancer and I was going through a hard personal time. I was close to her, and so I watched the dying process and was a caretaker for her back east. I used to go back and forth. They lived in Florida at the time, so I was in a grieving stage. And a friend told me about the spiritual pieces of Glide, and so I started going because of that.

[Guy Raz]

Yeah. And did you grow up going to church as a kid?

[Amy Ehrett]

No, I grew up Jewish. So this was. Yeah, my mother, who just unfortunately passed away at the end of last year. Very hard moment, had this famous saying that I've talked about all the time. I was okay when you came out as a lesbian, but now that you're chairing a Methodist church, you're killing me. So that was her comment about Judaism. But I didn't grow up religious. I grew up more with traditions. I would say to this day, it wasn't about reading the Bible, it was about helping people and the goodness of paying it forward. That's where my spirituality lies today.

[Guy Raz]

All right, so back to the timeline. I guess around 1996. This is about six years after you launched the consulting firm, after you launched Spectrum. You get acquired. And from what I gather, the terms are pretty good. And I have to imagine, Amy, I mean, this is. I mean, for somebody who grew up with not a lot of money. I have to imagine that this is really a life changing transaction for you.

[Amy Ehrett]

Yes, absolutely. Life changing transaction for me. But I was three years of can I get more money? Because these earn outs are about. You get a payment and then you spend the rest of the time chasing the remaining payments. And so I did that and I was really focused on the bottom line of that.

[Guy Raz]

I mean, at this point, let's be frank, you probably didn't need to work. You probably could have stopped working, which is not interesting for most people.

[Amy Ehrett]

I don't think that's true.

[Guy Raz]

No. Okay.

[Amy Ehrett]

Yeah. I don't.

[Guy Raz]

You didn't have enough.

[Amy Ehrett]

I made a good amount of money, but I didn't make enough money to live the lifestyle that I wanted to. So I was still chasing more. Yeah, yeah.

[Guy Raz]

You get a job in a completely different industry. In travel. You got recruited, I guess, to become the CEO of a company called Olivia. This is a company that's still around. It is a travel company that at the time, I think was focused primarily on gay women. Today, it says, I will look at the website. Lesbian and LGBTQ women.

[Amy Ehrett]

Yeah, we actually. They were very large vacation experiences. So we would rent Holland America ships, cruise ships, and reinvent the entire experience, the entertainment, the activities, thus excursions, to tailor it to what gay women would want. So it was a premium, it was a great experience. And, you know, we had people like Melissa Etheridge or the Indigo Girls or people that were iconic in the gay women's community.

[Guy Raz]

All right, you're there. You would end up being there for five years. And the. Let's say the ending was not what you had imagined. You were actually like, oh, you were fired.

[Amy Ehrett]

I was fired In a hotel lobby on a Monday morning. Completely blindsided.

[Guy Raz]

Completely blindsided. There for five years. You've grown the business. You think everything's going well.

[Amy Ehrett]

And the founder had a health issue. And so I hadn't seen her in a really long time, but was reporting to her in the form of emails or sort of updates. So I thought we were just having breakfast. We weren't having breakfast, by the way.

[Guy Raz]

What did she. I mean, did she give you a reason? Did she say, hey, I'm not happy with what's. Like, what was it?

[Amy Ehrett]

Well, I walked into the lobby and she was there sitting on a couch, and I went to give her a hug and she sort of moved back. And I thought, well, that's strange. And then she handed me an envelope and said, we're taking the company in a completely different direction. You're no longer the CEO. And I was completely startled.

[Guy Raz]

What was in the envelope?

[Amy Ehrett]

A lawyer's letter describing how I was being let go for cause. And cause was very nebulous. And so I was really blindsided. And, yeah, it was. It was one of the hardest things in my life. And it was one, in. In retrospect, the best thing that ever happened.

[Guy Raz]

I mean, it was a. It must have been particularly hard because it was a public story and it was this kind of juicy story, this lesbian focused travel agency, and there's this kind of internal rift, and it was covered by the Advocate and other publications. So it was. It was out there. People. People could read about this because you eventually decided to sue, and then they countersued, and now it's a bigger story beyond just a, you know, an employment dispute.

[Amy Ehrett]

Exactly. First and last time I've ever been in a lawsuit.

[Guy Raz]

And you guys basically settled for an undisclosed amount, and that was it. You were out of the picture. Tell me. You said it was the best. It was the hardest. But the best thing, paraphrasing what you said to happen to me, tell me why getting fired was, in some ways, the best thing that had happened to you.

[Amy Ehrett]

I started to understand what motivates me, and I had a. The. Madison Reed was a little kid, three years old at the time.

[Guy Raz]

Your child?

[Amy Ehrett]

My human child, named Madison. My human child named Madison Reed.

[Guy Raz]

She had been born in 2003, I think, at the time, correct? Yep.

[Amy Ehrett]

So I felt financial pressure, but I also, as you said, felt a lot of shame and reputation, you know, damage. And I started to go down a journey. I got a therapist, and I think it was my first opportunity to understand that things don't happen to us. We have 100% responsibility for what does happen. And I was really unhappy in the job. And in fact, my wife had been telling me for about a year, I don't think this is a great job for you. You're frustrated. The business, you know, it won't. You. You have bigger things you could do. And so I don't understand why you're being loyal and staying there. And I just blew that off and thought I was, you know, I had made a commitment, and so I was going to stay and try to do the best I could. And I think that's just an important lesson in life, that sometimes shit happens to you. And the key for my life has been a certain amount of resilience and persistence. And so I knew what was true about me, and so I just decided that I needed to release myself from that shame and just Put my head down and follow my heart. Important word, heart, not head. I tend to go to my head a lot, to the analytics rather than the feelings. And I made a conscious decision I wasn't going to go take a job again. That didn't satisfy me.

[Guy Raz]

It sounds like that was quite a transformational shift for you mentally. Like, it sounds like if I'm reading between the lines, you really were not somebody who kind of confronted your emotions. You were focused on success. You were hard charging. You were. But now you are forcing yourself to kind of peel back the onion layers.

[Amy Ehrett]

Just. I'll go back to not being able to be out. Right. There is some analogy here with absorbing a certain amount of things that you don't want to be true, that are true. And when you're not out, you're living in a sort of numb state anyway. And so I think I was used to living in a numbed state. I wasn't being in my life at work. I was doing. And why I say it's the best thing is that I got really clear about what motivates me and what's important to me.

[Guy Raz]

All right, so you sort of get through this. You're going through this, this kind of mourning process of being fired and losing a job and also a lawsuit. But you do find. You get back on your feet, you find a job in venture, kind of back to the world of finance again. And this is a venture firm called Mavrin, which was founded by Howard Schultz, who was his venture capital firm.

[Amy Ehrett]

Correct.

[Guy Raz]

What are you. Some of the things that you. Because I'm assuming you had some facetime with Howard Schultz, who's been on this show before. What are some things that you. You learned from him?

[Amy Ehrett]

I learned that this thing inside of me, which is mission based and values based, was an important factor in whatever I did next. And so he validated that that could be true and be have success through that. And I had the good fortune of walking into stores with him and seeing that he started to get on the line when there was a line taking orders. Right. That he was just part of Starbucks. Regardless of him, whatever role that he was in, I also learned that he saw things before other people saw things. He had a gift about spotting a trend. I will never forget. It was the fall of 2007, and we had an investment meeting in Seattle and he walked in and he said, we need to slow down our investment. Now, you remember that bank collapses happened in the fall of 2008. Yes, but this was 2007, a year before that.

[Guy Raz]

Wow.

[Amy Ehrett]

And he was seeing a trend about the purchasing patterns at Starbucks. He was starting to see the consumer's pain or the consumers, you know, the afternoon drink, so to speak, was something that I think they were starting to experience that slowdown. So validating one's gut is an important part of what I saw in Howard. And excellent brand builder as well.

[Guy Raz]

I have to imagine that you, as somebody who really is not built to work for other people, here you are working for other people and obviously had immense respect for Howard Schultz. But you're seeing all these like founders come in energetic, they're psyched about their business ideas, you're vetting them, you're, I have to imagine you're starting to get like, like, like FOMO here. Like I'm, I, I need to be on the other side of the table. The other side of the table, absolutely.

[Amy Ehrett]

I remember my experience being on the in boards where I'd be watching the CEO wishing I was that person while all the other investors got in their Teslas, as I say, and drove away, probably completely relieved that the board meeting was over and I was sitting there thinking, what would I do if I was in their position? And that became more and more and more of what I was feeling.

[Guy Raz]

And tell me where that comes from. Because look, at this point, you're in VC now, you've built up a considerable net worth. Like you've got a nice life and you probably could spend a bit more time with your daughter, I don't know. But what was it about seeing these startup founders who were just grinding, working 100 hour weeks that made you think I wanted to do that?

[Amy Ehrett]

I never felt like I had the big outcome that I wanted. I had a really nice outcome, but I didn't have a big outcome.

[Guy Raz]

You're seeing other people who have $100 million plus exits and you're thinking, I could probably do that.

[Amy Ehrett]

Yeah. And this is one of the things that I'm not sure when I say that guy that I feel proud of that, but it's a vulnerable thing to say, which is that I did not think that I had the outcome that other people that I was hanging out around with. I am in something called ypo and my counterparts are the, you know, the top of whatever mountain there is in Silicon Valley. And I'm thinking, I'm smart, I need to do that. So I think it was ego driven as much as it was, and I think I used the excuse, which I've done all of my life as a working class kid, that I needed more money. I Think I used that excuse because when is enough ever enough of anything in life?

[Guy Raz]

I really appreciate that vulnerability because I think what you just said is something many people think but don't say, and we do. Especially when you're in a status conscious environment, when you're in the San Franciscos or the New Yorks or Los Angeles of the world. I mean, that story can be told again and again and again in many different industries and categories. And yeah, I mean, I hear you.

[Amy Ehrett]

When you're a working class kid and the first one to go to college and you go to Wharton and you work at a blue chip bank and you just keep trying to prove that you can be successful. This is a game I can play my whole life. I can decide that no matter what happens at Madison Reed, it's not big enough because there will always be an AI company that's bigger. There'll always be a SaaS platform that's big. And I have a hard time seeing myself as successful. I don't think of myself as a successful person.

[Guy Raz]

I mean, if the story ended with your time at Maveron, you would be a successful person by any definition of that word. But we haven't even gotten to the thing that we're about to get into, which is the marquee part of this story. And so you are back to the timeline, you are seeing all this happen and you start to think to yourself, I gotta start something, I gotta get.

[Amy Ehrett]

Back in the game.

[Guy Raz]

Gotta get back in the game. And you land on this idea to do hair color. And we're gonna get to that in a moment and what it was gonna be. But how did you tell me what you started? Because I imagine in your mind you're like, I'm going to start something. What? But, but you probably didn't land on, on sort of the cosmetics or the hair care industry or whatever it was going to be right away, did you?

[Amy Ehrett]

No, not at all. And I would say that where I landed initially, a little bit of a twist to what you said is that I want to be an operator again. Right, like that. And that's the way I was thinking, like, oh, like do I want to be an investor? Like, I was bored. You do a deal a year, you kiss a lot of frogs. It isn't results oriented for 10 years or 8 years or. Right. So it's just a different lifestyle and people that love it are great at it. And I found a way to be good at it, but I wasn't great at it because it isn't my passion. Point it didn't make me spring out of bed every morning saying, I'm, I'm here, I'm ready. So the operator part was an itch. And we saw an investment @ Mavron called Dollar Shave Club.

[Guy Raz]

Yes.

[Amy Ehrett]

And we passed.

[Guy Raz]

I know the story. Well, he was on our show. Michael Dubin.

[Amy Ehrett]

Michael is now my independent board member at Madison Reed.

[Guy Raz]

So you had passed on that, and then I think they were eventually acquired by Unilever.

[Amy Ehrett]

Correct. They eventually had a very good outcome. And I was intrigued by the concept of disrupting consumer products by the Internet and bypassing someone's shelf. And that's exactly what Dollar Shave Club did.

[Guy Raz]

Yeah. So how did you land on hair color?

[Amy Ehrett]

I had an analyst who worked for me as a summer intern from gsb and she did a scan of analogous products with repetitive use in the women's beauty category or women's category. And hair color was the number one thing that came up. And I kept saying, this can't be true. These numbers just seem very large. And that's what came up. And then I started to do a bunch of research about online solutions for buying hair color. There must be something that I'm missing. And I wasn't missing it.

[Guy Raz]

So I think at this time it was like $10 billion. There was a report that showed $10 billion was spent on hair colors globally, super fast growing category. And like in the US Alone. I'm just reading from my research that at the time, 90 million women colored their hair. So every six weeks. Every six weeks. So it's a huge opportunity.

[Amy Ehrett]

Yes.

[Guy Raz]

All right, so 2013.

[Amy Ehrett]

Yeah.

[Guy Raz]

Is the year that you founded Madison Reed, named after your daughter. But what did you start to do? I mean, I'm assuming you start to buy some hair dyes and just test them out and find a pain point or something you could improve on.

[Amy Ehrett]

Yeah. So I'm a believer of synchronicity in life. And so while I can't make this story up, while I'm thinking about this, my wife, who turned gray at 25, who spent every 10 days sitting in a high end stylist chair because she doesn't want to be gray, was saying a lot of things about, what do you think is in hair color? Like, I'm doing it this often. It doesn't feel that good. Like it smells, it burns. It's kind of crazy. I'm in Whole Foods doing a Saturday morning shop and she texts me and says, do you mind buying me a box of hair color? And I text back at Whole Foods. She says, yes, I said, well, where? Where is it? And so you go. I go over to the beauty section and, you know, have to. There are six shades. I say, this is not high quality. Like, why are you going to do it at home? She said, well, at Whole Foods, it must have better ingredients. And so I buy a box with dust all over it, meaning it's been sitting there a long time of the darkest black hair color that I can find. And the next stop on the Saturday morning errands was Walgreens, and I was picking up prescriptions and happened to walk down the hair color aisle and turned. And if you've ever looked at it, it is crazy. There is no. There's no product differentiation. It's all $10. It's just an inferior consumer experience. And I bought 30 boxes randomly, just put them in my basket, and went home. And now Claire and Madison are like, what are you doing? And I'm taking them apart, looking at the consumer experience and seeing like, this is torturing a woman, smelling the developer, torturing a woman. And the irony of it is she's supposed to feel beautiful at the end. And so that was part of the mix of all this research that I started to do, talking to a lot of friends. How often do you get your hair colored? Do you care what's in the ingredients? And just. I spent about six months digging deep into just, is this a good idea? Could it work? Why hasn't somebody had a $30 prestige box? What are the limitations of that? And then found out the access you get when you're a VC is that. I ended up getting what was supposed to be 30 minutes on the phone with an executive at L' Oreal and just started to ask a bunch of questions, not under the guise of me starting it, but, like, I want to find out about the industry and what goes on. And he started asking me questions like, are you gonna start something? Like, are you gonna. Like, why are you asking this? And then I finally said, I'm contemplating this. And he said, well, this is something that somebody needs to disrupt, because there's no prestige box that goes to somebody. And if you do it, I'll invest.

[Guy Raz]

This is a l' Oreal executive.

[Amy Ehrett]

Yeah. And he left, like, two months later. So I didn't know that he was leaving. And he was like, this is a really good idea. It's hard, but it's a really good idea.

[Guy Raz]

Now, I just want to put this into context because. And this is really, I think, my favorite part of the story, in some ways, which is you're 55, maybe 56. And you decide to do a startup at that age, which I think is awesome because you really, I mean, you're at a point in your life where you could really kind of throttle back and then. But you're hitting the gas.

[Amy Ehrett]

Yes. I never doubted. Did I have the energy? Did I have the brain power? Did I have the persistence? It was like everything I've done up to this point, I felt like positioned me uniquely to be successful at this business. I'm a better CEO because I was an investor and because I got fired and because I faced into adversity. And, boy, do you face into adversity every single day in these jobs. So what dawned on me was like, oh, I've waited all my life for this. I have waited all my life for this one.

[Guy Raz]

When we come back in just a moment, Amy launches Madison Reed with a Groupon deal, which does not go according to plan. Stay with us. I'm Guy Raz, and you're listening to How I Built this. I just got back from vacation with my family, and I stayed at the most incredible Airbnb in Athens with a view of the Parthenon from the bedroom. It was just amazing. And we had such a great time as a family, cooking together and hiking together. And, you know, I remember thinking while I was there, I could have put my house on Airbnb while I was away. Hosting on Airbnb provides you with another stream of income. And who knows, your earnings could help offset the cost of your trip. Your home might be the perfect place for someone else's time away. The personal touches you've added, your favorite kitchen gadgets, the artwork, all of that can make someone else feel right at home. Your home is probably worth more than you think. Find out how [e-mail] rent host this episode of How I Built this was brought to you by Square. In Square's new series, the Way Up, I sit down with six local businesses. I chart the entrepreneur's journey, the hurdles and the highs, and how Square played a part in helping the business grow. Think about a thriving local business you admire. Maybe it's a great boutique with the softest towels or a local cafe that has the best scones. Many of these businesses trust Square to help manage their operations and grow. For instance, I absolutely love talking to the father daughter duo behind Vala's Pumpkin Patch. They started with a tiny plot of land growing pumpkins, and now they make pies and ciders and welcome up to 20,000 people in a single day. And that Growth. It was made seamless by square. Here are the journeys of six rising American businesses. Visit square.com go biltine to learn more. That's s q u a r e dot com go built. Learn how square can help your business on the way up. Is your AI built to work with the tools your business relies on? IBM's AI agents can easily integrate with the tools you're already using so they can work across your business, not just some parts of it. Get started with AI [e-mail] the AI built for business. IBM. Hey, welcome back to How I Built this. I'm Guy raz. So it's 2013, and Amy is trying to learn all she can about the business of hair color. And one of her best contacts in the industry is this guy she knows who happens to be an executive at l'. Oreal.

[Amy Ehrett]

I emailed him and I said, hey, this is a crazy question. Do you know scientists? And he said, I know these people who have a consultant company that help people develop hair color. And, you know, the private label industry is all in Italy. And so I went to Italy with these scientists, these hair color experts, stylists.

[Guy Raz]

That you hired as consultants.

[Amy Ehrett]

Hired as consultants. And they introduced us to 13 hair color manufacturers. And the first.

[Guy Raz]

What were you looking for? Before we talk about the meetings, what were you. You wanted to just find somebody who was willing to make a dye for you. Hair color?

[Amy Ehrett]

Yeah, I wanted to figure out whether you could do it without harsh chemicals. Like, was it really feasible? There must be a reason that people aren't doing it. I kept thinking, I'm missing something. I'm missing something. And the first 10 contract manufacturers I met with were all guys, and they literally laughed at me.

[Guy Raz]

They said, you have to use ammonia.

[Amy Ehrett]

Ammonia, ppd, resourcinol sulfates. This is all the things that stabilize hair color so it works, and you're gonna try to sell it on the Internet. So they were like, I don't understand. And then lucky number 11, I spent five hours with them. And I was meeting with the CEO. He's since become a very close friend, and he's listening to this idea, and he's like, yeah, you can take the chemicals out, but nobody wants to do that. It's more expensive, and you need to spend more time in the lab, and you need to really do a lot more testing and stabilization. And then he paused and he said, and you're a venture capitalist, and so are you going to raise money for this? And I said, yes. And then he said, we laugh about it today. He says, well, you have to pay me upfront 100% for the first run and all in euro.

[Guy Raz]

Wow. And how much was that going to cost?

[Amy Ehrett]

I think altogether it ended up being like maybe 160,000 of US dollars, because, remember, the first run, a limited minimum order quantity. And when we launched, we only had 19 shades.

[Guy Raz]

You wanted 19 shades?

[Amy Ehrett]

They only could make 19 shades. I wanted as many shades as possible.

[Guy Raz]

But that to me sounds like for a first run, I'm thinking 19 shades. I'm thinking about ice cream. If you're starting an ice cream business, you just start with vanilla, chocolate and strawberry. Because all of the data shows that, that, that accounts for most of what people order. And then you get into the chocolate chip cookie dough and the honeycomb brittle and whatever you want. And I'm thinking it's gotta be the same in hair dye, right? Like, probably only. No, it's not.

[Amy Ehrett]

No. I mean, look at. Every person has a different hair color. So the nuances of your hair is very specific to who you are. So there's, you know, 15 today, different brunettes, you know, and 20 different shades of blonde. 20, right. And eight different shades of red. So we had to have a full enough spectrum of color that people could take us seriously in order. And so we started out with 19 and 19.

[Guy Raz]

This is going from what, to what, like blonde to black?

[Amy Ehrett]

Dark. Black, yeah.

[Guy Raz]

Okay.

[Amy Ehrett]

We have close to 100 today.

[Guy Raz]

I mean, it sounds like a lot to me, but I don't know this industry. The last time I dyed my hair was when I was in. In junior high and I was a punk rocker. I just sprayed it. Sprayed it. I was a punk rocker. Yeah, it doesn't count. But I mean, how long between that visit and the time that they actually had a formulation ready? Like, did they have to do a lot of research and a lot of work on it?

[Amy Ehrett]

And we had to spend a lot of time there because one of the things you do is when you make a color, it has to sit in testing, sort of quarantine for 3, 3.

[Guy Raz]

Months for stability to make sure that it's going to be shelf stable. Exactly. So you're just waiting for three months.

[Amy Ehrett]

And then we're getting models. So we recruited models in Italy that come into their salon and then they color their hair, and then we see what it looks like pre and post. And then you start doing things like looking at it in sunlight, looking at it under uv, looking at. To make sure that it's actually the representation of what the consumer thought they were going to get.

[Guy Raz]

What were you willing to spend before you went out seeking seed money? Like was there a number of people, about $200,000? You said, I will spend 200 and then if it doesn't work, I just, I'll eat it and move on. Yes, but clearly that didn't happen. I mean, so as they're developing this product and you're building the business model, how were you going to sell this? Were you going to, it was going to be a wholesale model. Were you going to go to cosmetics brands and Walgreens and Walmart? Was it going to.

[Amy Ehrett]

I was going to do what dollar Shave Club did, which is direct to consumer online. Yes.

[Guy Raz]

Because that is more profitable if it can work.

[Amy Ehrett]

Absolutely. More profitable. Higher gross margins. And the one little thing that I realized was color matching. The person coming into our site was going to be the most important thing. When you walk into a stylist, they are looking at what your hair looks like at that moment and they're deciding what your hair could look like if they put various colors on it. That's what they get trained to do. There is science to this, not just art. And so I was thinking, well, geez, maybe we could do a quiz. And it had 18 questions that you were answering, including what color is your hair now? How much gray do you have? When the gray grows out, what's the texture of your hair? And then what is your desired result? And we started to see very early on actually measuring customer satisfaction and net promoter score whether or not this algorithm, because that's what we built, machine learned algorithm worked. And that was the moment that we understood we had something here because the retention from the beginning and the color predicting from the beginning was very accurate.

[Guy Raz]

All right, so you were going to sell this direct to consumer and you had a hunch that there was an opportunity here. So here's a question. Was one of the ways you thought about positioning it in relation to your competitors, your potential competitors, was we are safer or we don't have harsh chemicals. Or did you want to avoid that because that's also can be like a minefield.

[Amy Ehrett]

Yes. And yes. We marketed and still market as ingredients you could feel good about. And we talk about an ain't free formula. So we're very, we're factual, we're not aspirationally. We don't use the word clean because that's a word.

[Guy Raz]

That's a meaningless word.

[Amy Ehrett]

It's a meaningless word, but lots of people use it. So we knew that if we got early adapters, maybe people that had been sick and they cared more about what they were putting in and on their body that we had an opportunity. And so the marketing in the beginning.

[Guy Raz]

Was about better for you and looking for influencer types.

[Amy Ehrett]

Initially looking for influencers, but also we saw an opening with the age group that we were actually targeting, which was women that are starting to go gray.

[Guy Raz]

So like late 30s?

[Amy Ehrett]

Yeah, 38 to be exact. 38 and older. That's when acceleration of gray hair starts showing up. And our business model makes sense, is based on the repetitive usage. So the more someone colors their hair, the more money they're worth to us. And so it was very important to get that market. 50% of women in the US color at home. So that is a bigger market than people thought. And that's who we were focused on, the at home user that wanted a prestige product with better ingredients who had gray hair.

[Guy Raz]

So, all right, so it's 2013, you're working on the formulation, you find this Italian manufacture and you decide to raise, or you need to raise money because you're, you can't, you don't have the funding to do it yourself. And in April, I believe April of that year of 2013, you raised $4 million in a series A round with participation from Maveron and, and where you'd worked. And you weren't going to launch until. Remind me when, when were you actually going to launch?

[Amy Ehrett]

15 months later, later. July 2014.

[Guy Raz]

And so, and I believe that even before you launched, you did a Series B round.

[Amy Ehrett]

That is correct.

[Guy Raz]

So was the idea here to go in big, to really go in hard in case some of the established players catch on and try to compete was the idea. We're going to go in well funded and we are going to go out of the gates just like guns blazing.

[Amy Ehrett]

Yes. And the idea was, since we knew that we wanted it to be a subscription based business, that building the core of the subscriptions would scale the business faster. So you have to, you need a splash to get above the sort of noise for these women and figure out a way to stop them from using what they're using now and have them come to you. So having been a vc, I knew that it was going to cost a lot to acquire customers initially and the.

[Guy Raz]

Cost was going to be through advertising, presumably.

[Amy Ehrett]

Correct. Yep.

[Guy Raz]

All right, so in 2014, July 2014, you were ready to launch, you got a website ready to go. What was the launch plan? How were you going to get on people's radars?

[Amy Ehrett]

So we had hired a PR agency that was pretty well known in beauty and we had developed a launch plan of getting a very famous stylist to tell people that this was efficacious, that this was salon quality hair color that they could trust and use at home. And we had a big, what would now be called an influencer event in their salon in New York City. And lots of press came, lots of people let us do their hair, believe it or not. And it was very, very successful. And so now all of a sudden, all of these blogs, all of these magazines, all the online magazines and content are saying, this hair color is amazing and you can buy it online and it's got, it's better for you. And so initially, the first bang, if you will, was really PR and influencer driven.

[Guy Raz]

And you do, I think a deal early with Groupon, which we've also told the story on the show, is an amazing story.

[Amy Ehrett]

Yes.

[Guy Raz]

And at the time it was one of the hottest startups, maybe the hottest startup in the United States. And what was the deal that you did with them?

[Amy Ehrett]

They could offer to their base, which was extensive, a free box of hair color if people came to our site, gave us their email address. And it was trial. Right. The whole concept was trial.

[Guy Raz]

How much did that cost you? You must have given away a lot of free boxes.

[Amy Ehrett]

We gave away a lot of free boxes. The good news of our business is it's very high margin. Right. So it appeared like a lot of money, but compared to the cost of acquiring a customer, it wasn't a lot of money compared to a Facebook ad. Right. So I'll never forget one of our engineers early on said, I'm going to build this thing in the office where a bell would ring. And the bell would ring every multiple of 58. Because our first address was 58 South Park. And the Groupon thing went live on Groupon and the bell just. There was like three days where the bell was ringing every millisecond.

[Guy Raz]

Wow.

[Amy Ehrett]

There were a lot of people that took the offer for the trial.

[Guy Raz]

And did you pay for the shipping cost too?

[Amy Ehrett]

Yes, we paid for everything.

[Guy Raz]

Oh, wow. So that was a big, big risk.

[Amy Ehrett]

Yes.

[Guy Raz]

Because you're, you're basically saying, look, we might give away A million, $2 million worth of this stuff and you know, retail price or who knows? I don't know. But. But it's a big risk. I mean, because you're hoping that people are gonna come back to you.

[Amy Ehrett]

Exactly.

[Guy Raz]

And buy you.

[Amy Ehrett]

Yes. And so we had really good success with the. We were shocked, the number of people who took the box. But then again, it was free, but it was hair color and a big risk.

[Guy Raz]

Do you remember how many people took it?

[Amy Ehrett]

Yeah, I think that it was maybe 7,000 or something like that. So in a small company, that was substantial from the beginning. Out of the gate, you got 7,000 customers.

[Guy Raz]

Yeah.

[Amy Ehrett]

Then the not good thing happened. Very few of them came back.

[Guy Raz]

That's Groupon. That was the Groupon story. People went to the mochi shop and got their matcha lattes and whatever, but they never came back.

[Amy Ehrett]

Yeah, that's called not. The business model wasn't sustainable. And for us it was like, oh, okay, this was deal seekers. That's what we thought. These are just deal seekers. The box is probably sitting there, never used. Right. And so that taught us, like, a lot about these kinds of deals. However, the boomerang of that was all that email that went out to people that didn't take the offer. There was all of a sudden a lot of exposure and the PR articles and the influencers talking about it. And slowly but surely we started to introduce in those days just Facebook ads, which in those days weren't expensive compared to what they are today. And we were able to start targeting that very specific 38/ woman professional of a certain household income level. And sales started to trickle in. Trickle. The word trickle. But the great news was people that purchased it stayed. So we learn, trial by free, not so good. If I pay for it and I love the results, they stay. And that has been a hallmark of the company. High retention.

[Guy Raz]

Amy, I'm curious about fundraising, right? Because on the surface, somebody could say, okay, well, in 2015, so about a year after you launch, you do a Series c and it's 16 million. By this point, you've raised 32 million. A lot of people might hear that and think, you know, wow, she had no problems raising money. There were people throwing money at her. You were a very experienced vc. You had run several businesses, you had started your own business. So you were very experienced. I mean, you're in your 50s, and there are reasons why somebody at that phase in your career was going to be successful. But I don't think that's the entire story. Even though the number looks high, from what I understand, it actually wasn't as easy as it might seem to raise that money.

[Amy Ehrett]

The Series A was highly sought after for some of the reasons that you talked about. And then when we got to the Series C, not so much. And from that period on, it has been a difficult business to raise money for. And here's the key. Most people invest in Things they can relate to. Yes. So if you are a guy and you know nothing about hair color and you don't color your hair, or if you do, you're not telling anyone, you don't pay attention to how much your wife or your daughters or those people are doing it around you. It isn't relevant. So it wasn't a. In retrospect, it felt very personal at that time. Remember, I identify myself with being successful. Successful. What do you mean? You said no. Are you telling me my baby is ugly? But in retrospect, I've come to realize that this was not personal. It was just relative to using your capital. This isn't the place that you'd want to invest in because you didn't think this is the important part that would get venture returns. Right? Venture. It's the, it's not. I don't believe you're going to have a successful business, Amy. I don't believe you can give me a 10x. Right. That's the, that's the, that's the piece.

[Guy Raz]

All right, so you've got this, you've got, you know, you're sort of growing. But imagine it's going to be a ways before you start to see, you know, the kind of growth that, that, that, that you were hoping for. But I mean, this, again, this is an exciting category and you're getting more and more attention for it. And I know in 2016 you kind of start to explore like a physical shop. You do a pop up in New York. At that point, had you already started to talk to people about having, like, coloring locations where people could actually like salons, or were you not quite there yet?

[Amy Ehrett]

There were two things that happened that spurred that. One stylist started reaching out to us, asking if they could buy our color directly from us to apply to their customer's hair in their salons.

[Guy Raz]

Like at wholesale.

[Amy Ehrett]

Yeah. And that was like, oh, curious. That's curious to me. And it was not like three, it was like hundreds. And at this point we had maybe eight stylists that were in our call center. And I started to ask them, do you think this product is good enough to use as salon quality as we advertise? And they're like, absolutely. These are people that used to work in salons. So yes, I went to the board and the board said, interesting idea. Why do you think you can disrupt salons? Because the only reason to do this is if you could do it better than a traditional salon. Which took us down a technology path, much like the path of that color Matching quiz. Could we make appointments on a mobile phone? Could we keep all the data for the customer? Could we build an app for stylists that work for us that made the application only be 90 minutes, which is part of the model. You're in and out in 90 minutes. And so they said, you have $75,000. Go wild. See what you can do. So we opened a small pop up in flatiron. We spent 25,000 of the 75 for out of home advertising, like billboards on sides of the buses and phone booths, still foam booths in New York. And in five weeks, we were totally full and we had no idea what we were doing. And it had been an operating salon, so we didn't need to do the renovation to put sinks in and stuff. But it was really clear that there was a lot of things that were going well, but a lot of things that we had no idea about.

[Guy Raz]

But that was the, that was the genesis. That was where you were like, we've got to have a permanent location, permanent color color bar, hair color bar.

[Amy Ehrett]

We need to play in 100% of hair color, not just the at home box.

[Guy Raz]

And I know the model was direct to consumer, and now you've got color stylists, you know, contacting you. So now you're thinking, okay, here's another distribution channel. And then the color bar would be your own salons.

[Amy Ehrett]

Correct.

[Guy Raz]

So, I mean, now you're talking about, you know, a much more diversified distribution model. But not yet. Still not yet. Thinking about working with, with, with retailers, actually.

[Amy Ehrett]

I believe the pop up happened in 16, but shortly after, in the beginning of 17, Ulta contacted us.

[Guy Raz]

Ulta contacted you? Ulta Beauty. And they said, hey, we want to sell these in our. Which is great to be contacted by them rather than try and pitch them.

[Amy Ehrett]

Yeah, it's amazing how branding works. I do radio and podcast commercials to tell the story about naming this after my daughter. And a very senior person at ULTA kept hearing it on the way to work and went into the buyer and said, do we have that hair color that's named after a founder's kid because it's better ingredients and we're going in that direction. And the woman was like, I don't know what you're talking about. And they then they contacted us and it just, again, synchronicity. The buyer used to work for our head of product at Sephora. They knew each other. It was just serendipitous. And in my infinite wisdom, I said, we don't go on other people's shelves We're a D2C model. We control all of our own business. And my head of product looked at me and said, amy, I think we should just hear what they have to say. I think you're crazy.

[Guy Raz]

Tell me a little bit about your hires. You know, when you started to raise money, you know, let's go. Jump back to 2014. When you launch, did you think, I'm just gonna go for the top people in this, you know, in the industry, and I'm gonna recruit them and try and get them to work with me?

[Amy Ehrett]

Yes. And we had four co founders when I started, and I believed that they all represented sort of the cream of the crop from where they came before. And all three of them are gone from the company through some of the most painful experiences that I've ever had in my life. These were three people that I cared deeply about. Two were personal friends. And in one case, I've lost that friendship. That is really hard. And it set us back as well, because when a business starts scaling, but the people that you have there can't scale with it, the business moves at the rate of the slowest senior person. Yeah, that's what I've come to understand. And I learned a lot. My series A investor said, amy, four co founders is too many. And I said, no, it's not. And boy, was he right.

[Guy Raz]

When we come back in just a moment, Amy learns some very hard lessons about hiring, firing, and moving on. Stay with us. I'm Guy Raz, and you're listening to How I built this. And now a quick vital break for a little more from our sponsor, Vital Proteins. Vital Proteins helps you look good and feel good because it supports healthy hair, skin, nails, bones, and joints all in one collagen powder. After 30, our body's natural collagen production can start to decline by 1% per year, which may lead to the appearance of fine lines, saggy skin, and your bones and joints not moving like they used to. That's where Vital Proteins comes in. They're the experts. The number one brand of collagen peptides in the US And Vital Proteins collagen powder is unflavored, so it tastes great and can easily mix into your coffee, your smoothie, or any of your favorite drinks. I put vital proteins into my post workout shake every morning, and it's awesome. Get 20% off by going to www.vitalproteins.com and entering promo code built at checkout. These statements have not been evaluated by the Food and Drug Administration. This product is not intended to diagnose treat, cure or prevent any disease. As a founder, you're moving fast toward product market. Fit your next round or your first big enterprise deal. But with AI accelerating how quickly startups build and ship, security expectations are higher earlier than ever. Getting security and compliance right can unlock growth or if you wait too long, stall it. With deep integrations and automated workflows built for fast moving teams, Vanta gets you audit ready fast and keeps you secure with continuous monitoring as your models, infrastructure and customers evolve. Fast growing startups like LangChain, Rider and Cursor trusted Vanta to build a scalable foundation from the start. I love that over 10,000 companies, from startups to huge enterprises, trust Vanta because it makes me trust them. Go to vanta.combilt to save $1,000 today through the Vanta for Startups program and join over 10,000ambitious companies already scaling with Vanta. That's v a n t a dot com built Vantage to save $1,000 for a limited time. Hey, welcome back to How I Built this. I'm Guy Raz. So it's shortly after launch, around 2014, and Amy has discovered that running Madison Reed with three other co founders is a lot harder than she thought.

[Amy Ehrett]

This was on. This is on me. This is definitely on me. These are four, you know, three extraordinary human beings, wonderful human beings. This was Amy's magical thinking, as I call it, to put something together with a group of people that I liked, which is a bias by the way, that one hires for liking a lot. As a certain bias that I would suggest everyone start thinking about. It's not just about like, and I thought I could will it to work and it didn't. And it cost the, I would say it cost the company a couple of years in retrospect of, of, of what I would call substantial developmental leaps that we needed to take.

[Guy Raz]

I mean it's very hard. I think a lot of co founders success stories happen because of luck, really do. It's like marriages. But some people have certain strategies for figuring out is this person going to be the right fit? What do you think happened? I mean, were you just, do you think you were mainly focused on sort of resume and credentials rather than is this person the right fit with me?

[Amy Ehrett]

I think that all four of us were the right cultural fit with each other. We wrote the values of the company together and they're still the values of the company. So there wasn't a difference of, if you will, how we wanted the company to operate or how we treated people or what were the values I think that I did not get the level of expertise that one needed to be in a technical business like this. This. So one co founder was focused on finance and the supply chain. And a supply chain part of this business is really a big deal, especially when you have product coming from Italy. And what I thought was that his experience would suggest he knew how to do that. And that started to fall apart as soon as the company scaled.

[Guy Raz]

How did you. How did you unwind that? I mean, you are now the only. You're the last person standing here out of the four. How did you. I mean, it must have been so complicated because you're running a company, you're raising money, you're trying to be a leader in this category, and then you've got this executive team that you realize it's not the right. It's just not the right team.

[Amy Ehrett]

I had to learn really quickly honesty and directness with people and to be really clear about expectations and to try to separate that I like you from. This isn't working. You're not doing your job. Here's tangible examples of what is going on. In the first case, it was just clear to everybody in the company that the first guy that left just. He was going through a hard personal time, which made it even worse because, you know, it was a hard time in his life. And so there was a lot of honest conversations between us. And that was amicable. In the leaving. I think the key about someone's leaving is to figure out what they need, what motivates them to be okay. And in that case, you know, kept a desk, kept being listed as a co founder, kept an email address. In the second case, it was clear that this person couldn't do their job as the CMO of the company, that there were no. We couldn't get things done. The hiring was slow, the branding was not as crisp as it needed to be. The media allocation of dollars was off. And that required. That was my closest friend and that required, required just really honest, really honest, painful conversations. We have remended that relationship, but it took a long time. And then the third one was the hardest because he was the closest to me as the co founder and handled finance and handled logistics. And I'll never forget that two other relatives, relatively senior people, came to me and asked me to come into the conference room and said, amy, where are you? And I'm like, what do you mean? And they're like, so and so is really terrible at his job. And why aren't you doing anything about this? Like, are you not paying attention. And so my denial. I have this saying now, when you know, you know. And we spent. I have spent. Spent a lot of time, like rationalizing and this would be bad. And here's the reason why I can't. And every single person that is no longer at Madison Reed has gone on with great things in their life with courage and dignity, and we've treated them well. But I could have skipped. I could have skipped a bunch of humiliation of them. I think it's humiliating for someone to do a bad job.

[Guy Raz]

Yeah.

[Amy Ehrett]

Yeah.

[Guy Raz]

All right, so let's get back to the timeline of the story, because where we left off was you were now ready to open a permanent salon, a permanent location. And I think the first one was in New York. Right.

[Amy Ehrett]

The first one was the pop up. And flatiron closed and we found a permanent space one block away. So Flatiron was the first one in New York.

[Guy Raz]

Flatiron. Okay.

[Amy Ehrett]

Yep.

[Guy Raz]

And that was in 2017.

[Amy Ehrett]

Correct.

[Guy Raz]

But now imagining. Imagine there are two things happening. One is or three things. You've got Ulta. They want to get into the Madison Reed business and sell your stuff at Ulta stores. You've got a plan to grow to create more of these color bars where people could go in and get their hair dyed instead of doing it at home, you know, or they'd have an option. The third thing was you were really leaning into early into AI. You guys were like, I think you really thought and maybe even still think of your company as almost like an AI company that using the tools that were available and they weren't as good as they are now, I guess to help people choose the products.

[Amy Ehrett]

Yes, we have a technology enabled company. We all know that a busy woman lives her life with her phone. And so the camera, we talked about taking a photo. The camera became something and is something where we let you take a picture and on one side of your hair, you see your natural color and then you can swipe and see Madison Reed colors and see what you might look like when somebody uses that. They convert 30% more than any other customer that doesn't use it. And in addition, the same quiz is given to every customer on their first Madison Reed hair color bar visit. Because we have a belief that we should allow you to go to any one of our 95 locations and have the same outcome. And so if we don't log in the color that the stylist puts on your hair, that wouldn't be possible.

[Guy Raz]

How many shades do you have today, by the way?

[Amy Ehrett]

Close to 100.

[Guy Raz]

Wow, that's a lot of shades of hair. What is the biggest sort of challenge in terms of convincing people that this is what they should buy? Like there's L', Oreal's, the 800 ton gorilla on the block here, and they probably sell more in a week. I don't know what it is globally, but can you say this is safer or is that kind of treading? I mean, could you say, hey, because of the ingredients we use, you're not going to die of some disease. You can't say that. Right. But I mean, how can you get to making claims without running the risk of getting sued?

[Amy Ehrett]

So we've invested a lot here to be safe about this. And we talk about a better for you formula. And we are very factual about these eight things that we factually have taken out that nobody else has taken out.

[Guy Raz]

What have you taken out? Tell me.

[Amy Ehrett]

Okay, you're gonna test my ability here.

[Guy Raz]

Don't have to remember all of them.

[Amy Ehrett]

Just give me ammonia, ppd, resource, phthalates, gluten, blah, blah, blah. Right, got it. And we've put in three things. Ginseng root extract, argan oil, and one other thing. And that it is our hair color is much gentler on people's hair, so we can use words like that.

[Guy Raz]

I'm curious about the branding again though, side of this, because when you look at a matte reed box at Ulta, it doesn't say that on the box right away. It just says hair radiant, hair color, kid. Or you know, like, you know, sometimes you see like food, like an ice cream brand that says like you know, ten hundred calories and three grams of sugar and blah, blah, blah, just like the macros. Right. They call it in food. Would there be an advantage to putting those macros or macro equivalent, like argan oil for beautiful, blah, blah, blah, collagen for great skin. Like, I don't know, would that, would that make a difference?

[Amy Ehrett]

On the back of the box it says those things. But I think. Have you thought about being a CMO guy?

[Guy Raz]

I'm right. That's my next job.

[Amy Ehrett]

That was pretty good.

[Guy Raz]

All right, so as you begin to expand, by 2019 you've got nine locations. New York, San Francisco, Dallas, and then Atlanta, I think Atlanta to expand. And you come into 2020 with like 130% growth in sales. You're reportedly generating like 100 million revenue. And then we've got the pandemic. Now at this point, you had nine locations that had opened up and you got to shut them down, especially salons they were hit so hard, like restaurants. But you did something interesting, which is you did not, I mean, you didn't furlough the 300 people who worked at these color bars. You basically, I guess, what, retrained them to be sales reps. Yeah.

[Amy Ehrett]

One of the things that was happening was the online business exploded. But it was a lot of women that went to salons, so they had no idea what color to buy, even when the quiz told them they were unsure. So our inbound, we were getting 16,000 inquiries a day.

[Guy Raz]

Wow.

[Amy Ehrett]

Yes. So you can imagine how overwhelmed our customer service department was. And so I decided, I said, I don't know how long this is going to last, but these people need jobs and we need more trained colorists. The majority of the people in our customer service are X colorists. So we had a way to say, okay, out of the 300, how many of you want to stay? And we'll send you a. We, I think bought. Well, we bought 300 Google Chromebooks in two days with headsets and shipped them to the people that wanted to stay and then did what would have been months of training in four days and put them to work. Some of them are still in customer service and never went back to stores.

[Guy Raz]

I mean, but from a business perspective, where you did, you have, I mean, we've had a lot of brands on the show that, you know, they were running out of cash, they were not doing well, their sales went down 80% overnight. It sounds like the opposite was happening with you guys.

[Amy Ehrett]

Yes, the opposite was happening. However, I had this instinctual thing like this is going to come to an end. So sure enough, past pandemic, our e commerce business started to, you know, we weren't gaining as many customers, but we also did an interesting thing was we took a lot of real estate because we understood that commercial real estate in four walls was at an all time low.

[Guy Raz]

So basically you took advantage of all of the cut rate prices to sign leases and that enabled you to expand.

[Amy Ehrett]

Yeah, you're never going to get real estate in places that we have it today. We could never afford it today if these were brand new deals. And I knew that all those people that came to us were going to go back to their stylist. Yep. So could we give them an opportunity to stay in brand? And it's hard to measure that. We think a number have stayed in brand, but we've also grown since then. So all our numbers as a company never went down. We kept the doubling of the business and then have grown since then. Every year.

[Guy Raz]

All right, here's a question for you. In that heyday, sort of crazy Covid days where you know, many of your customers or most of your customers, they couldn't go to their stylists or their colorists so they were buying your products, doing it themselves, calling the customer service line, getting help, knowing that there was a possibility that they were going to go back to their colorists and they were not going to buy your products. Was there any moment where you thought now is a good time to see about getting acquired? I mean we talked about Dollar Shave Club he founded in 2011. I think he was acquired in 2016. Right. And so did you ever. Did that ever cross your mind like hey, we better strike while the iron is hot?

[Amy Ehrett]

Yes, but having been an investor, I thought the chances of that were slim because remember in the pandemic a lot of these strategics just went away. They pulled back, they pulled back. And in addition, remember I have a very nascent business model so I got it really quickly, like oh, this could be really good but not now. And there's a other window that we had already passed. Many of these strategics buy things that are sub $100 million in revenue. When something gets bigger, it becomes harder for them to get the board to approve.

[Guy Raz]

Then you have to go to a Unilever or a Procter and Gamble at that level.

[Amy Ehrett]

Exactly. So our window sort of we self qualified ourselves out of a certain window. And now I will say that to you that. But there's a limbo window now, a significant limbo window for consumer companies now.

[Guy Raz]

Tough window for consumer in general.

[Amy Ehrett]

Consumer. If you're not AI, you're not. Right. That's the conventional wisdom that if you're not AI, you're not something that's going to give venture returns. Yeah, of course the founder is going to tell you how different we are. As I call it, the lies one tells themselves. This is one of the things I talk about in the company all the time. You can believe your own stuff because you're used to saying it.

[Guy Raz]

I mean everything is cyclical of course. And so we're now talking in mid-2025 and yes, I hear this across the board that for consumer brands it's just a different category. Especially in food. Like it used to be if you had 20 million a year, you're going to get acquired for 6.7x of that. And now it's a different world. You have to be doing at least 100 million to get even the attention of a big multinational choir. And so when you say there's this limbo window, you mean there's a certain threshold that you have to hit to even attract the interest or there just is a lot of.

[Amy Ehrett]

Well, when Mike sold dollar Shave Club and in those days, growth was the factor that everybody looked at, right. Profitability wasn't. Now the world has shifted to wanting both people want you to grow at least 20 plus percent top line, but they also require profitability. And to do both those things is.

[Guy Raz]

Not easy, very hard, extremely hard.

[Amy Ehrett]

And if you look at the IPO window, it's non existent for consumer companies. So we're still like anybody else, fighting the good fight. I mean, it's not gotten easier.

[Guy Raz]

So I mean, here we are 2025 and you have a lot of stores and it is a known brand in this space and it's kind of changed the conversation around hair color. But it is a more challenging time for all consumer brands for a variety of reasons. I mean, and you know, there's uncertainty in the economy and there's competition, tariffs, all kinds of things going on. I mean, did you, when you, when you started this process in 2013, did you think that it was something that you would probably sell or it would get acquired in about, within about 10 years or was that not on your mind?

[Amy Ehrett]

I thought it would take 10 years. I thought that this kind of category because you have to build your reputation and efficacious feedback, you know, really different than a razor. Right. This is like you've altered my appearance. So now I got to figure out whether I'm willing to give you the business to take that risk. So I thought it would be slower. I also thought that we had a chance to build something that was a legacy, an iconic brand. The chance change the industry. Remember, we're using the same box of hair color in our hair color bars that we sell. It is not a different product. It's the same. So we're an omnichannel business where the box of color we think is superior. Would I have predicted this curveball now? No. So I just like every other entrepreneur in growth stage company, because that's what we are. We are more a private equity target. I wouldn't have predicted the IPO market closing. I wouldn't have predicted some of the instability that consumers are feeling. But my head's down every day because I want that big outcome.

[Guy Raz]

And so now that the goal, not just for you, but for virtually every consumer brand, is growth, profitability, you got to hit both of those things.

[Amy Ehrett]

And we are doing both. We are a Profitable company now. We crossed profitability last year.

[Guy Raz]

Congratulations.

[Amy Ehrett]

Thank you. And we are growing pretty significantly and it's still hard. I think consumers in general are fatigued and scared of the price of eggs and gasoline. And for any consumer company, it has. It has an impact on the emotional state of your buyers. I also think that this is a good thing for us to prove that hair color is pandemic proof and recession proof, because that just means it's going to happen no matter what happens.

[Guy Raz]

Like lipstick.

[Amy Ehrett]

Like lipstick. The lipstick effect.

[Guy Raz]

Yeah. When you think about the journey you took and all the twists and turns of where you are now, again, I know that the word success, you have a difficult relationship with which I think is healthy. I think a lot of people actually do. I do, too. But would you say that your success has more to do with how hard you worked or has more to do with just luck and being at the right place?

[Amy Ehrett]

I think there's an element of both. I think I work really hard, really hard, and I think I've been lucky. As I used to say in venture. Great venture capitalists position themselves to get lucky. They hang around in the right places and they talk to the right people and they know enough relationships and they have the capital. But most of the time their outcomes have some luck to do with it. So I think it's a healthy mixture of both those things, and I feel grateful for that.

[Guy Raz]

My only concern, and I'm just going to be very frank with you, is that if you do get acquired, you're just going to. You have such itchy feet. You're going to start another company. You're going to be like 75 and.

[Amy Ehrett]

You'Re going to be ready.

[Guy Raz]

I'm ready to go.

[Amy Ehrett]

That's a dance. Yeah. As I joke with my investors, I will have a walker. As I ring the bell on the New York stock exchange, maybe 120, they're at your desk, by the way. They're kind of a similar age. So we'll be together with three walkers. And so I don't know, you know, I'm. I don't think I'm cut out to retire.

[Guy Raz]

I think you're not. I think you need it.

[Amy Ehrett]

Yeah, I, you know, I think a lot of it is upbringing. I was raised by a strong woman. You know, in some ways, the harder it gets, the more I dig in. My coach and I talk about, well, could you still be really motivated but not have to torture yourself? That's the essential question. And I think the answer to that is yes, I'm getting there, my wife would tell you I'm much more pleasant to work with.

[Guy Raz]

That's Amy Ehrett, founder and CEO of Madison Reed. By the way, since the hair color is made in Italy, all of the shades are named for Italian cities. There's Parma, Positano, Siena, Napoli, Verona, Milano, and Amy's favorite, which she happens to use on her own hair, a light, icy hue called Roma Blonde. 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 miss a new episode of the show. And if you're interested in ideas and insights from the world's greatest entrepreneurs, sign up for my [e-mail] or on substack. This episode was produced by Sam Paulson with music composed by Ramtin Erabloui. It was edited by Neva Grant with research help from Iman Maani. Our engineers were Patrick Murray and Kwesi Lee. Our production staff also includes Casey Herman, Alex Chung, Kerry Thompson, Katherine Cipher, Karla Estevez, Noor Gill, Rommel Wood, Andrea Bruce, 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 plus 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 hey everybody, it's Nicole Byer here with some hot takes from Wayfair. A cozy corduroy sectional from Wayfair. Um, yeah, that's a hot take. Go on and add it to your cart and take it.

[Amy Ehrett]

A pink glam nightstand from Wayfair.

[Guy Raz]

Scalding hot take. Take it before I do. A mid century modern cabinet from Wayfair that doubles as a wine bar. Do I have to say it? It's a hot take. Get [e-mail] and enjoy that free shipping too. Wayfair Every style, every home.