It’s Kombucha Thursday at the Santa Monica headquarters of The Honest
Company, which means that groups of young, stylish workers gather at
communal tables in a converted toy factory to slurp fashionable
fermented tea. Jessica Alba, Hollywood star and company cofounder, sits
in the adjacent room. She’ll join her troops shortly, but for now she’s
transfixed by a box of tampons that looks more like it holds an
expensive candle than Kotex. “Dope!” she declares, approvingly.
“We’re using all-organic cotton and plant-based polymer and a
bio-plastic applicator,” says the 34-year-old actress earnestly,
contrasting that with the plastic content of drugstore tampons and their
effect on hormones. Honest’s new feminine care line launches in July.
Alba can go similarly deep on almost all of The Honest Company’s 120
products, whether the ingredients in a new organic beeswax sunscreen or
the clever insulation pocket hidden inside a chic $170 vegan-leather
diaper bag. Yes, she has a pretty face — it seems as if every men’s
magazine has named her the most beautiful woman in the world at some
point — but it’s the details from which great fortunes stem.
Details and hard work. Alba laughs about how she once worked an 86-hour week as the star of James Cameron’s sci-fi TV series,
Dark Angel
— the series that launched her career. Now, she says, she spends those
86 hours at a vintage teal blue desk, overseeing marketing and brand
development for a company that feeds a growing demand for safe, nontoxic
products, particularly among young helicopter parents who treat
children — and what goes near or inside them — like porcelain.
Safety sells. The Honest Company has experienced an absurd level of
growth. In 2012, its first year selling products, it hit $10 million in
revenue. By last year it was $150 million, and industry insiders are
predicting over $250 million this year. The company is focused on growth
over profits, boasting a current valuation to match: $1 billion.
That figure means Alba, who owns between 15% and 20% of the company,
according to a source with knowledge of her investment, is sitting on a
fortune of $200 million. She’s on her way to earning a spot on FORBES’
new ranking of America’s Richest Self-Made Women,
just $50 million shy of Beyoncé and Judge Judy, who are tied at number
49. The only other two celebrities to make the inaugural list are Oprah
and Madonna. The difference is that foursome made their money in their
core field, media and music. Alba, at a young age, has done it in a
completely unrelated industry. But ask Alba and she’ll tell you she and
Honest are just getting started. “If we really want to make a difference
in the world and people’s health, it’s billions and billions of
dollars, not just one,” she says, surveying the open-plan company floor
from a conference room above its wooden rafters.
Like most great ideas, The Honest Company was inspired by a need that
wasn’t being filled. In 2008 Alba was newly engaged to Internet
entrepreneur Cash Warren and pregnant with their first child. At a baby
shower thrown by family and friends, she remembers her mother advising
her to use baby detergent to prewash the piles of onesies she’d received
as gifts. She used a mainstream brand and immediately broke out into
ugly red welts, harkening back to a childhood spent in and out of
emergency rooms and doctors’ offices.
“She was the most sensitive child,” remembers her mother, Cathy Alba,
who wasn’t referring to her daughter’s emotional well-being. Raised on
Air Force bases in such places as Biloxi, Miss. and Del Rio, Tex.,
Jessica’s bad allergies and chronic asthma made her predisposed to
pneumonia, which she contracted about twice a year, often leading to
two-week hospital stints.
Now covered in hives again — and wary of having her baby relive her
own experience — Alba spent late nights on Google and Wikipedia
researching the contents not just of the offending detergent but also of
everything in her bathroom cabinet and under her kitchen sink. “I was
like, ‘How can this be safe for babies if I’m having this type of
reaction?’” she says. What she found terrified her: petrochemicals,
formaldehydes and flame retardants in everyday household products from
floor cleaners to mattresses. Some were listed on the ingredients label
plain as day, with others disguised under the catchall of “fragrance,”
which is entirely legal.
Armed with Internet printouts and fear for the health of her unborn
child, Alba first tried to shop around the problem but grew irritated
trying to find natural and eco-friendly products that weren’t either
extortionate or seemingly designed for yurt-dwelling vegan yogis. Or
both. “I felt like my needs weren’t being met as a modern person,” she
says. “I want beautiful design like everybody else. But it shouldn’t be
premium-priced, and it should, of course, be safe.”
She tried making her own cleaning products out of baking soda,
vinegar and essential oils but wound up with something closer to salad
dressing. So when she came across Christopher Gavigan, who for seven
years led a nonprofit called Healthy Child Healthy World, she, like most
new mothers, asked him what to buy.
“They don’t want to be that investigatory weekend toxicologist,” says
Gavigan. “They just want someone to hold their hand.” He explained that
several companies with “green” credentials like Vermont-based Seventh
Generation were doing good work across some product categories, but
there was no one umbrella brand positioning itself as the go-to for all
things eco-friendly, safe and nontoxic.
A lightbulb went off for both of them. Pretty soon Alba and Gavigan
were polishing off wine on nights and weekends, cooking up a business
plan and buying up Web domain names with the word “honest” in them.
Through her husband, she met Web entrepreneur Brian Lee, a trained
attorney who had hit it big with LegalZoom.com, an online
legal-documentation service he cofounded with Robert Shapiro of O.J.
Simpson infamy.
“I made some introductions for her and said good luck,” says Lee, who
looked at Alba’s 50-page PowerPoint in 2009 but didn’t bite. He says
now he was simply tied up launching subscription shoe site
ShoeDazzle.com with then partner Kim Kardashian.
Meanwhile, Alba was busy with her Hollywood career, starring in the likes of
Valentine’s Day,
Little Fockers and
Machete, all of which premiered in 2010.
Alba kept Gavigan on her payroll as a consultant. By 2011 she had
turned herself into an expert on consumer products and traveled to
Washington, D.C. to lobby for updated legislation. She was — and is —
particularly focused on reforming the 1976 Toxic Substances Control Act,
which has allowed more than 80,000 chemicals to remain in household
products untested. Only five are regulated by the Environmental
Protection Agency; just 11 are banned from consumer goods. (In Europe
that figure is more than 1,300.) “Enough people have to get sick or die
from a certain ingredient or chemical before it’s pulled from the
marketplace,” says Alba.
Alba at Honest HQ in Santa Monica, Calif. Photo: Jamel Toppin for Forbes.
For Alba’s husband, Cash Warren, it was a lesson in climbing a steep
learning curve. “I didn’t know much about all the chemicals that were in
our consumer products, so she educated me on this epidemic,” he says.
“It felt massive, so I was a little reserved at first. She jumped into
it headfirst.”
She went back to Brian Lee in 2011 armed with data on the rise of
childhood diseases and a much more concise ten-page pitch deck. Lee’s
mind had changed — not coincidentally, he had recently become horrified
when his young son was banned from bringing that classic, all-American
lunch the PB&J sandwich to nursery school. Too many kids had severe
nut allergies. “Autism, Tourette’s, chronic allergies and asthmas and
celiac disease — all of this stuff is on the rise,” Lee says. “I almost
had this moment of awakening. Why aren’t we doing something about this?”
Lee got on board with Alba and Gavigan that year, bringing with him a
fourth cofounder in Sean Kane, who’d spent a decade selling discount
products at Pricegrabber.com. Lee and Alba seeded their new startup to
the tune of about $6 million, with another investor, according to a
source close to the deal. (The company would not comment on initial
investments or its founders’ current personal stakes.) The group called
their new firm The Honest Company, as a nod to its values and
transparent ingredients.
ONE WALL OF THE HONEST Company’s L.A. office showroom best represents
its roots. On it you’ll find rows and rows of diapers, mounted, matted
and framed. Each has a whimsical design on the butt. There’s one with a
purple-and-green leopard print; there are juicy pink strawberries and a
stars-and-stripes print perfect for baby’s first Fourth of July.
These are the diapers that gave The Honest Company its start and
indeed still account for a large proportion of sales: About 75% of
revenues still comes from online commerce, and the majority of that is
from the company’s $79.95 monthly bundles of diapers and wipes.
During Alba’s days scouring supermarkets for safe baby detergent, she
often wondered why no one in the retail or fashion world had yet come
up with seasonal designs for diapers. “I kind of want them to be cute,”
she says. “And the natural diapers: Why do they have to look like your
baby’s wearing a brown bag?”
After having her first daughter, Honor, in the summer of 2008 (in
2012 she had another daughter, Haven), Alba also found herself routinely
running out of diapers in the middle of the night. She was toying with
the idea of a subscription service for nontoxic household essentials —
cleaning products, maybe diapers, too. But this was long before monthly
cosmetics-sampling startup Birchbox launched, and that business model
didn’t really exist.
Creating safe, chemical-free, nontoxic consumer goods from scratch
without the infrastructure of, say, a Procter & Gamble or a
Kimberly-Clark was a prospect that would cost way more than even the $6
million seed fund. So they went looking to get venture capital into the
diaper business. “That’s the only thing we pitched,” says Lee. “It was
very strategic as we knew that was the way into your home.”
Lee was a known quantity among the venture capital firms of Palo
Alto. Even so, The Honest Company took a gamble approaching backers
without having made even a dollar of revenue. “They hadn’t shipped yet
when we invested, so it was a leap of faith we don’t normally take in
e-commerce businesses,” says Neil Sequeira, a managing director at
General Catalyst Partners.
He was a big believer in online-only models, having backed pioneering
eyeglasses e-tailer Warby Parker. He also liked the subscription aspect
of the business: It took much of the pain — and expense — out of
acquiring new customers. “Assuming they like it, the big Super Bowl ads
and stuff become less important,” he says. Early on Honest relied on
Facebook for efficient advertising instead of traditional campaigns.
General Catalyst joined Lightspeed Venture Partners and Institutional
Venture Partners in a 2012 Series A that raised $27 million.
That turned out to be just the start. As the diaper business proved
its efficacy, Alba and her team — Lee serves as the CEO — reverted to
the original concept: a single brand that carried its credibility across
all products in the nontoxic universe. Raising a total of $127 million
through August 2014, The Honest Company has been able to create more
products in different categories — dish soap, kitchen cleaner,
detergent, nipple balm, multivitamins and even nursery furniture.
Lee, Alba and their team intended for The Honest Company to remain
online, where its revenues grew steadily thanks in part to the actress
“trying to yell from the rooftops,” as she describes her marketing
efforts. (She has over 5 million Instagram followers on her own
account.)
But almost as soon as they launched, high-end mommy-and-baby
boutiques with cutesy names (The Pump Station in west L.A. and The Upper
Breast Side in Manhattan) cottoned on to The Honest Company, asking
whether Lee and Alba had considered selling the brand in
brick-and-mortar stores. Stock in these mom-and-pop shops sold out so
quickly that when Costco came calling in 2013 wanting to sell baby
shampoo in family-size packs, the Honest team relented. Since then Whole
Foods, Nordstrom, Buy Buy Baby, Destination Maternity and even discount
behemoth Target have started selling The Honest Company’s wares.
Two things stand out on their short-term agenda. First, international
expansion. Honest products will debut in South Korea later this year
and in China possibly in 2016. And then, most likely next year, a public
offering, according to people familiar with the company. Such a move
provides a war chest, though that doesn’t seem to be an issue at
present. “The company’s outperforming,” says General Catalyst’s Neil
Sequeira. “They have pretty much unlimited access to capital and a very
strong balance sheet.” Liquidity, then, would seem to be the key driver.
With a big payday in the offing, Alba remains an active presence,
much to the delight of her venture capital backers, who had built-in
celebrity endorsement from a cofounder. “I think they realized they got a
lot of bang for their buck,” Lee says. Alba still makes the occasional
film, but she makes quick work of it. She shot her scenes for the
upcoming movie adaptation of hit series Entourage in three hours. In
2016 she’ll appear in a sequel to crime-caper mainstay Jason Statham’s
The Mechanic. “It took ten days in November and ten days in January, and I got to be in a fun action movie,” she smiles.
Such efficiency is important when you have 130 customer service
representatives to train in all things Honest. All told, there are now
350 employees at two offices.
While Alba doesn’t have the time to travel the country educating
retailers, she now has the next best person on her staff: her mother. A
year ago Cathy Alba came on board at The Honest Company, spending two
weeks a month telling store managers at Whole Foods and Buy Buy Baby
outposts across the country about her daughter’s struggles with
childhood illnesses. Cathy came out of retirement to take the gig. “I’m
very much like Jessica,” she says. “All or nothing.”
