Why Silicon Valley Is Pouring Millions Into Hair

Photo: ohsarahrose / Flickr

This week, a Silicon Valley venture capital firm better known for backing online advertising startups and ex-Wired editor-in-chief Chris Anderson’s DIY drone company just invested millions in a hair dye startup.

Because, you know, your hair is in need of a little disruption.

Hair color doesn’t sound like a business that would attract the tech industry’s attention. But the $4 million bestowed on Madison Color in a True Ventures-led financing round isn’t quite as weird as it sounds. Tech investors are currently captivated by app-powered startups that sell non-techie products directly to consumers without anything so old-timey as a store interfering.

The creative use of technology to move merchandise is part of the appeal. Perhaps even more seductive: hugely lucrative product categories that have yet to taste Silicon Valley’s sacred cow-slaying approach to innovation.

“It’s just doing something really, really, really well and relating incredibly well to your consumer,” says Joel Cutler, a managing director at General Catalyst Partners and a board member at Warby Parker. “It’s what separates an okay investment from a great investment.”

Warby Parker is the eyeglasses startup that’s captured the love of the tech startup scene and more than $50 million in funding. They design, make and sell “vintage-inspired” glasses for a decent price, mostly online but also through a flagship brick-and-mortar store. As with hair color, glasses don’t sound like an especially enticing product for tech investors (unless they have Google in front of the name).

But Warby Parker has come to exemplify a new kind of startup that’s trying to do for physical consumer goods what many straight-up internet companies have done so well in recent years: build brands into which users invest a part of themselves. It’s easy to see how that self-identification works in relation to social media services like Facebook and Twitter. Glasses and hair color don’t offer the same species of technological venue for self-identification and expression.

But the web and mobile technology are still key. Warby Parker and other Silicon Valley favorites such as high-end hoodie maker American Giant and crowdsourced clothier Betabrand, however, are banking on a more intimate kind of connection between themselves and their customers enabled by mobile devices and the internet—a connection of a depth that they believe traditional retail can’t hope to reach. Through a clever mix of marketing and public relations across the digital channels where their target customers spend their time, these companies build stories around themselves and their products with the aim of attracting customers to involve themselves in the narrative.

But the digital-direct approach to niche retail isn’t just about a more nuanced sales pitch. If the product doesn’t meet the raised expectations the marketing strategy sets, the company won’t last long. These companies’ founders and backers contend that the path of direct online sales, which includes not just marketing but taking and shipping orders, also leads directly to better quality. “When you’re selling direct,” Cutler says, “you have more margin to put into the product.”

That’s the sweet spot that Warby Parker, American Giant, Betabrand and now Madison Color are trying to hit: neither overpriced luxury nor cheap throwaway, each in its own way is reaching for mid-priced goods that are more stylish, solid and even ethical than the competition.

For Madison, hitting that spot means aiming for what co-founder and CEO Amy Errett describes as the wide gap between the $10 to $15 ammonia-based off-the-shelf hair dyes from the nearest drugstore, and the $100 or more you’d spend to get your hair colored at the salon.

She says Madison’s dyes will be ammonia-free. Customers will be able to use their phones and tablets for how-tos on coloring their hair at home. They’ll be able to take pictures of themselves and send the photos to stylists who will help match them to their best colors—all with the aim of approximating salon quality at home.

To skeptics who might challenge that no one will care about buying hair color online, Errett points to a once-small startup that decided to go big on another fashion product that didn’t seem to lend itself to internet sales: Zappos. Of Zappos, she says, “I don’t know if anybody thought you could sell shoes online, because you have to try them on.”

Errett and her backers believe that the more personal connections made possible by the internet lend themselves perfectly to selling a personal care product like hair color.

Hair is also an enormous industry that has yet to find its way to the internet in any ambitious way. Errett says the U.S. market for women’s hair coloring alone is $15 billion annually. Between $3 billion and $4 billion of that total is home hair coloring, she says.

Such figures don’t make you the next Apple or Google. But even a percentage of those billions starts to look like profits worth pursuing, even if the business isn’t mainly about hardware or software.

“The opportunity for impact is transcending just technical improvements,” says Jon Callaghan, a True Ventures founder who’s backing Madison. “It’s the first time we’ve ever as venture capitalists been able to tap into markets where customers are in the billions.”

Source : MARCUS WOHLSEN, 05.03.13

Silicon Valley And The Reinvention Of Food

Fake meats have been around for years, but a new crop of Bay Area startups backed by tech investors think they can make meat substitutes good enough to compete with the real deal. Beyond Meat — backed by Twitter founders Evan Williams and Biz Stone via their companyObvious Corp — created an eerily accurate chicken substitute, for example.

But the most ambitious project is Rob Rhinehart‘s cheekily named “Soylent,” an attempt to replace food entirely with a liquid shake that has all the protein, fat, carbohydrates and micronutrients you need. The only ingredients recognizable as food are salt and olive oil. He claims to have lived exclusively on the stuff for a month. He says he has started eating real food again, but two months later he still gets 92 percent of his meals from Soylent.

Rhinehart makes an unlikely food scientist. He’s an engineer fresh off a stint at a Y Combinator-backed networking startup called Level RF that never exited stealth mode. He says he doesn’t have a background in chemistry. “Formally no more than an undergraduate level, but I am a huge proponent of self-study, online courses, and textbooks,” he says.

He decided to create Soylent because he was tired of spending so much time and money on food. “It takes me about five minutes to portion out all the ingredients at this point,” he says. “Without water it keeps for years so I could make it far in advance to save this time.”

He’s still working out the kinks. For example, he recently posted that he had run into some trouble with sulfur deficiency. Next Rhinehart is looking to do controlled experiments with a much larger sample base. “I have spoken to no biologist that doubts the feasibility of this,” he says.

But mainstream dietitians remain skeptical. “My short answer is that I don’t know any more about this product than the limited information provided on the product website,” says Diane Stadler, PhD, RD — a registered dietitian and assistant professor of medicine at Oregon Health & Science University. Stadler warns that although we know many of the essential nutrients in food, we don’t know everything and there’s a strong possibility that an elemental diet like this could miss something critically important. “I would not promote this type of diet to the general public, as there are many ways that it can go wrong, especially if consumed long-term,” she says.

Rhinehart’s defense is that people who don’t eat well are probably already missing important nutrients. But he admits it needs more testing. He’s already selling the mix to several people, and is seeking funding. “I need funding to scale up production and conduct more controlled testing,” he says. “I have received orders of magnitude more requests than I can possibly fulfill, which is lost revenue.”

There are already many meal replacement shakes on the market, but Rhinehart plans to offer cheaper, customizable products. “An athlete would need a lot of protein, an elderly woman doesn’t need many calories, and a coder or engineer type could elect to have nootropics included, if desired,” he says. “Meal replacement products can be even more expensive than traditional food. Soylent is already much cheaper, and due to the lack of real food sources, scales very well in manufacturing.”

Given the Valley’s current penchant for food startups, I wouldn’t be surprised to see him land a round. Besides Obvious Corp, Khosla Ventures and PayPal founder and venture capitalist Peter Thiel’s Breakout Labs are also in the game.

Khosla is backing Hampton Creek Foods, which has a product called “Beyond Eggs.” It’s also backing a few other food and agricultural companies, including artificial salt company Nu-Tek Salt and fake meat company Sand Hill Foods. Last year at TechCrunch Disrupt San Francisco Khosla went so far as to say that the artificial beef, which is made from soy protein, is still “beef.” At any rate, Anthony was pretty impressed with Beyond Eggs earlier this year. Khosla also has investments in a company working on alternatives to salt and a beef substitute. Breakout Labs has invested in Modern Meadow, a company that aims to “print” lab-grown meat and leather.

All of these companies are challenging the common nutrition advice to eat whole foods and vary your diet. In fact all these projects fly in the face of current food trends that advocate whole, unprocessed foods. Both the Michael Pollan, “eat food, not too much, mostly plants” set and the Paleo set both agree that it’s best to avoid processed food and just eat what nature gave us.

But the implications could be wide for the world. I try to eat natural whole foods, but I always feel a bit uncomfortable hearing from organic food zealots and the anti-GMO crowd. Fresh organic food is expensive, and cooking meals from scratch is time consuming. And there are, y’know, starving people out there who would love to get at some highly processed, genetically modified soy.

“I think humanity has been running on the equivalent of crude oil for ages,” Rhinehart says. “Imagine creating an efficient source of fuel for every living human, alleviating global hunger and malnutrition, reducing the environmental impact of farming, performing research on poorly understood biological mechanisms and potentially bringing agricultural societies in to the global economy.”

Source : Klint Finley, Techcrunch, 4/5/13