Urgency and hard work are important, but assume you are running a marathon, not a sprint. Build work/life balance into your culture for yourself and your employees. Sustainability applies to businesses too, and to self-sustain both cash flow and creative energy flow are essential. Create a work-to-live culture vs. live-to-work.
As part of my series about the leadership lessons of accomplished business leaders, I had the pleasure of interviewing Eli Halliwell, co-founder and CEO of Hairstory, a company dedicated to helping people rethink everything about hair in a world where the old rules don’t apply. Eli has spent over 25 years building consumer businesses and his experience includes co-founding a consumer venture-backed technology startup (iMotors.com), building a growth business (Bumble and bumble) and re-energizing a turnaround (Jurlique). Prior to co-founding Hairstory, Eli spent five years investing in global consumer companies at D.E. Shaw & Company, a 50+ billion dollars global investment and technology development firm.
Thank you so much for joining us! Can you tell us a story about what brought you to this specific career path?
My first job after college was selling fish tanks. My friend had created a new invention called ‘The Rivertank Ecosystem,’ and I had joined up with him to turn it into a business. My first business trip was to Minneapolis to train our first distributor how to introduce our product to customers, and I asked my college roommate if I could crash at his parents’ house while I was there. It turns out that his father, Jerry Gallagher, was the most successful retail venture capitalist in the country, having made early stage investments in Whole Foods, Ulta Beauty, Office Depot, PetSmart and countless other big box retailers and restaurants that took over American strip malls. He would ultimately fund my first business too, but on that first night over dinner, he told me a story that gave me the courage to focus on hair.
We were sitting in a stately dining room in a beautiful, early 1900s mansion. At some point, Jerry asked me if I planned to sell fish tanks as my main vocation (I’m sure in a very polite, yet funny way), and I shared that I didn’t know what I wanted to do, but that my father seemed to like the idea of me getting a law degree. Here’s how he responded:
“Eli, let me tell you a little story that you may find interesting. I was on a plane flying home to Minneapolis from Detroit and I’d just settled into my seat when a young woman sat down next to me. Now, I’m on a plane many times a week, and as a rule, I avoid making any conversation with anyone sitting next to me, and that evening was no exception to the rule. But the young woman was very energized and excited, and she eventually couldn’t contain herself any longer and introduced herself. I acknowledged her and turned back to my reading when she said, “I’m so excited because I just found out I got into law school!” I turned to her and said, “Congratulations, that’s wonderful,” and then turned back to my reading again. She was quiet for a bit, and then said, “You don’t seem to actually think it is that wonderful. Why is that?” And so I decided to break my own rule. I put down my reading and asked her, “How many lawyers will the U.S. graduate this year? 20,000? 30,000? You seem like an intelligent, engaged young person. Does the world need another lawyer? I’m not so sure. So the truth of the matter is, I’m not actually that excited for you.” Well, she was taken aback, but she was now curious and maybe a touch combative, and so she asked me what I thought she should do instead of becoming a lawyer. “Well, if I were you,” I told her, “I’d go to beauty school.” He paused for emphasis to let that sink in — with all it’s implied chauvinism. “And when I graduated from beauty school, I’d get a job as a hairdresser in a high end salon and then I’d get a job in a low price salon chain.” Another pregnant pause for effect. “And then, I’d go to business school and get my MBA, because I’m just coming back from a meeting where I’m on the board of directors for the largest salon chain in the entire Midwest, and I’ve been interviewing dozens and dozens of people and I have not been able to find a single person who both understands the salon industry and knows how to run a business.” Pause. So Eli, I guess I’m inclined to give you the same advice I gave to that young woman on the plane. When everyone is running in one direction, the best opportunities often come from heading the other way. That’s what makes the difference.”
Fast forward less than 10 years later, and I had earned my MBA and was running a hair business (Bumble and bumble)! Was I following Jerry’s plan? No. But that fateful night, he gave me something incredibly valuable and profoundly important: he gave me permission to take the path less traveled. Not only did he give me permission, he presented it as a noble undertaking. Taking a step back, I’m guessing Jerry had already figured me out that I was entrepreneurial, independent and wasn’t likely to follow a traditional path anyway, and so he helped me realize it myself and made me feel good about being who I am. It was an incredibly gracious, generous gift — one of the best anyone has ever given me — and I will be forever grateful.
Can you tell us a story about the hard times that you faced when you first started your journey?
My first real business was iMotors, which ended up being a grueling, heart-breaking lesson in snatching defeat from the jaws of victory.
I had been the first Wall Street analyst to write a research report about a new venture called CarMax — the world’s first used car superstore. After reading my report, Jerry Gallagher asked me to write a business plan for a competitor. He partnered me up with a co-founder, funded our seed round and, within a year, we were fully operational. It was the late 90s, and as the first .com boom hit, we evolved our business model from 100% retail to become the first company to sell used cars sight-unseen over the internet. We changed our name to iMotors.
By early 2000, iMotors was on fire. We had one “used car factory” on the west coast that supported 10 satellite delivery points from Seattle to San Diego, and our sales were such that we were approaching cash flow breakeven. When the board of directors joined for a meeting in our San Francisco offices, they could almost taste victory and it blinded them into taking a step that would ultimately destroy the business. Rather than leverage our success on the west coast to achieve profitability and use cash flows to drive growth from there, we decided to buy two new used car factories in the east and south so we could cover the whole country. This decision more than doubled our expense base, but the board was uncowed. Right then and there they committed to 35MM dollars in new funding and voted to start the process of taking iMotors public.
A year later, when the stock market dropped 35%, iMotors was on pace to generate 100MM dollars sales annually, but was still burning through 2–3MM dollars per month. We had raised 150MM dollars in total since founding and had filed our S1 to take the company public, but now an IPO was off the table and no one was as excited to pony up more funding. When our cash ran low, we wound the business down, licked our wounds, and moved on.
Fast forward to today, Carvana is a company that went public in 2017 and is now worth 46 billion dollars with exactly the same business model as iMotors. The main lesson I learned from this is that even the best intentioned, most intelligent investors have incentives that are not aligned with you as an entrepreneur. They place many bets, and their job is to push each company to “go big or go home.” The entrepreneur has only one bet, and our job is to make sure the company can survive long enough to prove its potential. That means managing cash like your life depends on it so you can chart your own course without requiring that next round of funding. Truly great ideas can create tremendous value, but they almost never come to fruition in the timeframe you expect.
Where did you get the drive to continue even though things were so hard?
About two years into my first role as a CEO of Jurlique, my second child, Levi, was born. Pretty early on, we discovered he had suffered a stroke in utero that would impact him neurologically for life. Fast forward to today, he is a wonderful, highly-functioning 13-year-old who has weakness on the right side of his body and uses medication to quell a seizure disorder, but back then, his future was very unclear and it had a profound impact on refocusing me and my motivations. What I realized is that my life was already amazing: I had a loving wife and two beautiful children; I lived in the town where I grew up — close to both family and lifelong friends; I lived comfortably if not luxuriously; and my family was set up to thrive.
Whereas prior, my motivation had always been to achieve more, this experience made me realize what I really need to focus on is simply preserving what I already have.
This one shift changed everything. I started mapping out a path to sustaining the life I was living and actively abandoned aspirations for more. This meant a shift from extrinsic validation to intrinsic motivation — I focused on what I valued for myself instead of basing my decisions on how others would perceive me.
Within a year, I had quit my CEO job to focus on supporting my wife in caring for our children. It was the best investment I’ve ever made. Two years later, I shifted back to my investing experience and spent five years at an investment firm before finding the inspiration to start Hairstory. In creating Hairstory, I finally found the mechanism to take full control of my own destiny and chart the life I want to live.
So, how are things going today? How did grit and resilience lead to your eventual success?
We founded Hairstory to prove out two big bets: 1) that we could change the way people clean their hair and 2) that we could leverage technology to enable hairdressers to participate in e-commerce.
My going-in belief was that hairdressers would be more open than general consumers to the idea that shampoo is horrible for hair, and, therefore, our hairdresser side of the business would be much larger quick than our direct-to-consumer side. The exact opposite turned out to be true.
While hairdressers are generally less conservative than most in many of their personal choices, they are very cautious when it comes to what they recommend to their clients. Anything that they perceive as risking their relationship with their clients is scary, and they take to it tentatively. Consumers, on the other hand, are much more willing to try something new, and view the downside of it not working out as low — particularly when they are offered a full refund opportunity.
Right off the bat, our direct-to-consumer business took off, so much so that we were cash flow positive within a year of launching. The hairdresser business took longer to perfect, but we gave ourselves the time to learn and iterate. Last year, both areas of the business took off, and next year, we expect our hairdresser business to grow even faster than the DTC side.
Five years in, we have built a real business that is creating value in the world, and we are only just starting to reach our potential. Our next big question is: how many people are open to changing the way they clean their hair?
Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lesson you learned from that?
When we launched Hairstory, my partner and I got on a plane to meet with hairdressers in several major cities across the U.S. We wanted to do the first round of prospecting and cold-calling ourselves.
The very first appointment on the first day was with a hairdresser in Santa Monica named Jonathan Van Ness. He was about twenty minutes late for our meeting and, apologizing profusely, came straight over and gave us each a huge hug before inviting us into his studio.
Jonathan became one of our very first Hairstory hairdressers and, I guess the funny mistake is that we had no idea that he was on the cusp of becoming one of the most famous hairdressers in America. If I could do it over, I’d have signed him up with a long-term endorsement contract right there and then! As it stands, he has been a huge supporter and has requested our products for use on the set of Queer Eye multiple times.
What do you think makes your company stand out? Can you share a story?
We certainly are different — we advocate quitting shampoo (something almost every human has used regularly in their lives since they were kids) and we have a completely new business model for hairdressers (they can make money selling retail products without investing in any stock), but despite these radical propositions, we keep a pretty low profile.
We are building a business that creates value for our customers in the form of better, healthier hair. We aren’t trying to take over the world and we don’t believe in growth for the sake of growth. We think Hairstory deserves to exist in the world and will become only as big as our customers ultimately decide we should be.
We are proposing some pretty radical changes, but we don’t have ambitions to remake the world in our image. We are modestly ambitious.
Which tips would you recommend to your colleagues in your industry to help them to thrive and not “burn out”?
- Find your intrinsic motivation, follow it, and stop caring about what other people think.
- Invest in your relationships — at home, with friends, with employees, vendors, and, where possible, with customers. If you invest in them, they will invest in you.
- Manage your growth in line with your cash flow. It’s the only way to stay in control of your own destiny as a business, and it is the best way to minimize sleepless nights.
None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story?
For me, personally, I’d circle back to Jerry Gallagher. He was by far the most influential mentor I’ve had in my career. I also owe a deep debt of gratitude to Michael Gordon, the founder of Bumble and bumble, my former boss, who is also a co-founder of Hairstory and remains an important investor. These two people gave me the courage and the opportunity, respectively, to build a career in hair care, and I can draw a direct line between their influence and the successes we are enjoying today at Hairstory.
How have you used your success to bring goodness to the world?
Sustainability is a very important concept to me personally, and it has been a cornerstone of how we’ve built Hairstory. I was born a hippie flower-child in Vermont, and have always carried a deep appreciation for nature.
When we started Hairstory, we created a refill program for our subscribers, whereby we would send them a metal, refillable canister and a small travel bottle with their subscription. This enabled us to ship the actual product in a pouch that uses 76% less plastic than bottles. The pouches were so successful that we created smaller ones for our first time customers too, helping us eliminate plastic bottles from our New Wash line entirely. Also, because New Wash replaces both shampoo and conditioner, you’re actually cutting out two bottles, not one, so the full plastic reduction from switching to New Wash is 91%. In 2020, we will end up using 30,000 pounds less plastic than we would have if we hadn’t switched to pouches, or the equivalent of 330,000 bottles.
We believe it is our job to constantly iterate to reduce our impact on the planet. To that end, we are currently in the process of launching new pouches in 2021. The one problem with our current pouches (and all pouches currently used for health and beauty in the U.S.) is that they have an aluminum lining, which makes them difficult to recycle. Frustrated by this tradeoff, we were able to find a new FDA-approved pouch technology without the lining that is just as recyclable as any normal plastic you would buy. This is just hitting our production lines and will be rolling out mid-2021.
Beyond our packaging solutions, we participate in 1% for the Planet, a non-profit organization that vets grassroots organizations and funnels donations from companies like ours into high-impact initiatives. Even though our 1% donations are relatively small — we will end up donating ~50K dollars this year — they have a huge impact on these organizations, funding new initiatives directly. The response we get is overwhelming with gratitude, which feels wonderful.
We recognize that all businesses create waste and burdens the environment in some form or fashion. By selling products that minimize their impact, and by investing in organizations that help clean our environment, we strive to undo some of the harm we acknowledge we create.
The one place we refuse to accept any harm is in our ingredients. New Wash is biodegradable and every ingredient is carefully vetted to optimize both performance and safety. Even here, we are constantly evolving, and as new information arises, we will adjust our formulations as well.
What are your “5 things I wish someone told me before I started leading my company” and why. Please share a story or example for each.
- Raise enough money at the outset to get to cash flow breakeven and then grow responsibly from there as your cash flow allows. Assume you will never raise another dollar.
- Make your plans with the full knowledge that they will be wrong. Nothing ever works out the way you expect, and you need to be analyzing and watching the business closely to pivot when you see opportunity.
- Urgency and hard work are important, but assume you are running a marathon, not a sprint. Build work/life balance into your culture for yourself and your employees. Sustainability applies to businesses too, and to self-sustain both cash flow and creative energy flow are essential. Create a work-to-live culture vs. live-to-work.
- Human capital is the life blood of your business. Hire cautiously, invest in your talent, and curate your culture so there is sufficient alignment that everyone is on board with the mission but also there is enough diversity of opinions and creative thinking that every idea gets challenged and you avoid group-think.
- Establish your business structure such that you have as much control as possible. Investors’ incentives are never aligned perfectly with those of entrepreneurs, and you will need the power to say no sometimes. Build that into the legal structure of your business. If that means passing on certain investors, so be it.
You are a person of great influence. If you could start a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger.
I am convinced humans share much more commonality than many of our national, religious, and cultural leaders want us to believe. In our globally interconnected world, what happens in one place impacts someone else’s life in another, and because of this, I believe everyone should have a say in how our world is governed.
Digital interconnectivity and global businesses have already undermined the relevance of the traditional nation-state. What if we had a mechanism whereby anyone could weigh in on how we should govern ourselves, a crowd-sourcing public policy tool that could ferret out areas of commonality that we might not see on our own? The only way we will survive is by coming together, and the only way we can come together is by celebrating our commonality as humans.
How can our readers follow you on social media?
This was very inspiring. Thank you so much for joining us!