Thirty Minute Mentors Podcast Transcript: Interview with Birchbox Co-Founder and CEO Katia Beauchamp

I recently interviewed Katia Beauchamp on my podcast, Thirty Minute Mentors. Here is a transcript of our interview:

Our guest today is the co-founder and CEO of a company that helped disrupt the beauty industry and define the subscription box business. Katia Beauchamp has taken Birchbox from an idea to a business that serves more than two and a half million customers around the world. Katia, thank you for joining us.

Katia: Thank you for having me.

Adam: You started Birchbox in 2010, coming out of business school. It was a rough economy as we were still dealing with a fallout from the Great Recession, and I remember that well. Actually, I also graduated from business school in 2010. We're in a tough period right now and a lot of people are drawing parallels to that same tough stretch we were in 10 years ago. What are the best lessons you learn from starting a business in a really bad economy and what advice do you have for entrepreneurs or people thinking about becoming entrepreneurs on building a business in the climate that we're in right now?

Katia: Yeah, so one of the things that I remember reflecting on almost immediately after starting Birchbox was how many entrepreneurs were in my class in business school, it was a really outsized number of people that actually launched businesses right after graduation, and I think one of the main reasons that that happened was the recession and getting some really big job and some high paying job was less present and it gave people an opportunity to really feel free to take over. Obviously putting, earning potential immediately at risk and really going after something that you're excited about you believe in has a high chance of failure. So one thing I always think about is that it creates opportunity. It creates an opportunity because it frees us of thinking about, you know, some preconceived notion of our careers. But it also literally creates opportunities, because people start to think differently. There can be more openness in these economies. And that's definitely something that we found too and now also, you know, reflecting on it in this moment, and just recognizing that Birchbox is really well positioned in this challenge. I remember in 2009, when Haley and I initially had this idea, one of the things that we talked about, kind of often during early stages of the conversation around the opportunity that we saw was that the beauty industry performed really well in recession. So that was one of the characteristics that really drew us in was that there was an opportunity here that wasn't just gonna follow the normal business cycles.

Adam: How did you come up with the idea for Birchbox and how did that idea become a household name business?

Katia: So the idea of Birchbox really came from an insight that seemed kind of glaring to us when we started looking out and thinking we wanted to write a business plan. We saw that a lot of businesses were being geared towards female consumers, that women were launching businesses for female consumers and a lot of the conversation was happening in fashion. And we noticed that no conversation was really happening aroun beauty. And that just stood out to us knowing that these were adjacent categories, and we wanted to understand why. And when we dug in a little deeper, we found that in 2010, the beauty industry was less than 2% sold on the internet. And that was low penetration, yes, but the more interesting thing was that there wasn't any sign of change in trend. So while there was still low penetration in fashion, there was a massive sign of growth starting to happen and obviously huge and a lot of other categories like electronics, and household goods. But beauty had no sign that there was going to be any growth or any penetration happening on the internet. And we just found that to be so exciting. We thought, you know, somebody's going to figure out how to sell beauty on the internet. And we need to figure it out, we need to be those people. We need to be the ones that crack this. And we did some research and we talked to consumers and we figured out something that seems very basic, but it's what we built the entire Birchbox model off of, which is that beauty is a challenging category to navigate in the first place because there are so many options. And the internet makes that worse. The Internet doesn't have walls. The internet is basically infinite. If you use Google trying to find a moisturizer or shampoo your options are truly endless. And we recognized that but, the internet was an even less likely place to get someone to feel they could make a choice with all the choices. And the second thing is that consumers said over and over again was that trial was a critical part of practice. So we basically set out and said, we have to figure out how to make the options feel digestible and finite and we need to give people a way to try before they buy. And within about 48 hours, we came up with a business model of Birchbox, which as you know, is a subscription service with personalized sampling delivered to you monthly, and then content about the products you get. And then you can purchase any of the full size products that you love directly from us with a great loyalty program.

Adam: Two and a half million customers. What advice do you have for listeners that can help them acquire customers for their businesses? What are some of your best tips on the topics of sales, marketing and branding?

Katia: I mean, my best tip is to remember how much insight you have as a consumer. If we're talking and you ask the question about, a business that is directly related to consumers. We as people are interacting with brands and companies all day, and we know what it feels like to have a great experience and trying to distill that into your vision and your execution of the product, I think, is really the goal. And it's so much more simple than I think we can make it out to be. And yet execution is a huge challenge, right? Because when you initially start something, you can kind of hold it in your hands and you can hand it to someone. And then if you're lucky enough to surpass the point where you cannot be the one making every single version of your product or holding it and being the one to give it away. Then you start to think okay, well how can I scale this? How can I grow in my perspective? If you stay true to the insight, and you really have high integrity about delivering a great customer experience, and you respect the fact that that could change, you know, as the consumer's context changes, it's definitely really possible to go and have exceptional growth. And it's also really possible to stay relevant for a really long time. But you just have to remember that it isn't necessarily the exact experience as you wanted it or as you initially started it that matters. It's more the insight that matters and how you can think about creating an experience around the insight versus really being so focused in on a potential way you saw to solve that initially, and so I think you know, in short, basically, your customers are your best way of having that happen. People who love what you do and are happy with it are the biggest asset of any business that is directly going after the consumer.

Adam: I agree with you completely. I think that you anyone who's an entrepreneur learns really quickly that without customers, you don't have a business. And it doesn't matter what business you're in, you need to run a customer-centric business and acquiring a customer is a lot harder than retaining a customer. And I wrote an article on how to transform customers into your brand ambassadors, and a lot of what you're talking about is universally applicable. So thanks for sharing that.

Katia: Absolutely. I think that's the thing- we didn't know we were doing that, right? We didn't have those words. We didn't have that vocabulary initially. But just by hearing a lot about the experience and expecting that you're going to learn from your customers, asking them to kind of engage and be a part of the creation. It happens organically and then you realize, wow, it's such an asset to have a consumer base that isn't just expecting you to crawl into their brains and know everything but rather is rooting for you and wants to share feedback because they want you to be successful.

Adam: Like all entrepreneurs, like all businesses, you've experienced your fair share of ups and downs. Birchbox has had high moments and has had low moments. As an entrepreneur, something that I often tell audiences is that there's no linear path to the top. Can you describe your toughest moments, how you manage them, and how you were ultimately able to bounce back?

Katia: Yeah, I mean, I think it was very different, to your point, at different stages in 10 years, which feels like a long time. And it also feels like just the beginning because I always said, I really wanted to build a Forever Business. I wasn't trying to create something and flip it. I wasn't trying to kind of get out of this. So in some ways, 10 years old, feels so young. I think in the early days, the challenge was really getting beauty brands to work with Birchbox and it was so frustrating because we were seeing a lot of product market fit with consumers and we had really severe supply chain problems with partners because, you know, there was so much demand and trying to find partners who could work with us at that scale at that speed was so difficult. I feel like I spent over 50% of those years crying, just basically so frustrated that I couldn't get people to, you know, basically give me this product that they had been giving away for free to loyal customers, and show them how I could monetize it for customer acquisition so much more effectively than what, in my mind, they were doing so I really had to, I think, start on that, you know? If I wasn't able to convince people with the way I thought I needed to understand how they thought and understand their jobs better and understand the work they were doing and really what were the challenges and how could I show them that this was a solution to many of the things that they were saying. So, for example, one of the things that came up was being a better listener, trying to understand or starting to understand that there is a huge question of using social media since 2010. Facebook existed, Twitter existed, but social media was really changing and brands were very anxious about how to control social media. That was the narrative. How do we control this? This is crazy- people can say anything here! And one thing that we started to see was that Birchbox was this interesting way to have a more consistent kind of campaign that really came from people and where people were opening their boxes, and then reading the product card saying the same things about this product, and participating in the way that we asked them to and the user generated content that really wasn't a thing at the time. But that was a first way in to start to get brands to think of Birchbox in this new way. We became a partner in helping them have more of their arms around what was being said about them on the internet and in social channels. We became a partner in helping brands who had never really had a direct consumer business learn more about customer acquisition, customer acquisition costs, the funnel. We were creating all these resources for brands so we became a partner for small brands that would never have manufactured samples at scale. And we learned every manufacturer in the world and where you should make these things, whether it's mascara, or just a tube of moisturizer- who makes them who makes them at the best cost. We pre-negotiated prices for our partners. So just starting to go into problem solving mode. Like, how can we actually show people that we are going to be the best partner to them? That was a really big game changer, but it doesn't take away how hard it was.

Adam: You've raised a ton of money over the years. What are the best lessons you've learned from your experience fundraising? What's your best advice for listeners?

Katia: My best advice is going to be frustrating because it's frustrating to say out loud, but my lesson in fundraising is that it's always the best time to fundraise when you don't need it. It's always the case. The less you need to raise money, the more it seems to be available, is how I've experienced it. And I think that just gives you options. If you're very early and getting started, if there's a chance that you can self fund, any of your beta tests or exploration or initial few months or years of operations, I really do think showing that you understand how to do that- how to create profits and how to use that to self fund growth is hugely valuable. I can say something else about that if you'd like later because I think it definitely has another side of the coin. But I also think that it's really important to just think about what are the opportunities the business is experiencing the best and when? And how can you then use that as a moment to really go after the capital. Then it's very, very challenging to go and find capital when you really need it. And I know that's not what anyone wants to hear. But I think it's kind of universally true.

Adam: It's great advice. And it's advice that I've personally heard from many great leaders and entrepreneurs who I've interviewed. I'm sure it's great advice that you've heard a lot over the years before, you've had to face it yourself and experience it yourself. What advice do you have on cultivating relationships with investors? And I'll open that question up more broadly on cultivating relationships in general, what can you share with listeners?

Katia: I mean, I think one of the things that I've reflected on recently is, particularly when it comes to ambassadors, you know, you tend to kind of jump into that relationship in a way that you would never jump into any other relationship where you're in your like, instincts. It saves people's time. Everyone knows why we're here. And so you're meeting someone for the first time and you're asking for a lot of money. Basically, you're telling them, you know, they've now considered your product for maybe a total of 20 minutes. And now you're talking about hundreds of thousands or millions of dollars. And my general experience is, success has happened more when you actually build relationships as you would more traditionally, where you establish credibility. Well, I always say the first thing you have to do is get someone to listen to you. And I know that sounds so basic, but when it comes to investors, they're hearing hundreds of pitches a year. And I think it does get a little bit rote and mundane and kind of rising above that noise is hard. So how can you do some of your research and work to help someone hear you and to help engage them and show them you actually, like, took the time to get to know them and to get to know their work and engage them in your business from the perspective of what could they bring to the table? I think that's really helpful in getting someone to actually listen to your insights into your solution. And then establishing credibility is really about showing them and talking about milestones that you have in place. And coming back and discussing the progress of those milestones, and the performance of those milestones. And it can be weeks, it does not have to be over months and years and quarters. So that, in my opinion, has led to more valuable relationships with ambassadors and with better deals where you aren't really rushing it and expecting just to blow someone's socks off with an elevator pitch and then close them in two weeks, but rather, you're kind of approaching this like a traditional relationship where you're getting to know each other, you're showing that you have actual, genuine interest in them and why you know, there's an interest in why you want them to be a part of your business. And then you're really showing that you can operate by managing the process of saying here’s the milestones and here's what I want to talk to you about them.

Adam: What do you look for in people you hire and what do you believe are the keys to building a winning organizational culture?

Katia:  Ah, that’s been kind of an evolving insight over time. But I think there's a few characteristics that are really important. All of them are things that develop. It isn't like somebody has everything all the time, but ultimately, I want a team that really understands their own power and their own agency and really takes responsibility for what it means to have agency and is really looking for a more reciprocal relationship, which means that yes, Birchbox has responsibility, but you, the person; you, the employee has responsibility in designing the career you want, and creating the development opportunities you want that's more balanced with the company and not really just looking for the company to solve that for them. And I also am looking for somebody who really sees everything as opportunities and really kind of understands and talks about challenges as things that have been assets, and have been the biggest ways that they've really excelled in their career and have appreciation for challenges. And then I guess the last thing I'd say is that, especially when it comes to leadership roles, I'm looking for people who have resilience, who have overcome challenges and know that, particularly when it comes to your pair, there's nothing that ends you; that you always know how to get up. And I think that's a really, really important characteristic. People who have the perspective that truly nothing is the end all be all as it relates to solution. Nothing is the end all be all as it relates to a problem.

Adam: I love what you just said, because you're gonna make my next question a lot easier to ask. You recently had to layoff 25% of your staff and you've had significant layoffs in the past. A question that I'm often asked, and unfortunately, I'm being asked this question more often, in these times, is as a leader, what is the best possible way to lay someone off? And it's a question that no leader ever really wants to address. But it's an important topic that we have to face and I'm curious to know, as someone who's had to deal with this, what is your answer to that question?

Katia: I mean, I would never pretend that I have all the answers to it. But I will say that one very basic learning that seems to hold true in this case is respecting your team and treating people as adults that you respect and can just be so powerful for your organization, not keeping people or protecting people from all of the challenges of operating a business or running a business, but actually enlisting them in the problem solving is game changing both because you still have so much to learn, I still have so much to learn, and because it also just creates a very different engagement for the team itself. And so, you know, counter intuitively, I'd say that it's really valuable. If this is something that you're approaching to try to bring the team in to the thinking of that and help them understand, you know, like this are, these are the challenges we're seeing as a business and showing them like, here's the gap that we're trying to solve, and here are the ways we could solve it, including having smaller payroll costs. And I'm not saying that, you know, just go out and do that without thinking. I think there's a very thoughtful way to do that. But I do think it's really helpful to treat people and show people that there has been a lot of thinking and that, you know, you really are trying to solve for the best way to move forward as an organization and that humans are not expendable resources. And that's not what this is, you know? In many cases, it's existential for our business and trying to help people understand that there is a lot of thoughtfulness, there's a lot of consideration, and there's a lot of care going into all the different paths to solve a funding gap.

Adam: Yeah, I think you really hit the nail on the head and you summarized it as well as one can. You have to be as compassionate and as thoughtful and as transparent as one can be, and there's no easy way to do it, and there's no perfect way of doing it. But as leaders, all we can really do is try our best and utilize our best humanity as possible. So I appreciate that answer. I read an article you wrote about your experience spending 100 days in the hospital, managing an extremely difficult pregnancy, while you were in the heat of negotiating a major deal with Walgreens. It was incredible. I mean, there's a really moving article, there's so much that I want to ask you about that experience. I just thought it was amazing that you were leading your company from a hospital bed while you were pregnant. And what did you learn about leading from a remote setting that is particularly applicable to other leaders trying to understand how to best lead their teams in today's landscape? And on a human level how did you power through that experience? Managing your team, managing your family, and managing your own personal needs?

Katia: That's a heavy one. That's a heavy question. I'll start with a simpler part of the question, which is the remote part of it. I think at first it was just really embarrassing. But being a woman and being at the stage of your life where you're having children, for some reason, it just feels really hard to tell people that you're even pregnant, let alone that you're having a pregnancy that's actually going to require you, the CEO, to be out of the office. And I hate that- I really have hated it. I hated it. Every time I've had to tell an investor that I'm pregnant, how scared I am, how uncomfortable the conversation is. And this was just that times a million. And so it wasn't really investors at that point. That was the scary part. But it was just yeah, talking to Walgreens about our potential business development deal. And then their potential investment. I was embarrassed, I didn't want people to think that I was incapable or that suddenly, you know, something wasn't going to be what they expected in terms of the quality of execution. So I really didn't come forward and talk about it at first probably for the first month, which was the most challenging time emotionally and I really regret that. I think being transparent with your situation- You know, when we started this, and I said, “Hey, my kids are probably going to walk in here at some point, that's gonna happen,” and level setting people on what to expect with you or new normal of working remotely, and how you're dealing with it and trying to open the conversation of how you're dealing with it so that your team can have that conversation with you. I think it's so important. This is, even in the best situations, which I know, I'm sure you and I are both in the boss situation, it's still really hard to be working in such a new way and get what you need and also support your team and I think talking about the experience for you, and showing vulnerability, it helps your team understand that they can come with that too. So that's the first part of your question. The second part of your question was, how did I deal with it? Frankly, I was so grateful to have worked because it was so sad on a personal level to be away from my husband and my kids. And obviously I'm facing a potential real danger that while I was in the hospital. So having work was a blessing. I found myself really engaged in the work and really productive working so many hours, no commuting, no walking. So I just had a lot of time to work. And I felt so much gratitude for how much I cared about my work, right, and how meaningful my work was to me to be able to both like, create career opportunities for my team who I really cared about to create customer experiences for the customers I really cared about. It just couldn't have felt more like I- for all the hardships that this has been trying to build this business trying to, you know, find myself as a leader, like how much gratitude I felt for just having something to spend, you know, 10 hours a day on that mattered to me, was really striking, frankly, and was a big part of keeping myself focused on appreciation, I think is important in those moments. And what was your third question?

Adam: I was moved by the article and I was just interested in any insights that you could share with our listeners on what that experience was like and how you were able to get through it and what you really learned from it,

Katia: The biggest thing I’ve learned- and it's been this, but it's been so many of the other hard things of building Birchbox is, you know, this phrase, “hindsight is 2020.” It kind of irks me now. And this idea that, you know, no matter what it seems like, we look back at these hard things that we really hated and we really thought would be, you know, the end or some sort of horrible moment, and we always feel gratitude for them. And this idea that we have to wait months and years later for gratitude just feels like such a waste of time. And that's kind of the wake up call I feel like I had because I do not want to live with hindsight being the moments of gratitude. I want to have moments of gratitude, when things are hard, and learn how to really bask in the sun when things are good because that's really hard to hold.

Adam: I love that I think that's great wisdom and great advice. And it's so easy when you don't need to be an entrepreneur, you don't need to be a CEO to understand and appreciate how living a busy life can distract you from what really matters. And I think that that's great wisdom for our listeners. I want to ask you about that deal with Walgreens that you were working on from the hospital bed. What advice do you have for entrepreneurs and other entrepreneurial businesses on selling to developing relationships with and doing business with huge companies in general?

Katia: My advice on thinking about business development or partnerships of any kind, frankly, of any size is when you find the reason why you want to work with them, spend a lot less time on that and try to think through the reason they'd want to work with you. So really trying to get smart about the business and what's happening and then try to understand the business makers and the decision makers and what they're roles are in it, what their personal objectives are for it, and how they think about success is so valuable. Spending as much time as you can kind of excavating and mining that information. And then deciding, does this still seem like a great opportunity for us? But I think it ends up really showing, again, the thoughtfulness of why you want to partner and I think it ends up building excitement and momentum when you have an authentic, real well considered reason that you want to work together. So I think that's where you start. And I also think that when you have that and you're focused on building the relationships with the, you know, the key people, that ends up being a really rewarding experience for everyone.

Adam: I want to ask you one last question, and we touched on this just a couple minutes ago, but you have a husband, you have four kids. How have you balanced work and family and what advice do you have for listeners on how they can excel personally and professionally at the same time?

Katia: So I’m working on this answer, you know? One of the things that someone told me, and I don't remember exactly how they said it, but thinking of balance as more of a long term game than like in the day or in the week, or even in the month. Letting yourself really be okay with that and even celebrate that, that you're able to have more time right now to prioritize your family, you have a few weeks that are a little lighter, and not feeling guilty about that. And when work comes back, and you need to be really dialed in there and you have less time to give your family, letting that be okay so that it doesn't have to be like an everyday thing. I think that is honest. And that not walking around, always being on the wrong side of balance is really helpful. And for me personally, the wake up call of my career was realizing that I didn't have as great of ideas when I was thinking about my business hundred percent of my waking hours. Or even 90% of my waking hours. But, you know, for anybody that could make creativity kind of could just cut off your creativity a bit. And for me, you know, kids and becoming a parent for the first time is so all encompassing that it actually was the first time I felt hours and even days in maternity leave where I was just completely taken by something else. And when I came back to my work, I felt better at the job and felt fresher. I felt like my brain went somewhere else. And it came back with more creativity and more ideas. And that was very freeing and exciting and empowering to think like, this is not a problem. It's actually an asset to the career I want to have. To the kind of, you know, way I’ve chosen to live my life which is really caring about my career and really caring about my family. Like one is making the other better and similarly for my children. And my husband, you know, I feel really lucky that I have something else that I really care about for myself too. And it keeps my identity. Something from my own. You know, identity is as important in my relationships with my family as it is to God.

Adam: Yeah, I love it. Thank you so much for joining us. Thank you for all the wisdom and great advice.

Katia: Thank you for having me.