Madison Reed, a hair coloring startup, raises $16.1 million

October 2, 2015 11:44 AM

An online hair coloring startup is seeing green after its most recent round of funding.

Madison Reed Inc., which CEO and founder Amy Errett says aims to be the Dollar Shave Club (No. 319 in the Internet Retailer 2015 Top 500 Guide) of the hair coloring industry, raised $16.1 million in funding during a Series C round lead by Comcast Ventures, which also has invested in Dollar Shave Club. That brings the total amount of funding raised since the company launched in July 2014 to $32.1 million.

“The business was predicated on the premise that women only have two choices in coloring their hair,” Errett says. “One is to go to a salon versus going to buy a box of color off the shelf at Walgreens or Target.” Salon color is expensive and home kits can be messy and difficult to understand, so Madison Reed offers an “affordable luxury,” she says.

As with Dollar Shave Club, shoppers can sign up for automatic product delivery. Errett says Madison Reed is on pace to do $15 million in online sales this year, its first full year in business. The company has 75,000 customers and recently shipped its 200,000th unit. It has two fulfillment centers, with one in Nevada and the other in Connecticut.

Here’s how Madison Reed works: When a shopper signs up, she is asked eight questions about her hair, including what type it is (straight, wavy, curly), if her hair is color-treated, what her current hair color is and how light or dark she would like her hair to be, among other questions.

“We will let someone buy single boxes because we believe the most important thing to a woman is to get their color right and have the confidence that they can do it,” Errett says. “The average woman in the U.S. is coloring every 7-8 weeks, and before making a commitment, they want to try the color. They don’t want to sign up for an auto-renew before they see whether it works for them.”

Madison Reed’s push for the hair color market comes as older competitor eSalon (No. 471 in the Top 500) is experiencing a sales surge. Co-founder Tamim Mourad says it is on track to collect $30 million in sales this year, up from about $10 million in 2013. The company launched in 2010, collecting $1 million in sales that first year.

Errett says her company is seeing growth thanks in part to television advertising and social media.

“Our revenue has been doubling every two months,” she says. “It’s a fast-moving, fast-growing business. We’re focusing a lot of efforts on the loyalists to our brand. Now we’re working on ways for them to be telling each other why this is such a great thing to do.”

More than half of all traffic to Madison Reed’s site, which uses responsive design that adapts the site to the device it’s being viewed on, comes from shoppers on mobile devices.

“We have worked really hard at a responsive site, quick checkout, the ability to render great photography,” she says. “Mobile web is really important for us.”

The company offers an app for Apple devices, but Errett says the goal of the app isn’t necessarily to sell products. “[The app’s] primarily been used in engagement rather than in acquiring customers,” she says. “It’s very focused on a rich content and rich educational experience. We’re moving in a direction where mobility is so important to our customer.”

Errett says the latest round of funding will go toward expanding TV advertising to a nationwide audience as well as streamlining the company’s infrastructure and operations.




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