How FabFitFun Brought in $40M in Revenue and 200K Subscribers Last Year | Ep. #194

There's some things you have to unlearn. You know, when you're working with your brother, your instincts can be, you know, to use all the shorthand ways of communication that you learned growing up, you know, throwing things at each other and yelling or whatever.

Do you want to impact the world and still turn a profit? Then you're in the right place. Welcome to Growth Everywhere. This is the show where you'll find real conversations with real entrepreneurs. They'll share everything from their biggest struggle to the exact strategies they use on a daily basis. So if you're ready for a value-packed interview, listen Here's your host, Eric Siu.

Before we jump into today's interview, if you guys could leave a review and a rating and also subscribe as well, that would be a huge help to the podcast. So, if you actually enjoy the content and you'd like to hear more of it, please support us by leaving us a review and subscribe to the podcast as well. Thanks so much. All right, everybody. Today we have a special guest. His name is Michael Brookhime. He is the co-CEO/co-founder of FabFitFun, which offers an awesome beauty box subscription service. Mike, how's it going?

It's going great, Eric. Nice to be on the show.

Yeah. Thanks for being here. So, why don't you tell us a little bit about who you are and what you do?

Absolutely. You know, along with my co-founders and my co-CEO, Daniel, my brother, and Katie, our editor-in-chief, run FabFitFun. Give you a little bit about the company. We curate a box of products every season. It's actually beyond a beauty box. It's a whole lifestyle experience. So, there's products in it in beauty and fashion, fitness, wellness, home, technology. It really can be anything. We sort of use the framing of it's sort of like a happiness membership. If you sort of think of some of these different memberships, you might personify a person. The beauty boxes might be your makeup artist or your beauty shopper. There's some sort of fashion products which are sort of your stylist. We think of ourselves as sort of being your best friend.

Yeah.

Products to make your life better and just brighten up your day and inspire you to try new things and stretch a little bit beyond what you're thinking about in that, you know, any given time. We tend to be very busy, and so this is a real like treat yourself, take care of yourself type of product, and that's sort of what we do at FabFitFun.

What's like an example? What can I expect to see in like a box from— for this month?

Well, I'll talk about our Editor's Box, which is sort of our greatest hits. Box that's selling right now. It's available today. It has a beautiful sort of blanket scarf from ModCloth, which is another great e-commerce retailer that we've partnered up with. It has a lovely necklace from a company called Juca Nona. It has different skincare and beauty products. So we had an eyeshadow palette by PÜR Beauty, a Dermalogica sort of skin hydrating booster. We have a coloring book with colored pencils. We did a partnership with Pencils of Promise in there, and that's sort of almost like if you follow the trend, there's a lot of sort of soothing and calming to doing coloring. So, that's sort of the angle there. We also include access to online workouts from our partners at Barre3. And so, it sort of spans the gamut. There's a little bit of everything in there, and that's a pretty good representation of what we're doing.

Awesome, great. And how do you guys make money?

The old-fashioned way. We— our members pay us. The subscription is $49.99 per quarter or $180 for an annual subscription where you prepay. And our members get a tremendous amount of value. Each box has well over $200 in retail value in the products. And then there's a whole sort of slice of content and community features that you get access to as a member. We're building on pretty aggressively. So there's a lot of value for our members and that's, you know, that's why they pay us for it. We also have a little bit of a heritage as a media business, so there's certain brand partners and sponsors that also contribute to our revenues.

Cool. We'll talk about that in a second. How did you come up with the idea originally?

I think FabFitFun was, in a lot of ways, it's a happy accident, and I don't want to take credit for the idea. I think the idea has been a collaboration of myself, Daniel, and Katie, and frankly, the rest of the team. There's been a lot of people sort of around us who've helped us figure out a lot of the nuances. The earliest background in terms of my personal journey that led to where we are at, I started a digital agency in college doing initially political new media consulting, worked on a presidential campaign, did a bunch of Senate and gubernatorial campaigns, spent a few years doing that, building websites, doing digital strategy, media buys. At some point, I wanted to be back in Los Angeles.

when—

where I grew up. I was in New York and Boston at the time. When I started spending more time in LA, someone told me politics is Hollywood for ugly people. If you can do this stuff for politicians, you can do this stuff for celebrities and entertainment folks. Got introduced to our first entertainment client around 2009, which was Rachel Zoe. Helped her sort of come up with the concept for and launch The Zoe Report, which is her online media property. And that sort of set things on a totally different direction. We Shifted gears fully into sort of lifestyle and entertainment, picked up a ton of clients in that world. And at some point, we just wanted to, you know, have our own sort of brand that we were operating. And we'd always done different internal experiments within the agency, which was initially called Opera De Media. Eventually, we called it Charlie in our Hollywood days. And we launched FabFitFun as an internal experiment. Initially, it was just a media business producing editorial content across all of lifestyle. And at some point, we said we want to be more than just media. We want to actually have a product. We want to sell something. We'd seen the trends around different subscription-based e-commerce businesses. We thought the writing was on the wall if you were going to be a niche lifestyle content site only. What we saw out there in the subscription space, we thought there was just white space and no one really taking that positioning of just make your life better, make your life happier, brighten it up, and not care about Is it a beauty sample or is it something else? And so, we sort of wanted to create the anything goes in service of making the customer happy model of a membership program. Launched that in 2013 and sort of the rest is history.

Got it. So, it sounds like, I mean, there's a lot of agency owners out there that eventually want to transition into doing, kind of launching their own brand, right? So, at what point was it like, I'm going to go all in, we're going to go all in on FabFitFun and then kind of do away with the agency? Was there ever kind of that transition?

To be honest, it was gradual because there were other experiments. I mean, the trail of dead bodies in terms of things that we had tried is very long. When we started Fab2Fund, we didn't think this was going to be it. We didn't know. We just said, oh, that's interesting. At least it's worth kicking the tires on. Initially, it was definitely strong out the gates. There was a lot of traction just as a media business. Our agency clients helped pay the bills, and we kept that up. So it overlapped for a couple of years. But I think it becomes obvious when you just sort of— where there's smoke, there's fire, and the thing starts paying for itself and more than that. And we saw that with RapidFund. We saw just the potential was enormous. And so at some point, it just naturally just sucked up more and more of our time. To the point where there was nothing left. Great.

Makes sense. And so, in terms of subscribers, revenues, what do those look like?

The number that we've shared and, you know, really proud of is we did over $40 million in revenue last year, in 2016. And we had, in the fall, I believe, we talked about crossing the 200,000 subscriber number. We've gone quite a bit past that now, but we're not sharing those numbers at this point. But, we're excited. We're seeing just a tremendous amount of growth. That $40 million number represented over 3x growth from the year before, which itself was over 3x growth from the year before that. So, we're seeing really consistent, just a lot of traction and a lot of energy and a very excited, energized community. Our members are really, really getting something out of their experience.

Yeah.

There's just a tremendous amount of sort of word of mouth and excitement around it that's been propelling our growth.

You guys seem to be making subscription boxes work, and then you see other people in the space struggling. What do you think sets you apart?

You know, I think the characterization is just— it's interesting. I think subscription is, you know, it's a sort of form of payment. It's a structure that can work and it cannot work, and whatever the underlying product or business is, most products launch, most businesses that launch fail. I think we just have some high-profile flameouts in the subscription space that have maybe created a little bit of skepticism. I personally think a lot of that is misguided. There's just going to always be business failure, whatever your business model, whatever your payment method is. One of my personal business role models, at least, is Jeff Bezos. He's done well with a subscription by the name of Amazon Prime. I think there's a lot to it. I think there's a lot to the type of relationship you can create and the type of experience you can create with a customer when your relationship isn't purely transactional. So if we were— if every time we wanted to do something for, you know, our customer, it was sort of just, you know, a checkout experience, you're just a lot more constrained. Where we just think a lot more holistically about our customers are our members, and there's an ongoing sort of set of member benefits and perks that we can invest in. We have that sort of relationship of trust where our customer is telling us, hey, I'm going to come back quarter after quarter, and we have a lot of reliability in terms of what that looks like and lets us deliver even more value, be a lot more efficient, create something that we couldn't create otherwise. I think I wouldn't focus on— if your question is, what are we doing right versus what are other people doing wrong? I think there's a lot of people doing a lot right, and I'd say the people that are doing something right are creating something really valuable. Fundamentally, it's sort of a product question. I think we've created just a very valuable product, I think.

Just to clarify on this part, so you guys started FabFitFun as a media property first. So, is the kind of steps to success here, you guys build out a media property, it starts to build up a lot of traffic, and then you guys layer commerce on top of it? Is that kind of the model?

That's how we got there. I wouldn't say that that's necessarily like the recipe. I think there's other subscription services out there. I think you can look at Ipsy or Stitch Fix or a number of others that are doing exceptionally well and that we look up to. They didn't have their roots in media. They are actually— if you look at Ipsy, they're doing a ton in media and doing really impressive things. That was just part of the model at the outset in terms of this hybrid of of content and commerce. So we think there is— there's been a lot of promise and peril around how does content and commerce work, but we think it's real. We think the Condé Nast magazine, whether it's Vogue or any of the other titles or Glamour or Allure reinvented, we think has a commerce engine at the heart of it. I think that's what we think. That's one of the ways we think about ourselves.

Right. There's many different ways to skin a cat, right? I mean, if you look at Thrillist, Thrillist purchasing JackThreads, I think, and layering it on top. I think that's one way to look at it. Then you talk about Ipsy and the others, so a lot of different ways.

100%. There's so many— if you just think about retail, the enormity of the opportunity of these dollars moving online, I think Andreessen Horowitz put out a report. I think Benedict Ebens had a nice presentation on this where He just showed, sort of, on this idea of software eating the world, just industry by industry, how software is sort of reinventing these different industries. Retail is just, is an order, not even, maybe 2 orders of magnitude bigger than anything else. If Facebook and Google changed the media landscape, retail is just enormous. All of Facebook and Google's revenues essentially boil down to advertising revenue, right? Taking ad revenue and moving it from all the traditional media outlets into digital. What happens when all the retail dollars move online or a bigger portion of them? There's a lot there, and there's going to be a lot of winners, and there's going to be a lot of different things that work. I think there's a healthy skepticism about a lot of e-commerce, but I think the opportunity is so enormous that it's worthwhile to keep paying attention.

You guys, I mean, so, you know, we look at Ipsy, you know, they launched with an influencer. I mean, I believe you guys also launched with an influencer too, right? Giuliana Rancic?

Yeah, that's right.

Cool. And how did that work out for you?

It worked great. I think, you know, Giuliana was a great partner for us. You know, we started the FabFitFun newsletter in a partnership with her, and, you know, in a lot of ways, a lot of the sort of brand DNA that she sort of imparted into FabFitFun helped us find a voice, helped us find an initial audience. That was a really great partnership for us.

Great. And do you have any recommendations for people looking to partner up with influencers? or pitfalls to avoid because everybody's talking more about influencer marketing nowadays?

2 different things I'd say. One is this idea of sort of like partnering with an influencer who's sort of the face of the brand, and then there's just influencer marketing as a whole world now is a lot more than that. I think what I'd say is with respect to the first category of partnering with an influencer, maybe having them as a co-founder or initial sort of spokesperson or launch partner or anything like that. I think it can be very effective. It gets you above the noise. You have to make sure that that's not— to use a football analogy, it'll take you to your— get sort of a few yards after kickoff, right? You might get 10 yards out, but that's not the business. And I think a lot of people think that the right celebrity, if we only had so-and-so sort of Out there talking about us, you know that would be game over. And that's I won't even say rarely the case; it's just never the case. You know at the end of the day, you have to have a really well-run business. You have to have amazing products. You have to have a great sort of strategy and ideas around marketing. And and a celebrity in themselves isn't going to be the strategy around marketing. And it can be a key piece of the puzzle. You see something like Honest Company. Jessica Alba sort of is is the face of the brand in a lot of ways, but she's also you know. day in and day out there making it happen, really, really driving a lot of the creative strategy and a lot of other parts of the business. And so that's sort of one aspect of how to work with influencers and sort of the caution I'd put on that. And then more broadly in influencer marketing, I think we do quite a bit of influencer marketing today, working with different influencers in terms of getting unboxings going and things like that. It's been great for us. I think whenever you think of media, and this is a growth podcast, so everyone's thinking about how to grow. Some of that's paid, some of it's organic, but the eyeballs, people on these social networks, on Instagram, on Snapchat, on Twitter, on Facebook, on YouTube, and so to the extent that you can get into the stream of where the eyeballs are, in an organic and fun way, that's the way you want to think about how to do your marketing, or at least a really, really big part of it.

Going back to your early days, I mean, how did you go about acquiring, let's just say, your first— well, you guys have a lot of customers. Let's say your first 1,000 customers.

So, the first 1,000, we're very lucky. We, you know, we already had built up the media list a little bit. So, we actually, you know, had a couple hundred thousand people signing up to be receiving daily emails from FabFitFun, the newsletter. And, when we launched the box to that group, and I'll give a lot of credit to my brother Daniel who we had secured a great partnership with Moroccan hair oil and we sort of revealed that as a spoiler that everyone was going to get a Moroccan hair oil bottle in their first FabFitFun box. So, when we said that and that product itself retails for Over $40 and the box was going to be $50 but $10 off your first box. So, even if you just wanted that product, it sort of made it worthwhile. So, we sent that email out and we sold out of that box pretty quickly in that first week.

Wow, okay. We'll call it a pre-launch strategy. Is it just a matter of having the landing page up and kind of drumming up interest in it? Yeah.

I mean, look, that list for us was built over the course of years in terms of the editorial relationship that we had with with those people. But I think anytime you want to launch something, you want to have some audience that's ready to receive it. So, I think whatever you can do to build up a list before you launch a product, I think is great. The other thing I'd say actually on the— it's not on sort of a counterpoint, but we've never been sort of a big bang launch company. I've never personally believed that that's the most important thing. I think you want to do your launches right. You want them to be well-executed. You want them to be thoughtful, and you want to get the most out of it you can. Success is one foot in front of the other. The best thing is get something up and running, and you'll iterate on in terms of how to draw attention to it and how to do your marketing and distribution. It's not a one-time shot. Even if you have a great one-shot sort of thing at launch, That's not going to make your business. You got to figure out how to rinse and repeat some processes over and over and over again to keep growing.

What do you think is the most effective thing that you're doing today in terms of customer acquisition?

Not trying to cop out, but I'm going to say I think the most effective thing, having a very positive, friendly interaction with our customers. And the reason I'd emphasize that is I think you can either create a vicious cycle or a virtuous cycle in terms of sort of word of mouth. I think one of the best things is look at— it's always good to study what's the cancel experience in any sort of subscription service. Some people make it a real pain to cancel, right? You have to call in, you might have to be on hold for an hour, and then even then they're on a script that's trying to convince you, you know, 10 different reasons you shouldn't cancel and then put you on hold and maybe put you on a supervisor, et cetera, et cetera, et cetera. What happens is, you know, that might help sort of reduce churn numbers, you know, month over month, or, you know, go tell your board that, you know, look, look at all the people that didn't cancel, you know, for a certain period of time. But long run, what happens is those people have such a sour perspective on your brand and your offering. One, they're not coming back. Two, on the way out the door, they're telling other people not to, not to sign up. And so you have this sort of like vicious cycle of negativity that starts to build in the ether, and it's hard to really quantify it, but it just Like a negative review here and a bad article there that ranks high in Google. And all these things will really crush you long run in your marketing. And I've seen that play out a number of times, whereas we've decided from all of our practices to be extremely customer friendly and just make sure that everyone who interacts with us in any way, whether it's with our customer service or a cancel user experience or anything like that, is doing so in a seamless and positive way. And I think what that's done is create just a lot of positivity, just a lot of ambassadorship around the brand. And I think that's at the core of what drives our entire customer acquisition engine. And beyond that, we're tactically good across the board. I mean, we have best-in-class people and processes when it comes to paid acquisition, whether it's Facebook or Instagram or Pinterest or YouTube or the influencer channels we work on. We're doing a lot in a lot of places and our methodology revolves around just being very sort of data-driven and test-driven. And I think if you do that and you do it very deliberately and have some great creative behind it, you'll get to a great place.

What about in terms of struggles? What's one big struggle you faced while growing this business?

I think when you're in the world of physical product, there's just a steep learning curve to all of the logistics and operations about moving that product around. I think early on, we double shipped a set of boxes, so we mistakenly shipped 2 boxes to about, I don't know, 1,000 customers at a time where that was a monumental mistake for us. Yeah. Early on, we also forgot to put one product in a box, and that was all due to some you know sort of communication issues that that you know we we hadn't ironed out with a three PL vendor at the time. Since then, we've we've just internalized all of our logistics and operations. We have now our own warehouse, our own fulfillment sort of service and processes. But but I think I think really just you know so there there are a couple of those types of disasters that in some ways are unavoidable, but experience really helps you. iron them out. And I think the best thing there is, you know, your mistakes when you're small, you really want to iron out those processes so that you can scale and, you know, not make those same mistakes that, you know, when you're in hundreds of thousands of units being moved around.

Yeah, and this is a quote I've repeated on this podcast before: 95% of the time it's a process problem, maybe only 5% of the time it's the people problem.

Yeah, 100%. I think that's 100% true. I think, you know, though the Great people will also create great processes too. So you want to figure out who are those people who are going to develop those processes. I think I'm totally blessed to have just some incredible people on our team that are really very process-oriented and making sure that we're setting ourselves up for sustainable long-term growth.

What's one big change you made in the last year that has impacted either you or your business?

Hyper, hyper, hyper focused for the first couple years of launching the box, and I don't think it was the wrong decision. But I think in 2016, we just started planting seeds for you know five-year-long sort of oak trees to grow out of, and 2017, we're accelerating on that a little bit. I think focus is the absolute most important thing to achieving success. I think a lot of people probably. way, way, way too soon focus on those additional streams and seeds and product lines and things like that. But, you know, we've been incremental and deliberate about it. But, you know, we planted a seed in late 2015, beginning of 2016. I'd say that was a big change for us to say, hey, we're going to create an entirely new sort of revenue stream and opportunity for us. But we launched our add-on program where people could start adding things to their box. But, we waited a full 2.5 years into that, getting that core really ironed out before we did that. But now, a huge portion of our growth is now being driven by these add-ons and it adds an incredible amount of value to the membership. So, we're excited about that. And, I think figuring out just how to— I think as you scale as a founder and as a CEO, I think A lot of your decision-making becomes around resource allocation and focus allocation. I think learning how to do that effectively is probably one of the biggest changes where I went from really being a practitioner and a doer to being deliberate about thinking through what are the bets we want to make as a company and how do we want to place those bets.

Got it. A side question for you. Your title is co-CEO, so I'm sure you might have gotten this question before. How does that work being a co-CEO?

It works great. There's no rule to it. I think in my situation, it's not only co-CEO, it's my brother and we're 13 months apart. We're super close. We grew up together. We sort of have a mind meld type of thing going. So it's even unique. You can't really recreate that relationship in a lot of other times. So I wouldn't— I'd be hesitant to draw too many parallels with even other co-CEO types of relationships. But for us, it's worked phenomenally well. I mean, we've There's always work to do in any relationship, whether it's a co-founder relationship, a spouse, or a girlfriend, or anything. And I think sometimes— and I'll speak more towards working with family— I think sometimes when you work with your family, you take for granted the work that you have to do to make that relationship great. I think Danny and I were so committed to making this company successful and to building out this sort of vision that we both, we both had for what this could be, um, that we, we invested the time to make the relationship work too. There's some things you have to unlearn, you know, when you're working with your brother. Your instincts can be, you know, to use all the shorthand ways of communication that you learned growing up, you know, throwing things at each other and yelling or whatever. It's possible to unlearn it. I think there's so many advantages we have in terms of Even from a governance standpoint, we have each other. There's no communication tax. When we have something that we want to wrestle with, some idea or some project, there's no, oh, well, how do I say this? Or anything like that. It's just like, you know, it's coming from a good place. Whatever the feedback or criticism or thoughts are, and it's coming from someone you respect and trust infinitely and has a purview into the business that's uniquely like yours. And so the big— I think one of the reasons our decision-making has been so good is all the big decisions have been really wrestled with in a good way, and in a way that you can wrestle with it but still move forward and make a decision. It doesn't take a lot of— you don't have to set up big formal sessions and write long emails or whatever. We just sort of get to it and we can discuss things pretty quickly. I think it's been really effective.

Awesome. Yeah, you know, I hear oftentimes, you know, you don't want to work with your friends. And sometimes I'm— most of the time I should say I'm pretty hesitant to work with friends. But in, you know, some cases where I work with people, my friends, it's actually been the best relationships because, you know, it's like you mentioned, there's no tax on the communication and we just move a lot faster that way. So I can appreciate where you're coming from. Final question for you. What is one must-read book you recommend to everyone?

A must-read book. There are several. I'll say Antifragile by Nassim Taleb. I think that's a great book that informs a lot of how I think about the different types of structures that we want to build in our company and develop a lot of resiliency, where you don't want this giant bureaucratic monolithic type of organization. You want something that can withstand mistakes, that can withstand stress. And I think that book is really insightful in terms of its thinking in that regard.

Great. Well, Mike, this has been awesome. What's the best way for people to find you online?

michaelbrookim.com is my Tumblr. I occasionally post there. @brookim on Twitter. Trying to become a more active Twitterer this year, so follow me and love to connect with you guys.

Awesome. Sounds good. Mike, thanks so much for doing this.

Thank you, Eric. I appreciate you having me on the show.

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