This Korean Beauty Startup Has Big Plans to Disrupt E-Commerce
Head of Memebox USA (YC ’14) on the realities of running a fast growing startup
This story is part of an online media series, Sandbox, that profiles entrepreneurs and the hardships associated with building a business. This is the second episode of Sandbox, featuring insights from Head of Memebox USA, Arnold Hur (Y-Combinator Class ‘14). If you missed the first episode with EZTABLE Founder Alex Chen, or want more info about the program, mosey over here.
It’s easy to believe that every startup born in the Bay makes it big. A quick scan of tech news headlines today tells a glimmering story of overnight fame, million dollar acquisitions and celebrity investments. But Silicon Valley insiders paint a grimmer picture, one stained by sleepless nights, co-founder squabbles and funding woes. Even in an ecosystem as rich as ours, plump with investors and ripe with knowledge resources, there is no perfect formula to startup success.
“That’s the thing that really confuses people,” Arnold Hur, Head of US Operations at Memebox, tells me, “The PR release says ‘XYZ company’ just raised way more money than you can even imagine, from the outside. From the inside, you have no idea what’s happening. There’s so many problems, so many fires, so many big major issues you run into every single day.”
Arnold and I are sitting on the fourth floor of the Memebox US office on Market Street in San Francisco. It’s a temporary asylum for the beauty e-commerce company’s western headquarters as construction workers hammer away below us (some of which was picked up in the recording, much to my chagrin). Arnold plans to move his growing team — just over 30 people strong—and the company’s entire warehouse to the ground floor, once construction completes.
Memebox is the first Korean company to be accepted into Y-Combinator, and has gotten a lot of positive buzz over the last year. The company closed a $17.5 million Series B in March 2015. During our chat, Arnold is candid about the realities of running a startup, and ernest about his aggressive goals to disrupt the e-commerce space.
We covered a wide range of topics in this interview— for ease of access, I’ve included the entire transcript from our conversation below.
And finally, quick side note — I’m personally grateful that Arnold agreed to be a part of this inaugural recording of Sandbox— proof positive of his desire to support other self-starters in the community.
If you have a growth story of your own that you’d like to share, I’d love to hear from you. Oh, and please be patient with the occasional pop and crack in the audio — I’m aware of the issue and am constantly iterating, to make Sandbox better, for you. Thanks for tuning in.
Stephanie: Let’s go into what Memebox is, what you guys are all about.
Arnold: Sure. Memebox is a pretty simple company. We’re trying to help people take care of their skin and in turn, take care of themselves by selling the best Korean beauty products online.
We do this in three ways: We make, we buy, and we sell cosmetics. I think that’s a really interesting thing in that we try and figure out what people want. We use technology and data to do it. So, based on data, oh hey, this thing is really trending. Sometimes we don’t even have it so we go see if it’s available in the market. If there’s a gap in the market, if we see a big opportunity, we go make it ourselves. So we’re actually fully vertically integrated. We actually believe that is going to be the future of, not just e-Commerce, not just retail, but CPG in general.
The biggest thing is, we sell individual products, collections of products, but they’re not subscription model, and we also have a manufacturing arm so we actually manufacture our own. We sell all of these through online channels, whether through social media, or our website.
Stephanie: What do you think it is with Korean beauty that has made it so popular with consumers out here?
Arnold: #1, there’s a really strong emphasis on what works. It’s not so much about what the trend is, it’s about, “Hey, this is a new product that really works, and it works well.” #2, they’re actually very scientifically advanced. A lot of technological innovations, ingredient innovations happen right in Korea. And they release rapidly. So there’s a big difference in how a traditional beauty world release is VS how Korean beauty release is. And I think that’s the root cause of why these products are so much more effective and better.
One is, they release on let’s say, a three month cycle. Whereas other companies that I won’t name, will release from concept to launch in five years. A lot of traditional beauty is launching in the way Windows used to launch…Windows 95, Windows XP…they are doing a very much waterfall approach. Whereas in Korea you launch very rapidly, you see if it works in the market very quickly, if it really works well, you double down and figure out how to export it out. It’s this amazing iterative culture because they have to be. Because it’s so competitive, you launch, if it doesn’t work you move on and launch the next thing.
Stephanie: That culture where you’re constantly iterating, its hypercompetitive, it feels a lot like the startup ecosystem out here in the Silicon Valley.
Arnold: It’s funny, I always say that Korean companies, Korean culture is very “start-uppy” in a big sense, in that everybody has to work together, enjoy each other, go out, enjoy happy hours…if you think about it, Korea is only 50 years old, coming from 3rd world to 1st world. There’s this sense they had to push forward, they had to innovate to survive. And so that part of that culture is something I get really excited by, and it is similar to the way startups operate, versus big companies.
Stephanie: What are some of the activities that happen out of this office here?
Arnold: One thing that is interesting about us, is that we say “US office” several times in this broadcast because there’s the Memebox US office, there’s the China office, and Korea office. What’s unique about our structure is we actually operate pretty independently of one another. Reason we do that is we emphasize speed above all else. Because I think that’s kind of the only advantage you really have as a startup. Other companies will have more people, more money, more experience, more everything else, but they’ll always lack speed.
At the same time we always make sure we’re aligned on strategy. We always make sure we’re coordinating, figuring out ways…weekly calls, making sure we’re going in the right direction.
In terms of the US office, we’re a pretty independent office. We have a full stack marketing, engineering, design, customer service shop, even picking, packing, labeling and shipping from the supply chain. It’s kind of like we have three startups in one. And we all have a very unique approach to our strategy. Winning the China market is very different from winning the Korea market which is very different from winning the US market.
Stephanie: The story of how you came to join this company is pretty unique. You were this outsider to the beauty space and this is your first foray into beauty, so what about the company resonated with you?
Arnold: I originally started out in Finance, at Goldman Sachs on the mortgage desk, the desk basically shorting the market and making money on the fact that the world was not doing that well at that point. Really the only reason I chose that job is because I grew up extremely poor.
I remember making an excel sheet and looking at number of hours worked VS pay, pay divided by hours worked, whichever is the maximum, go get that job. And fixed income, mortgages at Goldman, was the job that supposedly would bring me happiness. Before then, money was always the biggest problem. But I realized very quickly it just wasn’t making me happy.
So I decided to make a startup of my own. Which, spectacularly, completely failed. Bruised up my ego, devastated my bank account. But I learned a lot. I fell in love with tech, so I actually found a job at Google on the strategy team.
I started looking into the beauty industry, and of course there’s some things on the logical side…the margins are great, business is very defensible. Even in a recession, beauty is one of the few industries that actually spike up, along with alcohol. You put on more makeup and drink more in a recession.
The more physical aspect, is when they get these products, people are smiling.
Stephanie: That kind of reminds me of our previous conversation where you were talking about the importance of building brand and how technology has kind of evolved how beauty brands build and share the story of their products to consumers. So how are you guys working on that?
Arnold: What’s interesting about beauty specifically is the evolution of what a brand means and how you can deliver a brand across different channels. Channels are just a way to communicate your brand. The fundamental principles of what a brand is, that hasn’t changed.
If you look at the beauty industry historically, when it first started out, it was like a pharmacy experience. You go 1 to 1, someone gives you a bottle with some stuff they think is prescribed specifically for you. The guy, what he looks like, his service, what he says, what he believes in, that’s the brand message you take away from that interaction. How you communicate a brand is through a series of interactions with your brand. That’s how it started.
Technological innovation happened — railroads. From 1 to 1, to one to some. And in the one to some world, you can now deliver packages. A lot of players that won were the people who innovated on packaging. If you think about what that first interaction with your brand at that point when you get that delivery….when you open up that box, when you see something not in a regular glass bottle, something more unique to your brand, that’s how you convey your brand through that interaction.
What’s happening now, that interaction, ever since technology became such a big player, not only through the web but through mobile specifically, the first interaction people will have with your brand will be a YouTube star, your Facebook page, your mobile app…so if you think UX as important to your brand as packaging, then you have to radically rethink how you structure your teams, how you allocate resources on your team. I view our app, it’s the same thing as our storefront. I want to make a lot of investments to keep improving on our app, mobile web experience, where a lot of our customers come in, because to me it’s like a customer first walking into your store.
Being in CPG is really interesting because you get growth levers not only on the online side, but also on the offline side. You can now track retention if the color of the box changes, if the messaging on the box changes…we did this one experiment. I opened a box and it had pink packing peanuts and it exploded all over my apartment. I said, “I hate these things. Why are we delivering these? We want to make people smile.” But of course, we had to structure it and use data, so we said, 20% of people will get crinkly paper and 80% will get the packing peanuts. And sure as you know it, the pink crinkly paper were instagramming…still to this day, I still have not seen packing peanuts for us on Instagram.
Stephanie: The external perspective…to most people, is running a startup is sexy. Break down the reality of the situation.
Arnold: I think the reality is…it’s really hard. Right now it might not seem like it, the market is great…ultimately, the market is going to go down. When it does, who knows? If I knew, I’d be setting bets on the market.
It’s not fun right, like we had Black Friday, Cyber Monday…people were pulling double shifts, 6AM to 11PM, picking, packing, labeling boxes. It’s the hard stuff that’s really meaningful.
It’s really similar to the way finance was. Everyone wanted to be in Finance because it was the new hot thing, but when it came to reality and the market crashed, people were like, “Why am I doing this?” That’s kind of the misconception, even on the recruiting side, is to cut away from the noise that’s out there, to find the people who genuinely care about how to run a startup.
Stephanie: Do you feel like there is a fear of failure in the Silicon Valley?
Arnold: It’s not so much a fear of failure, but…You’re never going to put a PR release out about the hard stuff about a startup. You’re always going to talk about how awesome you guys are, how it was so obvious you were going to be successful. I think that’s the thing that really confuses people…they only see the good stuff.
The reason I say PR is the Instagram of startups, is because everyone wants to show their best foot forward. They want to talk about how they have the coolest office, the best people, the best perks…by the way a lot of those postings, are paid!
People should start thinking about those PR releases, as if they were scrolling through someone’s Instagram. It’s a snapshot of the the peaks of their lives, not the hard stuff.
Stephanie: For anyone who’s interested in starting a business, what advice would you give to them?
Arnold: Don’t overthink it. People assume their idea should be PR ready from the start. That’s not how it starts. It starts with you trying to sell something door to door. Maybe an idea or a powerpoint presentation to a business and then building it afterwards. The whole lean startup idea sounds so logical because when you first start, you’re not going to have a full blown engineering, design, business team. You just have to get something out the door to see if people even want it.
It’s important to do great quality work but you should try to separate that idea from being worried about being embarrassed. Because if you can learn from it and move quickly, that’s great and it allows you to move forward. Fundamentally go see if what you’re trying to build is what people want.
Stephanie: What you guys got moving forward?
Arnold: All good announcements…ton of progress on the business, we’re growing very quickly. We’ll be moving on to relaunching our platform. We’re doing rapid iterations on mobile, desktop, tons of new products, potentially some men’s stuff.
Just keep checking up on us every three weeks. You’ll see rapid improvement. That’s the one thing that I can promise. Whatever we have today will be better tomorrow. And tomorrow will be better than day after. We’re a team, no matter what kind of problem it is, we’ll figure it out and make it better.
Stephanie: Move fast, break things, right?
Arnold: And make it better.