Aug 19, 2016 · 26m · top-founders
EP 391: Why Gary V Led $1.5M Round In This Cosmetics Company
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of 'The Top,' host Nathan Latka interviews Julie Fredrickson, co-founder and CEO of Stowaway Cosmetics, about raising a $1.5 million seed round led by Gary Vaynerchuk, designing right-sized beauty products with 80-90% gross margins, and driving direct-to-consumer growth toward net-zero burn through customer cohort retention.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Nathan holds 44.4% of the talking time here. How this is scored →
Nathan as informed peer 3.7 Guest teaching 5.0 Guest disagreement 3.0 Nathan pushing back 3.9
speaking balance: gold is Nathan, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 16:39 Julie rejects total customer count request
Julie refuses to provide her total buyer volume and dismisses Nathan's metric as irrelevant to the actual health and economics of a retention-driven business.
Hardest push from Nathan ▶ 10:05 Nathan challenges the premise of makeup wasteNathan pushes back on the company's central problem statement by pointing out that he leaves multiple chapsticks unfinished without caring.
Biggest teaching moment ▶ 10:31 Julie schools Nathan on female consumer realitiesJulie contrasts cheap chapsticks with the 40 cosmetic items women own and carry, explaining purse constraints until Nathan acknowledges he has no clue about the space.
Nathan holds their own ▶ 4:46 Nathan breaks down venture syndicates and LPsNathan steps in to explain angel syndicate architecture, LP allocations, and risk diversification mechanics directly to the audience.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Nathan as informed peer | Guest teaching | Guest disagreement | Nathan pushing back | Why |
|---|---|---|---|---|---|---|
| Introducing Julie Fredrickson and the Stowaway Cosmetics Concept | 4 | 5 | 5 | 6 | Nathan probes for the exact seed round valuation, prompting Julie to flatly refuse to disclose early-stage numbers. Julie educates Nathan on market-bearing price fluctuations and cap table optionality, referencing Brad Feld's Venture Deals. | |
| Gary Vaynerchuk's Seed Investment and the Retention Thesis | 4 | 6 | 2 | 3 | Julie breaks down Gary Vaynerchuk's thesis around cosmetics retention metrics and customer repurchase behavior. Nathan questions how she verifies customers actually finished items rather than losing them. | |
| Product Economics, Gross Margins, and Packaging Utility | 3 | 8 | 4 | 4 | Nathan challenges the core thesis by comparing unfinished makeup to his unused chapsticks. Julie schools him on women's purse real estate, product volume, and cosmetics margins, forcing Nathan to admit he is like a lost dog in this sector. | |
| Company Launch Timeline and Julie's First Business Exit | 5 | 4 | 3 | 5 | Nathan aggressively interrogates Julie on prior exit numbers, unit volumes, and customer acquisition costs. Julie stands firm on keeping previous acquisition terms private while articulating their shift from growth to net zero burn. | |
| Customer Cohort Retention and Makeup Replenishment Cycles | 5 | 6 | 5 | 6 | Julie directly rejects Nathan's request for total buyer count, arguing top-of-funnel counts are a vanity metric compared to repeat purchasing. Nathan pushes back by digging into specific 90-day cohort retention rates and repurchase frequencies. | |
| Connecting with Julie Online and Podcasting on Anchor | 1 | 4 | 1 | 1 | Julie mentions her presence on the audio platform Anchor, requiring an explanation for Nathan who has never heard of it. The segment concludes with an extended sponsor read from Nathan. | |
| The Famous Five Rapid-Fire Questions with Julie Fredrickson | 4 | 2 | 1 | 2 | Nathan runs through his standard rapid-fire questions, interjecting with corporate governance commentary about odd-numbered board compositions. |
Statements from this episode (15)
Julie Fredrickson: 75% of women never finish purchased cosmetics
“It turns out, 75% of women don't finish the cosmetics they buy, not just before they expire, but at all.”
Fredrickson: Stowaway Cosmetics are half size and half price of prestige brands
“So, a quick way of thinking about us is we are cosmetics that are half the size and half the price of a typical prestige cosmetic.”
Fredrickson: Founders should price early rounds and treat current cash as last
“If you can price something and price it now, it gives you something to work from and gives you more stability because you never know when your next financing round is going to come. And you should always assume that you're on your own with the cash you have al…”
Fredrickson: Mid-2016 startup fundraising valuations dropped 50% from prior levels
“The prices that the market will bear now are about 50% lower than they were when we fundraised.”
Fredrickson: Gary Vaynerchuk and Metamorphic Ventures led Stowaway's seed round
“Actually, Gary Vaynerchuk led the round. With Vayner Capital along with Metamorphic Ventures, which is a New York-based fund.”
Fredrickson: Beauty incumbents sell unfinished products and face high re-acquisition costs
“Gary sees trends farther out than anyone I know, and I think what was appealing to Gary in this case is that the beauty industry is heavily entrenched, heavily consolidated, and is selling a product that people don't finish, and it's very expensive to acquire …”
Fredrickson: 40% of Stowaway's revenue came from repeat purchasing
“40% of our revenue last month came from repeat purchasing.”
Fredrickson: Independent DTC cosmetics brands achieve 90% margins versus 50% incumbents
“So if you go into the 10 K's of these companies, they're looking at about 50% margin, whereas typically when you're independent and don't necessarily need to leave room for these resellers your margins in cosmetics can get up to 90%.”
Fredrickson: Most women carry 6–7 cosmetic products and own 40
“Most women carry between six and seven products with them at any given time and own 40. Cosmetics products.”
Fredrickson: Stowaway Closed $1.5M Seed Round in August 2014 Prior to Launch
“No, we closed that in August of 2014. So we close around prior to launch, yes.”
Fredrickson: Stowaway Cosmetics passes 100k lipstick units sold
“We're not in the millions yet, but we have passed the 100,000 mark. Actually, with lipsticks, it's the first, first product to make that point.”
Fredrickson: Stowaway Targets $40-$50 CAC and $1,000 Customer Lifetime Value
“Keep in mind, this is based off of, say, the idea of a CAC of 40 To 50 dollars, so let's just round it to 40, and knowing that I want to make a thousand bucks off of this woman over a lifetime, and that means having the best possible products and making sure t…”
Fredrickson: Average Customer Depletes Stowaway Cosmetics in 90 Days
“It takes somewhere between three and six months for the average woman to finish our products. 90 days is the sum total average, but obviously we have people that are more minimalist.”
Fredrickson: 40% of Stowaway's First Cohort Reached Third Order
“Our most mature cohort, which would be month one, has now gotten to the point where we're at 40% of them repurchasing, and they're now on their third orders.”
Fredrickson: Stowaway runs a real-time BI dashboard using Google Sheets and Zapier
“We have a business intelligence dashboard that's run through Google Sheets using Zapier that integrates all of our business data. So we have a real-time look at what's going on. So Stripe sales data, CRM, NPS scores, Google Apps.”