One of the most fascinating companies that I find is The Honest Company, Jessica Alba's brand.

One of the most fascinating companies that I find is The Honest Company, Jessica Alba's brand. And they announced last December that they're shutting down direct to consumer. So if you want any of their products, you have to find them in Amazon, Target, or any other retailer. I was super curious on how we got here, so let's start from the beginning. It's 2008, and Jessica Alba's pregnant. She washes a onesie with detergent and then breaks out in hives. That moment sends her on a mission to find products that are actually safe to use. Three years later, she starts The Honest Company with Brian Lee, one of the co founders of Legal Zoom. And together, they put in $6 million of their own money to get the company started. They made $10 million the first year of business and then $300 million by year five. I was actually interning at a VC firm when they were fundraising, and I remember seeing their investment memo on one of the desks. At this point, there were already a unicorn valued at $1.7 billion, and they were essentially selling diapers, cleaning products, and beauty products that are marketed as safe and non-toxic. And Jessica Alba is the chief creative officer. But then cracks started to show. In 2016, within the span of weeks, they got two lawsuits over ingredient labelling and had to settle for nearly $9 million in legal fees. To fix the slowdown of growth, they brought in Nick Vlahos, who was then an exact at the Clorox Company to be the CEO. And yes, he's the CEO of Rhode today. At The Honest Company, he streamlines the product line and doubles down on retail. This works well enough to take the company public. And then in may of 2021, they finally go public. Jessica Alba's stake is worth $130 million on day one. Then the stock falls. By 2022, the value of her stock had fallen below 30 million. Nick Vlahos quietly leaves the company, and he's replaced by Carla Vernon as the CEO. Under Carla Vernon, the company actually hits a record $378 million of annual revenue in 2024, largely due to the fact that they double down on retail in Walmart, Ulta, and GNC. At this point, Jessica Alba steps down as the chief creative officer, but she remains on the board today. But the direct to consumer model, the very thing that differentiated them in the beginning, is now too expensive to run, so then they shut it down. And I think this company was so fascinating because it's one of many firsts. It was one of the early brands founded by a celebrity with an equity stake at a time when most other celebrities were doing endorsement deals. It's also one of the first CPG brands coming out of the 2010 e commerce era to go public. This is the same time as Glossier and Allbirds. And now they're making a big move to exit direct to consumer. And I actually don't read it as a failure story. I actually see it as market signal that direct to consumer just isn't as profitable as it used to be. And as we're heading into the next era of e commerce, I wouldn't be surprised if bigger brands made similar moves.