The Revenge of Team MySpace: Will Intelligent Beauty Be LA's Redemption Story?
Some companies operate quietly, known only to industry insiders. But Intelligent Beauty, an ecommerce conglomerate, is so far off the radar as to be almost extra-terrestrial. Little known to most of tech ecosystem — or even its Los Angeles neighbors — the team that incubated MySpace long ago has shed its InterMix Media shell. Their new venture, Intelligent Beauty, is on pace to generate nearly half a billion dollars in revenue this year. Not bad for a company no one has heard of.
The company’s three ecommerce businesses include a Sephora competitor, a subscription fashion company that thinks it has ShoeDazzle licked, and a widely successful diet system based on smell and taste therapy. In true LA ecommerce style, they’ve even got a celebrity in Kimora Lee Simmons, but unlike most others in her position, she’s an experienced executive and apparently a force in the boardroom.
Intelligent Beauty is shockingly large and profitable and the people behind the company and the story of how they got here are fascinating. Here’s the exclusive peek inside this juggernaut that may be Southern California’s best hope at a multi-billion exit.
The Early Days at Intermix Media Our story begins the last time LA seemed to have a multi-billion dollar hit on its hands — MySpace. Intermix Media is known mostly for incubating the one time social media powerhouse. What is less well known is that at the time of its sale to News Corp, Intermix had a highly successful ecommerce and performance advertising division called Alena Media, which generated hundreds of millions in revenue and was its only profit center.
Alena was built in large part by Adam Goldenberg and Don Ressler, the co-founders of Intelligent Beauty. They were bought into the Intermix fold by founder and President Brett Brewer, who acquired Goldenberg’s first company, Gamers Alliance and Ressler’s FitnessHeaven.
Gamer’s Alliance was an advertising network for gaming sites and had grown fast enough to catch the attention of bigger players within the space. Brewer rushed to acquire it, doing the entire deal over the phone from Intermix’s then headquarters of New Haven, Connecticut. It was not until the deal was done that he learned that Goldenberg was just 17 years old.
Visions of corrupting the youth flashed before his eyes, as Goldenberg told him of his plans to drop out of school and move from his parents house in LA to his new job at Intermix. “I couldn’t believe it when this kid showed up at the door of my office just a few days later, parents in tow and dressed in an ill-fitting brown suit,” Brewer says. “Somehow he had built this company and talked me into acquiring it, and I never knew he was still in high school.”
It was only after his lawyers okayed the decision that Brewer went ahead with Goldenberg’s employment contract. It was clear already that this was no ordinary acquisition and that Goldenberg was no ordinary entrepreneur.
Despite the initial impressions, he proved to be a relentless worker and was promoted to COO of Intermix, which was already a public company, at the age of 19. He may be the youngest COO of a public company in history.
The following year, Intermix sold its stake in ecommerce music site CDUniverse.com and moved the operation back to LA, where they acquired Ressler’s company, health and fitness portal FitnessHeaven.com. Brewer remembers Ressler and Goldenberg clicking immediately.
The 19-year-old gamer and fitness buff made an odd couple, looking like Danny Devito and Arnold Schwartzeneger in the movie “Twins”. Goldenberg was — in Brewer’s words — “incredibly small and a bit dorky,” while Ressler was a bodybuilder clad in tailored suits. He never met a mirror he didn’t like.
Despite the superficial differences, in the decade since the two have been an incredibly effective product marketing and development team. The pair were the driving force behind Alena Media, which became a performance marketing machine and “built fortunes for external brands,” Goldenberg says. One of Alena’s greatest successes was Hydroderm, the first Internet-built skin care brand. (That was also the inspiration for Intelligent Beauty’s first company, but we’ll get to that in a minute.)
Goldenberg and Ressler were sitting across from each other in late 2005, just a few weeks after News Corp acquired Intermix Media. The two were watching the media conglomerate completely ignore the insanely valuable ecommerce business they had spent years building. Their response was essentially “fuck this shit,” and because News Corp foolishly hadn’t locked them in in any way, they left.
The Birth of Intelligent Beauty After less than 24 hours as free men, they decided to get the band back together and start on their next project. It was still the early days of online performance advertising, and Goldenberg and Ressler knew that they could build brands and drive commerce as well as anyone. This time around though, they insisted on building brands they owned and controlled.
They brought in a number of former Alena team members who spent two weeks brainstorming ideas in the living room of Goldenberg’s beachfront house. The company that eventually became Intelligent Beauty started out as the uninspiringly named Brand Ideas, a direct-to-consumer brand building machine.
The first brand launched was DERMSTORE, an online skincare and cosmetics marketplace that for some reason insisted on blaring its name in all caps. DERMSTORE has grown into a large play in the space, hoping to chase down Sephora. Although Intelligent Beauty doesn’t break out its financial results, the company says that DERMSTORE is generating nine-figure revenues and is highly profitable. A number of investors I’ve talked to back up these claims.
With two years of rapid growth in the books under DERMSTORE, the founders then got the itch to start another brand. This time they targeted the weight loss industry, launching the SENSA weight loss system and community. The pair brought in board-certified neurologist and authority on smell and taste treatments Dr. Alan Hirsch to develop the product. Together they’ve built a membership community where hundreds of thousands of users access weight-loss tools like progress graphs, meal plans, calorie counters, measurement trackers, and 24/7 forum support.
SENSA, like DERMSTORE, is said to be “massively profitable.” Goldenberg suggested that it might be Intelligent Beauty’s first liquidity event, although there are no immediate plans to go down that path. Goldenberg and Ressler even recruited an old friend to run it: Brewer became the CEO of SENSA in January.
The latest and best known of the Intelligent Beauty companies is subscription ecommerce fast fashion specialty retailer JustFab which launched in 2010. A central figure in the “shoes of the month” wars, JustFab offers members curated monthly showrooms of shoes, handbags, jewelry, and now denim. Many tech-focused Silicon Valley entrepreneurs have scoffed at companies that rely less on code than using subscriptions and celebrities to sell shoes. But nevertheless, JustFab and its competitors ShoeDazzle and BeachMint have been raking in the cash.
Each of these competitors has a slightly different model, including disagreements over whether to stick with or depart from the subscription model. Goldenberg and Ressler say they have no plans to move away from subscriptions. Like its sister companies, Intelligent Beauty is holding the detailed numbers on JustFab close the vest, but the founders claim rapid revenue and user growth — although the company is not yet profitable. The fact that JustFab recently expanded to a larger and much swankier office in LA and is launching overseas in Germany suggests that, at the very least, it’s not slowing down.
Many outside the company question whether JustFab is capable of keeping up with the likes of Brian Lee and his Andreessen Horowitz-backed ShoeDazzle. While Lee has also started a trio of companies — in LegalZoom, ShoeDazzle, and Honest — he’s focused on one at a time and hasn’t tied them together. It remains to be seen whether having three loosely related ecommerce brands in an umbrella company within Intelligent Beauty will be an advantage or a distraction.
One subtle point of differentiation for JustFab is its use of celebrities. Other brands have leveraged celebrity partners early on to supercharge their launches, even giving them ceremonial titles on occasion, despite their limited and short-lived participation. Goldenberg and Ressler eschewed the appeal of cheap celebrity publicity early, relying on their experience driving traffic online through direct response marketing. After nearly two years, they made the decision in mid-2011 to bring in an experienced fashion executive and creative director to take the reins and elevate JustFab.
It just so happens that this new executive was the six-foot-tall, former runway model and fashion icon Kimora Lee Simmons. She’s a celebrity, sure. But to reduce Simmons to simply a celebrity partner would be to devalue her experience in building Baby Phat into a billion dollar brand (the company was sold to private equity firm Kellwood in 2004 for $140 million, who later ousted the founder unceremoniously amid reported cost-cutting, according to gossip rags). She’s already demonstrated that she has chops to build a worldwide fashion business and that her customers (err, fans) love her. As JustFab’s president and creative director, Simmons is in the office five days a week, assuming the full responsibility of the positions.
That’s not to say that she doesn’t bring her own “fabulocity” (her word) to the company. When I first met her, Simmons was spilling the contents of her designer purse onto the floor of her office, including a giant diamond earring which she scooped up with a shocking casualness, saying “I was wondering where that went.” She then apologized for having to “take her pills” (vitamins) and asked me not to “make our interview sound like a rap video.”
Bling and vitamin gorging aside, Simmons was quick to get down to business, discussing her fight to elevate the quality and design aesthetic of the JustFab brand and to reach her audience of fashionable, value-driven women. “I think my customers are real women,” she says. “I’ve always been about bringing high fashion mixed with value and quality to the broadest audience possible.”
She has big plans for the company’s international expansion and is already exploring additional product categories. Simmons would even like to see JustFab join its offline competitors in the more serious fashion show circuit.
Although she’s committed to being seen as a business woman first, Simmons is tip-toeing the line of celebrity. She is partnering with the Style network on a reality show revolving around her role with the company. The network has begun filming the pilot episode tentatively named “House of Fab.” Starring in a reality show may not be the best way to convince skeptics that she’s more than a celebrity figurehead. But in the world of brand marketing, it’s gold.
Brand building is generally a hit or miss proposition. Intelligent beauty has only had three at bats, and at a minimum, they’ve put the ball in play each time. Goldenberg forecasts that the combined revenue of the three companies will grow 50 percent to $600 million in 2013. Each business has its own CEO and operates independently, with Goldenberg and Ressler sitting on the board of each and holding operational roles in JustFab only — as co-CEOs.
Looking ahead, the pair see the opportunity within JustFab as far and away the biggest of the three. Like ShoeDazzle and others, JustFab has its sights beyond the subscription commerce wars to compete with “fast fashion specialty retail” companies Forever21 and H&M. JustFab’s users visit its online showrooms 30 times per year on average; that’s far more traffic than most offline retailers see. With each visit, the showrooms are completely customized to the tastes of the user and the latest merchandise available on the site.
Intelligent Beauty was largely bootstrapped by its founders for the first two years of its operation, with only nominal investments from entrepreneur and investor friends. Only in 2008 did they raise a true institutional financing round, taking in $43 million from Technology Crossover Ventures. JustFab is the only subsidiary out of the three to raise outside financing, getting $33 million from Matrix and Technology Crossover Ventures in late 2011.
As impressive as Intelligent Beauty’s beginning is, LA companies are known for starting well, but finishing weakly. Some in Silicon Valley ask whether the Intelligent Beauty team is capable of building a billion dollar business or whether they’ll sell too early like they arguably did with MySpace.
On MySpace, Goldenberg and Ressler claim to have no regrets. But their words signal something more nuanced, a decision that made sense at the time but an outcome that still nags at them. “MySpace needed resources and international reach that we couldn’t provide at the time,” says Goldenberg. “News Corp was perfectly positioned to lead the next phase of expansion, and in fact the company grew massively shortly after the sale. That’s not to say I’m happy with how it ended up, or that I wouldn’t have done things differently, but I can’t go back and second guess the decision to sell.”
What MySpace could have been is the Web curse that haunts the LA ecosystem — and presumably the careers of Intermix execustives Goldenberg and Ressler. Intelligent Beauty is their second chance to prove they can build something that lasts.
[Illustration by Hallie Bateman]