Michelle Phan's MyGlam Raises $2.75 Million

By Erin Griffith , written on July 13, 2012

From The News Desk

Most new subscription commerce companies have a few things in common. They charge a monthly fee for "something in a box." They sell some consumer goods, typically to women. And they use a movie star spokes-founder to drum up attention and customers. ShoeDazzle has Kim Kardashian, BeachMint has Rachel Bilson (although she's not a founder), and Honest Company has Jessica Alba.

But we live in a post-Web 2.0 world. It only makes sense that YouTube stars and endorsement-hungry bloggers could take that same role.

That's the idea behind MyGlam. It's a subscription beauty products company co-founded by Michelle Phan, a makeup instructor with almost two million YouTube subscribers and 600 million video views.

Phan's San Mateo-based company began selling monthly "glam bag" subscriptions in November last year. In February, the company hired Jennifer Goldfarb, VP of Corporate Strategy for publicly traded Bare Escentuals, as its President. This week the company secured $2.75 million in venture backing.

Or rather, its parent company "Personalized Beauty Discovery" did, according to an SEC filing. [Update: The filing represents a first close, Goldfarb says, and the final close will end up being higher.]

The company reserved $270,000 to go towards payments to the salaries of* Goldfarb and CEO Marcelo Camberos (formerly a VP of Biz Dev at Funny or Die), which is a rare disclosure for a company this early stage. The company had raised $480,000 in January and filed to raise $3.5 million in June, apparently lowering that to its current raise of $2.75 million.

MyGlam looks a hell of a lot like Birchbox, the New York-based beauty product sampling startup which has by most counts been a runaway success amid a sea of sub-comm look-alikes. Both sites are even drenched in a menacing shade of pink. In fact, they're so similar that it's common for beauty bloggers to post side by side Glam Bag vs Birchbox showdowns each month. (Notably, this means they subscribe to both.)

Each service charges $10 per month for a delivery of four to five beauty items. There is a heavy emphasis on editorial and instructional videos. Phan is a YouTube star, but Birchbox is staffed with editorial talent escaped from Conde Nast and Hearst beauty mags. There is an element of personalization (you fill out personal preferences questionaires when signing up for each.) You have the option to shop more frequently via their ecommerce sites, which is the real underlying business model here.

There are a few (small) distinctions that I can tell. Birchbox features monthly themes. (For example, this month was done through a partnership with Glamour, past months have featured entertainment brands like Gossip Girl.) MyGlam promises "limited edition Glam Bag" every month, and, of course, carries Pahn's endorsement.

Beyond that, I'm having trouble seeing the distinction. It seems there's room for two beauty sampling subscription services -- if any category is perfect for the sub-comm business model, it's expensive, sample-heavy beauty products. But the real trick will come in execution -- both companies make their money on additional purchases, not on the subscriptions themselves. The service with staying power will be the one that can convert more subscribers into shoppers.