Madison Reed Raises $50 Million, Surpassed $100 Million In Revenue In 2020

Beauty disruptor Madison Reed turned dyeing gray hair into serious green during the pandemic. The 8-year-old company, founded by Amy Errett, reported record revenue in 2020, more than $100 million, and just secured $50 million more in funding.

“We grew enormously, proving that our omnichannel strategy is viable,” says Amy Errett, founder and CEO of Madison Reed. As Forbes reported in July, at the time, Errett projected revenue to surpass $100 million in 2020. But by the end of the year, she says the company “exceeded that goal by 10% and we’ll do a lot more than that this year.” 

Madison Reed experienced 130% growth in gross sales in 2020. According to a report by McKinsey, Covid-19 shut down up to 30% of the beauty industry las year due to closures of salons, factories and stores. While many CEOs resorted to layoffs, furloughs and cost-cuts, Errett took a different path to keep more than 200 in-store colorists employed. 

“The conventional wisdom would be, ‘Ah, our stores closed let’s fire everyone.’ But our culture is inclusive.” 

The 59-year-old previously worked at venture capital firm Maveron before starting Madison Reed in 2013. The hair care startup took on market dominators like Clairol and L’Oreal with hair dye kits that relied on clean ingredients like argan oil, instead of chemicals like ammonia. 

With salons shuttered for months, the home hair care industry exploded since the pandemic, during the height of which Pinterest reported a 417% spike in searches about hair care, and more specifically, a 156% jump in how to strip hair color naturally. 

Its latest VC round is led by True Ventures, where Errett is one of several active portfolio CEOs as well as partners. Says Jon Callaghan, cofounder of the San Francisco firm, “We’ve strategically designed our team this way so all the startup founders in our portfolio can benefit from the operating depth spanning our team, including Amy who has world-class expertise in building and growing modern consumer brands.”

The round also includes Norwest Venture Partners, Comcast Ventures and Shea Ventures — all of which have invested in earlier rounds. New investors include Goldman Sachs, Motley Fool Ventures, Portfolia Rising America Fund and Portfolia FirstStep Fund. 

Madison Reed has raised $199.5M in total since launch. Its previous funding rounds have charged the expansion of all three channels: direct-to-consumer, wholesale, and its chain of “drama-free, no diva” color bars across the country.  

Despite the pandemic, the company doubled its customer base and opened 16 new color bar locations, doubling its brick and mortar presence to 28 stores in total.

“One of the reasons for Madison Reed’s success is its consumer engagement and its rapid innovation to meet consumer needs,” says Andrew McDougall, hair care analyst at research firm Mintel. As Forbes reported, the company launched its “Colorist on Call” series on Facebook live to teach consumers how to dye at home during the pandemic. It also moved into male hair coloring with “Madison Reed Mr.,” which has raked in close to $5 million in less than a year.

Says McDougall, these launches can “help maintain customer loyalty beyond the short and medium-term.”

Although Errett revels in the immediate outcome, she has identified where her leadership could use more gloss and toning. Madison Reed products are made in the Lombardy region of Italy, which was the second hardest hit area during the start of the pandemic. Italian factories began to shut down. So did salons across the U.S. 

Meanwhile, Madison Reed was sold out of eight of its top-selling shades. The inability to replenish stock left Errett’s team in a standstill. “We learned a lot from an operations standpoint,” she says. “It’s an area a lot of companies don’t pay attention to until we have to. I wish I paid more attention to it before the pandemic so that the fallout would not have been as dramatic.”  

By early summer, she was able to revive manufacturing, but it took some craftiness—and negotiating with the Italian government. “The only way to keep our factory in Italy open was to agree to subsidize the production of hand sanitizer for free,” says Errett. It sounds simple but she admits it took relentless work to execute. “It cost us a lot to keep going. We had people working in different time zones 24/7 for seven months straight. An amazing amount of hard work and negotiation went into it but a lot of other businesses would’ve gone another way about it.” (Madison Reed has since designed a fallback operations strategy with secondary fulfillment centers.) 

Back in the states, Errett had to shut down all color bars across the country, which employed two-thirds of her 300-member team. She, again, got creative. “We could’ve let them go but we decided to pivot and turned them all into call-center employees.” Within 10 days, Madison Reed ordered 200 Chromebooks and headsets and trained all 200 colorists as call agents. Errett says it was a win-win. “We would have had massive customer service issues without licensed colorists.” 

“This is the muscle you grow when the cards get dealt,” she continues. “As an entrepreneur you have to be agile. The conventional wisdom would be ‘ah, our stores closed let’s fire everyone’ but our culture is inclusive.” 

Errett will have to keep flexing while tending to the longevity of all three verticals, as McDougall of Mintel expects the economic instability due to Covid-19 “will continue to affect discretionary items and services for the next 12 months.” In the meantime, all 300 Madison Reed employees—including the 200 colorists and shop workers—have remained employed through the pandemic; 80% of whom are women and 50% are people of color.

For Errett, it was her most defining moment yet: “In a time when a disproportionate amount of moms and women were dropped from the workforce, and hit the hardest financially, we looked at each internally and said, ‘No, we can’t let that happen’.”