Tatcha: Vicky Tsai (July 2020)

In 2008, Vicky Tsai walked away from a startup job and set out to rediscover herself on a trip to Japan. In Kyoto, she had an unforgettable meeting with a geisha, and learned about the face creams and blotting papers that the traditional Japanese hostesses had used for centuries. But as she contemplated selling those products in the U. S., experts on both sides of the Pacific told her it would never work. Strapped for money and juggling multiple jobs, Vicky worked out of her parents' garage, pitching her new brand—Tatcha—on QVC and steadily growing it. In 2019, Unilever acquired Tatcha for a reported $500 million. This episode was produced by Jed Anderson with music composed by Ramtin Arablouei. It was edited by Neva Grant. You can follow HIBT on X https://twitter.com/HowIBuiltThis & Instagram https://www.instagram.com/howibuiltthis, and email us at [email protected]. Sign up for Guy’s free newsletter at guyraz.com http://guyraz.com/ and on Substack https://guyraz.substack.com/. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Guy Raz?

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• 5:16Guy Raz?

  Hey, everyone. It's Guy here. So this week, we're bringing you a really great episode from our archive. It's a story of Vicky Tsai and her makeup brand, Tatcha. And as you'll hear, the company was pretty slow to launch. In fact, Vicky ran it from the garage at her parents' house for seven years and took no salary. But she stuck it out, and in 2019, Tatcha was acquired by Unilever for a reported half a billion dollars. This episode first ran back in July of 2020, and it's a great one. Hope you enjoy it.

• 5:50Speaker 01

  We ran out of money over and over and over again. I couldn't afford a salary. My partner couldn't afford a salary. I couldn't afford rent anymore. And my parents had bought a place in, um, near the airport at that point. And they let me move into there. And like, we had this really, really incredible high-end clientele. And, um, and I was, I was working on my mom's garage.

• 6:23Guy Raz?

  Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built.

• 6:34Guy Raz?

  I'm Guy Raz, and on today's show, how a trip to Japan and a meeting with a geisha inspired Vicky Tsai to launch Tatcha, a line of skincare products that almost nobody thought was a good idea until everybody did.

• 7:00Guy Raz?

  So as you've heard on this show, really good ideas often come from solving a problem that you and other people have. And of course, you can spend years solving that particular problem in just the right way, obsessing over countless designs, doing mountains of research to find the perfect fit between what you made and what the market wants. But sometimes, ideas just sort of reveal themselves, even when you're not looking. And that can often happen when you're visiting a different country. Like Gordon and Carol Siegel, who came across Scandinavian furniture on their honeymoon and went on to build Crate and Barrel.

• 7:42Guy Raz?

  Or Susan Griffin Black, who encountered lavender oil on a visit to Covent Garden in London and came up with the body care company EO Products. Or Blake Mycoskie, whose trip to Argentina exposed him to a type of espadrille shoe that he'd recreate as Tom's.

• 8:01Guy Raz?

  And for Vicky Tsai, our guest today, the pivotal trip for her was to Kyoto, Japan in 2008. She went there to kind of decompress after leaving a job that left her feeling pretty bad about herself. And it was on that trip that Vicky came across the nearly impenetrable world of the geisha, and in particular, the natural beauty products that the geisha used on their skin to make it look smooth and flawless. And when Vicky started to research the idea of maybe introducing some of these products to American consumers, she heard no from almost everyone. People in Japan told her that the skincare products used by the geisha were old fashioned,

• 8:45Guy Raz?

  the kind of stuff your grandma might use. And in the US, beauty experts told Vicky something even more disappointing, that Americans weren't even interested in beauty products from Asia. But it turns out, they were, though it would definitely take years for Vicky's brand, Tatcha, to gain traction. And much of that time, she worked out of her mom's garage, scrambling to pay her team, and pitching her skincare products on QVC. But by 2018, Tatcha was doing $70 million in sales. And a year later, it was acquired by Unilever for a reported $0.5 billion.

• 9:26Guy Raz?

  Now, Vicky actually got her start in the beauty industry, working for her mom, who ran a small cosmetics shop in Houston. Both her mom and dad came to the US from Taiwan. And after high school, Vicky went to UT Austin before transferring to Wellesley, the women's liberal arts college in Massachusetts.

• 9:44Speaker 01

  I loved my experience at Wellesley, but it was very, very small. UT Austin is a huge school, and I was used to my independence and used to big classes and lots of different kinds of people. So when I went to Wellesley, it's a very small... Boutique experience, tiny liberal arts college, and it's women only, which I understood theoretically, but it wasn't until I got there where I was like, where are the guys?

• 10:11Guy Raz?

  But I guess while you were there,

• 10:15Guy Raz?

  you met this guy who would eventually become your husband, named Eric, that you-- the story I read is that you actually really kind of pursued him, that actually at the beginning, he was, he was sort of not the kind of person who would ask someone out, I guess. Is that the story?

• 10:34Speaker 01

  Yeah. And it was the weekend before school started at Wellesley, and it had hit me that there really were no men there.

• 10:45Speaker 01

  And they had this dance called Tower Court Mixer, and men from surrounding schools would come in for the dance. And I saw him, and he wasn't at all interested in me. And I kind of kept on doing laps around the dance floor with my, with my new girlfriends, and they kept on getting plucked off one by one. And then every few months, I would try to get his attention and email him and call him, but he just wasn't interested.

• 11:19Guy Raz?

  So what got him interested? How did you eventually, you know, get him to agree to go out with you?

• 11:26Speaker 01

  I'm not totally sure. I think I just wore him down. We've been together over 20 years now, and I just kept asking.

• 11:36Guy Raz?

  Wow. So I guess after, after graduation, both of you moved to New York to work in finance, and both of you wind up, I think, at Merrill Lynch, right?

• 11:48Speaker 01

  Yeah.

• 11:50Guy Raz?

  Okay, so both of you are working in Lower Manhattan.

• 11:54Speaker 01

  Yes, we were.

• 11:55Guy Raz?

  And you guys were there on, on September 11, 2001, right?

• 12:01Speaker 01

  Yeah, we were in one of the World Financial Centers that's actually connected to the trade centers via a land bridge. And so I was on the trading floor, which was the seventh floor of that building, and my husband was on the 26th floor, which is where he worked of the financial centers. And I was in a meeting when the first plane hit, and there was no windows in the meeting room. So we felt the rumble and we heard it, but we didn't know what it was. But my husband, when he heard the first plane hit, he went straight to the windows to see what was happening. And he actually watched the second plane come in and bank, and he watched it go into the tower.

• 12:45Speaker 01

  At that point, I was back on the trading floor. We had gotten out of our meeting. And when we heard the second plane hit, we didn't know what was going on, and nothing came on over the loudspeakers yet. But I remember getting up and walking seven flights down and actually being one of the first ones to leave the building. And I'm ashamed to say that it didn't even occur to me to call up to my husband, to tell him what was going on. I just split. And then I waited outside for him.

• 13:18Guy Raz?

  You were on the sidewalk?

• 13:19Speaker 01

  On the sidewalk. And I realized we were never going to find each other because as people started flowing out of all the buildings, it got pretty chaotic down there. And then the people were jumping. And I couldn't watch it any longer. So I walked back to our apartment, which was in the West Village. And I thought, he's going to know that we can't find each other here, and he'll come find me, and he'll probably beat me there because I have heels on and he's fast. He was a marathon runner at that point. So then when I got home and he still wasn't there, that's when I realized, like, shoot, he was looking for me. And then I had no way of getting a hold of him because the mobile phones weren't working.

• 14:04Guy Raz?

  Wow.

• 14:07Speaker 01

  Both, um, both the towers fell before he got home.

• 14:12Speaker 01

  So there was a moment, there was a moment in there where I thought he was gone.

• 14:16Guy Raz?

  Wow.

• 14:19Guy Raz?

  How long before you saw him, before he got home?

• 14:22Speaker 01

  It must have been, it must have been minutes, not, not too long, but it was enough for me to be watching on the TV and see the power, towers fall. Um, I couldn't even quantify how long. But then he came up after and he was okay.

• 14:38Guy Raz?

  When that happened, um, I guess both of you decided you needed to kind of rethink what you wanted to do with your life, that maybe being a traitor in, on Wall Street wasn't what you wanted to do.

• 14:51Speaker 01

  Yeah, I don't know if, I don't know if I came up with that immediately, but I knew I didn't want to be there anymore. Um, he got sick with an autoimmune disease.

• 15:00Guy Raz?

  Pretty soon after, right?

• 15:01Speaker 01

  Almost immediately after.

• 15:02Guy Raz?

  And it was not related, unrelated to?

• 15:05Speaker 01

  Well, you know, we'll never, we'll never really know. Um, he never had any symptoms before that. He had run, I think, five marathons in two years prior to that, super healthy, captain of the crew team. And then all of a sudden, he couldn't move, he couldn't keep food down, he lost 40 pounds.

• 15:19Guy Raz?

  Oh, wow. How long was he getting treated for it?

• 15:23Speaker 01

  About three years. Um, so we would spend the weekends in the emergency room. Um, eventually we did go to the Mayo Clinic, uh, he had some procedures. They, they didn't know what it was. Towards the end, they were thinking about Remicade, uh, which is a pretty strong, um, treatment that the side effects included, you know, things like infections of the nervous system. I mean, it's pretty horrifying stuff. And we decided to just pull the plug on all the treatments, um, stop with all the, the medicine and the steroids and just quit it and see what happens. And thank goodness he got his health back.

• 15:56Guy Raz?

  Wow. So for three years, he was struggling with this autoimmune disease, you were? Spending your weekends at emergency rooms must have just been totally debilitating and scary.

• 16:07Speaker 01

  Yeah, it should have been, but I think what I did at that time, and I only realized it recently, is I started to almost disassociate. I didn't want to be in Manhattan anymore. I didn't want to be in ground zero. I didn't want to have to go there every day, especially because when the temporary trading floor in New Jersey was moved back to ground zero right before Christmas time, the only thing that I could see was out the window, which looked straight at the hole that was left.

• 16:38Guy Raz?

  Yeah.

• 16:39Speaker 01

  And you could always tell when they found a body or body parts because it would be covered with an American flag. And that was my only view for months. I couldn't see anything but that. And then I would go home and my husband would be sick. And so I actually just went really numb. And I just went on complete autopilot and I started planning, how do we get out of Wall Street? I just went into planning mode.

• 17:03Guy Raz?

  And I guess eventually you did get out of New York. You guys both moved up to Boston where you went to Harvard Business School, right?

• 17:15Speaker 01

  Yes.

• 17:16Guy Raz?

  And right that while you were there, I guess you kind of got your first experience working in the beauty industry. Like you got an internship with Procter & Gamble?

• 17:26Speaker 01

  Yeah. So I was actually working on SK2, which is a Japanese skincare brand that they own. And I treated my face like a science experiment and gave myself acute dermatitis.

• 17:40Guy Raz?

  Wait, when you say you treated your face like a science experiment, you meant you were trying all the products that you were working with?

• 17:46Speaker 01

  The products that we were working with, but then also to do competitive benchmarking, I would go to the other luxury brands, so La Mer and La Prairie, it doesn't matter, across the board. I just got a chance to buy a lot of them, to use a lot of them, to try to craft a SK2 strategy. And it was at that point that I ruined my face.

• 18:06Guy Raz?

  You got acute dermatitis. What is acute dermatitis?

• 18:11Speaker 01

  It's when the barrier function of your skin has become disrupted. And so, things that would typically not irritate the skin suddenly start irritating it because it's getting into the skin itself. So, it looks like bleeding, blistering, scalying on my entire face, including my lips and my eyelids. It was very painful.

• 18:27Guy Raz?

  Wow. And you had never had that before?

• 18:30Speaker 01

  Mm-mm. Never. And once you have disrupted the barrier function of your skin, after that, it's not able to effectively keep things out. And so, anything after that can start irritating your skin. So, detergents in my pillowcases, or fragrances, or my shampoos that had traditional ingredients in it. It was everything.

• 18:50Guy Raz?

  Oh, my god.

• 18:51Speaker 01

  When the spring came, pollution, whatever, it would freak out.

• 18:54Guy Raz?

  It's like the plagues in ancient Egypt. Like, first, there's 9/11, and then your husband's autoimmune disease, and then your dermatitis. We're only into 2004 here.

• 19:04Speaker 01

  Oh, yeah. And we didn't even get to the fun stuff yet. That's right.

• 19:08Guy Raz?

  Wow. So, you guys were dealing with a lot of stuff. How were you? How did you eventually get it? Did it just go away on its own? Or how did you eventually bring it under control?

• 19:16Speaker 01

  I had it from the summer of business school. So, between those two years, I had it my entire second year of business school. And then, I had it two years after that, when I graduated and I worked for Starbucks. So, after business school, we moved to Seattle. My job was to launch Starbucks's consumer products business in China. And I was flying all the time through Japan. There were not direct flights between Seattle and Beijing at that time. And the only thing I could put on my face that didn't irritate it was Aquaphor.

• 19:50Guy Raz?

  Yeah.

• 19:51Speaker 01

  Which, you know, you put on babies' butts when they have diaper rashes.

• 19:55Guy Raz?

  I know Aquaphor well, yeah.

• 19:56Speaker 01

  But it leaves you looking kind of greasy. So, when I would go to China via Japan, I would pick up these blotting papers that I found in Japan that I couldn't find in the US.

• 20:07Guy Raz?

  What are blotting papers for people?

• 20:09Speaker 01

  Oh, I'm sorry. Yeah, that's a great question. It's a piece of paper that is made out of, there's various kind of materials. The ones in the US are made out of cotton, the ones in Japan are made out of a certain type of leaf. And you press it to your skin when it's oily, and it lifts off the oil, but it won't disrupt your makeup or take any moisture from the skin.

• 20:28Guy Raz?

  And that helped?

• 20:29Speaker 01

  It helped.

• 20:30Guy Raz?

  All right, cool. So you got the blotting paper. You're going to China. You're working for Starbucks, which sounds like a pretty amazing job. And was there like a Starbucks craze in China already at that point? Like, were people waiting in line to get their Starbucks and stuff?

• 20:44Speaker 01

  I don't know if there was lines, but it was already a very popular and admired brand.

• 20:49Guy Raz?

  Got it. Okay. And your job is to, is to launch what in Starbucks?

• 20:56Speaker 01

  Essentially Frappuccino.

• 20:57Guy Raz?

  Frappuccinos, okay. Bottle Frappuccinos. So, so I, I read a story and I don't know if it's entirely accurate that, you know, you were grinding away at Starbucks. You were just working really, really hard and going back and forth. And you're really proud of this initiative. And then I guess it was time for you to get your annual review. And it was like meets expectations. That was what it said.

• 21:19Speaker 01

  You did do your research and found that.

• 21:22Guy Raz?

  And that, that really hurt your feelings. Like, you were really upset by that.

• 21:27Speaker 01

  I was offended, honestly. I would go 40 days straight without taking a day off. I would fly over the weekend so that I wouldn't miss any time and be back in, in the office by 8:00 AM Monday morning. The timeline for the project was extremely compressed. I was a team of one with no manager. And in the middle of all of that, I broke my arm. And I had a, a cast that went all the way up to almost my shoulder that I had to wear for months. And I missed zero days of work. And it ended up being a very successful launch. Howard was super happy with it and had me present to his board of directors.

• 22:09Speaker 01

  And I had a VP in my group who I had very little mentorship or guidance from. And at the end of the year, he gave me my performance review. And it was meets expectations. And I just thought, this is not a place where I'll be successful, even though I have so much admiration for Howard and the company and the brand. So I left.

• 22:30Guy Raz?

  Wow. Meets expectations.

• 22:32Speaker 01

  Yeah.

• 22:33Guy Raz?

  Phew. So you, you left Starbucks?

• 22:36Speaker 01

  Yeah.

• 22:38Speaker 01

  And then I was recruited out to the Bay Area to head up marketing for a sustainability startup. And then Howard Schultz found out and he called me on my mobile phone and asked me to come in and meet with him. So I went back to his office and it was the week that my furniture was already on a truck to San Francisco.

• 22:59Guy Raz?

  Wow.

• 23:00Speaker 01

  And he kept on being like, why? Why would you go? And tell me what you want to do and tell me what job you're interested in. But I had a weird loyalty to the

• 23:09Guy Raz?

  Sure.

• 23:10Speaker 01

  to the VP who gave me a meets expectations review. So all I said to Howard was, oh, you know, I just don't fit in here. So if I could do it all over again, Howard, I left because I got a crappy review that I did not deserve.

• 23:22Guy Raz?

  No, I mean, of course, like, and when you're like, wait a minute, I've worked so hard and somebody else is, you know, recruiting me now. It makes sense. So you went, so you got recruited by this, this other company and what was the company?

• 23:36Speaker 01

  It was called, well, it eventually became called Good Guide. It's very hard to say.

• 23:43Guy Raz?

  Good Guide.

• 23:44Speaker 01

  Good Guide. And it brought me to Berkeley. It was a few scientists out of Berkeley. And they wanted to create sustainability ratings for consumers by scraping the internet so that a consumer could plug in their values. You know, I care about, I care about gay rights. I care about, you know, animal testing. I care about carcinogens, but I, I also want a shampoo for curly hair and be able to check all these things off and how have it pop out a recommendation.

• 24:12Guy Raz?

  Wow.

• 24:13Speaker 01

  They were really ahead of their time. I give them so much credit for that.

• 24:15Guy Raz?

  Cause that was 2008. That's still, just as the iPhones coming out, so it's still pre-app really and

• 24:21Speaker 01

  Mm-hmm.

• 24:22Guy Raz?

  Yeah.

• 24:22Speaker 01

  Mm-hmm. It was.

• 24:23Guy Raz?

  I should mention, you were married at this point. You guys, in between, you did get married.

• 24:27Speaker 01

  Yes, we were married. We still had a house in Seattle and so I picked up and I left so quickly that I moved here, I moved to the Bay Area alone.

• 24:37Guy Raz?

  Got it. Okay. And, and what was your, what was your job at that internet startup? What were you tasked to do?

• 24:43Speaker 01

  I was their first business hire. And so my job was effectively to come up with a launch plan for them as well as, you know, a marketing strategy. And so I was with them for only, I think, maybe four months.

• 25:00Guy Raz?

  So did you, I mean, so you four months in and did you have a plan when you quit? Or did you just say, I'm, I'm, I'm gonna walk, I'm gonna step aside?

• 25:09Speaker 01

  You know, I think it dates back to nine 11 and the experiences there. But I was becoming increasingly impatient with spending the hours of my waking life doing things that I didn't believe in, or if I believed in, but it just didn't feel like the right fit or the right people. So I typed up a letter, a resignation letter, and I drove into the office and I handed it to them and I told them that I, I very much respected what they were doing, but it wasn't the right fit for me. And I tried to leave rather elegantly, but one, I was crying because I was so lost. And then two, I had brought this big clunky chair with me.

• 25:49Speaker 01

  And I was trying to take the chair out.

• 25:51Guy Raz?

  You brought to the office like a chair that you wanted to sit on?

• 25:53Speaker 01

  Like an ergonomic chair.

• 25:55Guy Raz?

  Oh, yeah.

• 25:55Speaker 01

  And then so when I left, I had to take the chair with me and, and I couldn't fit it in my car on the way out. And so I had to actually call up to someone in the office and have them help me compress the chair so I can close the trunk and drive away. It was the, the messiest resignation. It was humiliating.

• 26:13Guy Raz?

  So you're like four months in and you're out of work. Did you, did a part of you kind of regret leaving Starbucks at that point? Or does a part of you think like, God, what, what am I doing with my life?

• 26:24Speaker 01

  Oh, yeah. I, I thought to myself, Howard Schultz called me my cell phone and offered me any job that I wanted at Starbucks. And now I am unemployed, standing in the street crying with my chair in a different city than my husband.

• 26:37Guy Raz?

  Cause he was up in, in Seattle.

• 26:39Speaker 01

  Yeah. And I definitely was thinking about all the debt that we had because we had two business school debts plus a mortgage in Seattle, plus a lease for an apartment in San Francisco. And my husband had undergrad debt on top of that. And I just remember thinking, I've really made a mess for myself.

• 26:59Guy Raz?

  Yeah. I mean, you probably had hundreds of thousands of dollars in debt.

• 27:02Speaker 01

  It's probably about 600,000 at that point. And then now this is 2008.

• 27:08Guy Raz?

  Yeah. Which is just the beginning of.

• 27:12Speaker 01

  The Great Recession.

• 27:13Guy Raz?

  What was your, what did you, what did you want to do immediately? Did you want to like hide in bed and put the covers over your head? Like what, what was your plan?

• 27:22Speaker 01

  Well, I told my landlord that I was not working and she let me help be the, almost like the super for my building.

• 27:33Guy Raz?

  Oh.

• 27:34Speaker 01

  And rent out apartments for her and her other buildings for 400 bucks a pop.

• 27:38Guy Raz?

  And was that, was that pretty good? Was that enough to kind of keep you going?

• 27:42Speaker 01

  I worked about four jobs at that point. That was one of them. I think the only thing that was interesting about that was oftentimes the business school types, when they moved to San Francisco, will live in the marina. So when I was out there renting out apartments, it was not uncommon for me to see my business school classmates. And they would be like, is this your apartment? I was like, no. And they're like, why are you renting it out? And I'm like, for the money. They would give me this look of pity and confusion, but it didn't matter.

• 28:17Guy Raz?

  So you've left the job at the startup and you're kind of doing a bunch of different things to make money. And, and then I guess you at some point took a trip to Kyoto, to Japan, just to go visit? Like, was there a reason why you, you went to Kyoto in 2008?

• 28:35Speaker 01

  So I was unemployed. I still have dermatitis. I'm still using Aquaphor in my face and I ran out of my blotting papers. I tried to find those blotting papers around in the US and they're not available. They, there's different kinds here, but not that kind. And so I called up my friend from Starbucks Japan and I asked her where to find these blotting papers. And she said they're actually from around Kyoto and they come from gold leaf artisans.

• 29:05Guy Raz?

  From gold, gold leaf artisans?

• 29:08Speaker 01

  Mm-hmm. She said they're, they're hammering papers. They're beating papers. And I was like, what are you talking about, Tomoko? And I didn't really understand what she was saying, but I, I thought the whole thing was so fascinating and...

• 29:21Speaker 01

  I felt drawn to travel. I think I was trying to find myself. So I just picked up and I went to Japan.

• 29:28Guy Raz?

  All right, so most people wouldn't just go to Japan to get a fresh batch of blotting papers. I have to imagine that you were thinking, these work really well for me. I want to go check them out and see if they're, maybe I can, I don't know, do something with them in the US.

• 29:42Speaker 01

  I did not have a commercial idea yet at that point. I felt broken. We had had a pretty rough first 10 years of our adult life. And, and pretty rough is relative.

• 29:57Guy Raz?

  No, no, it was rough. No, no, you own that. You have, you get to, you get to say that.

• 30:03Speaker 01

  You know, I just, I felt like I didn't believe in anything anymore. And I questioned my value system and I questioned what I had been chasing my whole life. Because my parents is first generation Asian immigrants. You know, it's a very clear equation for success. You go to an Ivy League school, become a doctor or a lawyer, and then make your parents super proud and make their sacrifices worth it.

• 30:30Guy Raz?

  Yep.

• 30:30Speaker 01

  And I had sort of veered off every one of these paths. And I just started traveling. And I think, like a lot of people, I was traveling to find myself. And when she said Kyoto, there was something about it that drew me, even though I had never really spent significant time in Japan before. I knew nothing about Japanese culture because I'm not Japanese. But I just felt drawn.

• 30:52Speaker 01

  So I went there.

• 30:54Guy Raz?

  And what happens when you get there? Did you get your blotting papers?

• 30:58Speaker 01

  When I got to Kyoto, I went to the artisans who are a couple hours outside of Kyoto. And when I went to the workshop there, all they make there is gold. And there's gold everywhere. There's like, there's gold on their eyelashes. There's gold in their clothes. Just like, it's a mess of gold.

• 31:15Guy Raz?

  And this is gold leaf for like art, for like paintings and decorative works?

• 31:20Speaker 01

  Mm-hmm. In Japan, things that are precious are often leafed in gold, including the Golden Temple?

• 31:25Guy Raz?

  In Japan, or?

• 31:26Speaker 01

  In Japan.

• 31:27Guy Raz?

  So basically, for centuries, blotting, like blotting paper in Japan came from these gold leaf artisans who were using it to hammer gold into, you know, thin sheets of paper?

• 31:40Speaker 01

  Exactly. So gold is soft. And what they would do is they take gold paper, gold paper, gold paper, gold paper, and then these massive hammers made out of like stones. And it protects the gold during the hammering process because gold leaf is only a few micrometers in thickness. So it really has to get hammered down to almost nothing. And so this paper would get hammered with the gold and it would protect the gold. And then when they were done with hammering, the hammering paper would get thrown away.

• 32:08Guy Raz?

  So how did they figure out that this this paper that you were that they were using to hammer gold into into leaf would be useful on human skin?

• 32:19Speaker 01

  That was my question because it's such a weird leap.

• 32:21Guy Raz?

  Yeah.

• 32:22Speaker 01

  And so they they actually said, you would have to ask a geisha or a Kabuki actor because they're the ones who've been coming around getting them at the end of the day. And I was like, can I meet one? And they said, yeah. And so they introduced me to one, which is crazy because.

• 32:38Guy Raz?

  Well, they they like got you in touch with some with a geisha?

• 32:42Speaker 01

  Mm hmm. They introduced me to a geisha that they knew and they helped arrange for me to meet her in a tea house either later that day or the next day.

• 32:53Guy Raz?

  Wow.

• 32:54Speaker 01

  And I had a translator with me named Yuko, who's wonderful. And a beautiful, unreal geisha walked in and I was just completely beside myself. It was the summertime. I'm I was pregnant. I was trying to sit on my knees, which I'm not very good at. And I was sweating and I kept sliding off of my legs because of the sweat. And yet she was just the picture of perfection in wrapped in kimono. No sweat, never had to budge, never broke character. I just remember thinking, I'm a hot mess, but you're amazing.

• 33:33Guy Raz?

  Was she in in her uniform, in her sort of costume with with the makeup on and the?

• 33:39Speaker 01

  Mm hmm. She was in full performance makeup and kimono.

• 33:43Guy Raz?

  All right. So you meet this woman and and you start asking her, hey, tell me the story about this blotting paper.

• 33:50Speaker 01

  Yeah, and honestly, she didn't have a great answer. She just said, I don't know. We always knew that if we went and we used it before we put on our makeup, it would help create the nice canvas for makeup. And if we use it after, it would keep our makeup fresh. But she didn't have a lot to tell me about how that leap happened from one industry to in the next. But at the same time, I was so enchanted by her look, especially the makeup. And they told me that geisha had been around 300 to 400 years. And I knew a lot of the things that scared me about ingredients in personal care were largely from the petrochemical industry. And so I knew whatever they're using largely predated the petrochemical industry. And so I started asking her questions about her makeup, not because I wanted that look,

• 34:35Speaker 01

  but I was looking for anything at that point that I felt safe putting on my skin, because I still had my skin issue too. And now I'm pregnant, so I'm super careful about what I'm putting on my skin.

• 34:44Guy Raz?

  Right. And what was her advice? What did she tell you to buy?

• 34:48Speaker 01

  She just told me some basic stuff. We use oil to take off our makeup. We use a lot of rice powder and camellia oil and sake. And then Yoko took me to go find some of those things afterwards. And that's when I started seeing geisha flitting in and out of the store while we were there without any makeup on.

• 35:08Guy Raz?

  Wow.

• 35:08Speaker 01

  And their skin looks like a child's skin. And so if they reached for, you know, a bottle of oil, I would reach for that bottle of oil. And then if they reached for a powder, I would reach for a powder.

• 35:19Guy Raz?

  And what were the, like, the materials that were so different that you hadn't seen anywhere else? Like, what was the source of the cosmetics? Like, what were they making it out of?

• 35:29Speaker 01

  Largely food ingredients. The, when I took them home, Yoko had to write down on Post-it notes saying, you know, this is rice powder. Add water, create a foam, massage onto the skin, or leave on as a mask.

• 35:45Guy Raz?

  Because everything was in Japanese, right? Okay, yeah.

• 35:47Speaker 01

  Japanese. And so I just came home with this box of things like that. And I used half of them wrong. But about eight weeks later, my skin had pretty much healed. And that was after three years of dermatitis and steroids and antibiotics. And at the same time, I was so enchanted with the story of the blotting papers, the Goldie Fardisins, the geisha and the history. And to me, it embodied so much of what I was looking for as a woman. It was authentic. It was beautiful. It was steeped in true history. And so I guess if I take one step back is when I was still in Kyoto. After I met the geisha, I went back to the Goldie Fardisins. And I did ask if I could bring the blotting papers to the US.

• 36:32Guy Raz?

  If you could buy some from them?

• 36:33Speaker 01

  Mm hmm. And they said, no, we're not, we're not interested in, in distribution.

• 36:39Guy Raz?

  And by the way, were they selling the blotting papers to the geisha? Or they just like, it was just refuse and the geisha were just picking it up?

• 36:45Speaker 01

  Originally, it was refuse and now, now they sell it to them.

• 36:48Guy Raz?

  All right. So originally it was refuse, but, but, and clearly they were being sold in Japan because you had already used these blotting papers before.

• 36:55Speaker 01

  Exactly. And I was just asking if I could bring them to the US because they weren't available in the US.

• 37:00Guy Raz?

  And they said, we're not interested.

• 37:02Speaker 01

  They said they, they weren't interested. So then I said, how many would I have to buy to, to get you interested? And they said 10,000. And I was like, I'll buy it. And um.

• 37:12Guy Raz?

  Do you say, I'll buy 10,000 piece of paper?

• 37:15Speaker 01

  I'll buy 10,000 booklets.

• 37:16Guy Raz?

  Right. And how much did that cost you?

• 37:21Guy Raz?

  For like a hu- a couple thousand bucks?

• 37:23Speaker 01

  No, like 30,000, more than 30,000.

• 37:26Guy Raz?

  Wow. So you, so all right. So they said you have to buy 10,000 of these booklets. And you said, all right, I'll do it. But first of all, how did you, how are you going to do that?

• 37:35Speaker 01

  Well, first I said, I'll buy it. Then I went back to my hotel room and called my husband that night. So it's maybe 6:00 AM his time. And I said, good morning. I hope you're doing great. I just, um, I just bought 10,000 blotting papers.

• 37:50Guy Raz?

  To bring back with me to the US?

• 37:52Speaker 01

  Yeah.

• 37:53Guy Raz?

  And?

• 37:54Speaker 01

  And he, he said, how are you going to pay for them?

• 37:56Guy Raz?

  And you said?

• 37:59Speaker 01

  I looked around the room and the only thing of value that I had left at that point was my engagement ring in my hand. So I said, I'll just sell my engagement ring.

• 38:07Guy Raz?

  Wow. You said you'll sell your engagement ring. Did you pawn it at a pawn shop?

• 38:11Speaker 01

  I called the place in New York where I'd bought my engagement ring because I had I had proposed to my husband and bought my ring. And so I just called them and said, I need to sell it back to you. Would you buy it? So they took it on consignment. It took it took a few months for them to find a buyer.

• 38:27Guy Raz?

  Okay. And, and what were you going to do with the blotting paper with 10,000 booklets of blotting paper in the US?

• 38:34Speaker 01

  I had not really thought it that far out, honestly.

• 38:38Guy Raz?

  But you just thought, these work really well for me. There's something here.

• 38:41Speaker 01

  There's something here. Maybe I'll keep like a thousand for myself and then I'll figure out, give everybody, I'll sell the other 9,000 and then I'll have a steady supply for myself.

• 38:50Guy Raz?

  Got it. All right. So you come back to San Francisco and did you ship the blotting papers or?

• 38:57Speaker 01

  They it took them about a month to actually make them and send them to me or maybe a couple of months. And so they showed up in big crates a few months later.

• 39:06Guy Raz?

  So did you have an apartment just full of blotting papers?

• 39:09Speaker 01

  Yes.

• 39:10Guy Raz?

  But like, what, how were you, then what? Like, do you start calling friends? Do you have like a blotting paper party at your apartment and invite people over? Like, what do you do with them?

• 39:22Speaker 01

  I, I, I still can't explain it, but I saw this vision in my head of sharing these beautiful little treasures that I found in Japan with other women like me who were looking for something that was real and beautiful and safe. And so I thought, maybe, maybe I can create a way to keep sharing these things that I'm finding because there was these ingredients that heal my skin. There's this paper with this beautiful history that's fantastic and simple. And so I actually created Tatcha as just as a way of sharing these things I was finding when I go there.

• 40:02Guy Raz?

  And how did you come up with the name Tatcha?

• 40:06Speaker 01

  I had been helping out my friend Stanley, who had been the global head of creative for Starbucks and had left to start his own creative agency. And I had asked him for his advice on creating a brand, because I didn't know how to do that. And when I was telling him what I wanted it to feel like, I just said, I want it to feel like an exhale,

• 40:35Speaker 01

  like a breath of fresh air. And so he actually came up with the name Tatcha. And then shortly thereafter, he introduced me to this incredible woman, Nami Onodera, who's still with us, who's our Director of Culture. And she said, when I saw the name Tatcha, I assumed that it was short for Tatehana, which is one of the classical Japanese arts of flower arrangement. And it speaks to the beauty of simplicity in nature. And so we said, you know what? That's far, that's far more beautiful than just being an exhale or a breath of fresh air. So let's imbue it with meaning.

• 41:18Guy Raz?

  And did you start to talk to people about it? I mean, you had gone to business school, so you knew a little bit about like what it takes to fundraise. And did you build a deck and start like pitching the idea?

• 41:29Speaker 01

  I knew enough about fundraising that I didn't want to do it.

• 41:32Guy Raz?

  Because?

• 41:33Speaker 01

  I wanted to create something really, really pure and really, really true. And a lot of people from business school end up in the private equity world and in the VC world. And the ROI is, is very straightforward there. It's, it's about money.

• 41:49Guy Raz?

  Yeah, they want 10x.

• 41:50Speaker 01

  Yeah, it's money and it's growth. And it's money and it's growth. And I wasn't interested in creating something for money or for growth. I was interested in creating something worth loving and that I would want to spend the waking hours of my life doing. So I just wanted to self-finance it and, and just see what it could become.

• 42:07Guy Raz?

  Yeah.

• 42:07Speaker 01

  But the only thing I wanted was to make sure it stayed really true.

• 42:11Guy Raz?

  But here's a question, right? And I get this question a lot from people listening. They say, Guy, you know, I keep hearing these stories about people who self-finance. But how? How do they do it? I mean, I don't have any money. You sold your engagement ring, but presumably you had some savings from your Starbucks days and stuff like that.

• 42:29Speaker 01

  No savings. No, it was gone.

• 42:31Guy Raz?

  But how did you do that? How did you finance it without any? I mean, because to do a, create a company, a cosmetics company presumably requires a lot of capital, right?

• 42:41Speaker 01

  Indeed, indeed, yeah. Well, I started, before I even started the idea, there was maybe half a million in debt. So we immediately went to credit cards, which I don't recommend, but it is what we did. I worked four jobs. I begged my landlord for a discount in rent in exchange for renting out the apartments and being the super for the building. I sold anything that I had that was of any worth, including my car and my furniture. My husband is very good at poker. And so when he moved to San Francisco, every Tuesday night, he would go play poker.

• 43:19Guy Raz?

  Wow.

• 43:20Speaker 01

  And it would be just enough. I would wake up Wednesday morning, there would be a little stack of cash. And we'd use that to buy food. And then I just, I was just a team of one.

• 43:30Guy Raz?

  Working out of your apartment?

• 43:31Speaker 01

  Working out of my apartment. But, I mean, to be, to be completely honest, financially, things were dire. We would, when we maxed out one credit card, we would roll it all over to another credit card to buy ourselves some time. And I have a distinct memory of being nine months pregnant. I couldn't afford maternity clothes, so I just sort of pulled the drawstring out of my sweatpants. But then I'm like Humpty Dumpty without the suspenders. So like, I have to hold on to the pants when I walk or else they're on the ground. And I went to the grocery store. I was checking out and my credit card got declined.

• 44:09Speaker 01

  And the people behind me and the cashier looked at me with a great deal of pity because I was super pregnant and I couldn't afford my groceries. And I left them there and I walked out without them.

• 44:23Guy Raz?

  Wow.

• 44:27Guy Raz?

  When we come back in just a moment, how Vicky finally got Tatcha off the ground and into her parents' garage, where she would begin an eight-year-long struggle to keep the company from sinking. Stay with us. I'm Guy Raz and you're listening to How I Built This.

• 44:59Guy Raz?

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• 47:11Guy Raz?

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• 48:35Guy Raz?

  Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2009, and Vicky and her husband Eric are about to become new parents with a bank account that's almost empty and an apartment that's pretty much full of Japanese blotting papers. And Vicky needs to come up with a plan to launch her brand-new business, Tatcha.

• 48:59Speaker 01

  I was completely mistaken about how I would bring it to life. I thought if they're beautifully designed, and I tell this beautiful and true story about where they're from, I'll be able to find partners to work with. So retailers who would want to carry it, PR agencies who would want to work with us. And we were turned down everywhere.

• 49:22Guy Raz?

  You pitched everybody. You said, hey, I've got this great product.

• 49:25Speaker 01

  You name it. Yeah, I couldn't even give people money to take me as a client. And then retailers were not interested at all. And everybody also told me at the time, too, that there is no demand or interest in Asian beauty in the US because it's not aspirational.

• 49:43Guy Raz?

  Wow.

• 49:43Speaker 01

  And they had pointed out that Shiseido had been in the US for over two decades and had not been able to really make it beyond Chinatown. SK2, Procter & Gamble was behind them. They weren't having any meaningful success yet. Shuyu Amora, which was owned by L'Oréal, had been pulled out of the market and shut down. And there was no other Asian brands. And people told me very plainly that skincare is not really a thing in the US people care about. They care about makeup. And then Asian beauty in totality is not aspirational here. So don't do it.

• 50:23Guy Raz?

  But you did do it. I mean, you started putting the blotting papers out into the world. So how did you get the word out?

• 50:35Speaker 01

  Well, I went to the library and I couldn't afford the magazines, but I flipped through them and I wrote down the names of the editors and their mailing addresses and the makeup artists that I admired. And I started sending out care packages with handwritten letters to them, just with the blotting papers, and all I did was tell the truth of their story. And I said, "I hope you enjoy them." And that was where the press coverage started coming from.

• 51:01Guy Raz?

  And these are just blind? I mean, you were doing your own PR. This is you literally mailing it to somebody at one of those places?

• 51:10Speaker 01

  Mm-hmm.

• 51:11Guy Raz?

  And the makeup artists?

• 51:13Speaker 01

  The makeup artists, I saw the names in the credits on the side of the picture, and then I looked them up online and I found their agencies and I would send them to their agencies.

• 51:23Guy Raz?

  Where was the coverage? Like, what magazines?

• 51:25Speaker 01

  Pretty much everyone. Vogue did a spread. Oprah, it was on the Today Show pretty quickly. We got a ton of press. It was amazing.

• 51:37Guy Raz?

  And so in your first year, you're doing great?

• 51:40Speaker 01

  I mean, it was difficult. I had the labels made from a wine label maker in Marin. And then, when I got the labels home, I realized that the adhesive wasn't sticking the way that I needed it to. And so I got like a purple cow paper cutter and had to cut down 10,000 tops off of these stickers. But I was pregnant, so like, it was hard to even reach the table. So I did those 10,000. Then I bundled it all up and my husband helped me. And a lot of the, I would say, half that order, I actually shipped to the UK. Space NK was my first retailer.

• 52:22Guy Raz?

  Space NK is, that's the beauty retailer in Britain?

• 52:26Speaker 01

  Yeah.

• 52:27Guy Raz?

  How did they even find out about you?

• 52:29Speaker 01

  The magazines.

• 52:31Guy Raz?

  And you're still running this out of your apartment?

• 52:34Speaker 01

  Out of my apartment, mm-hmm.

• 52:35Guy Raz?

  So they weren't buying huge amounts? They were buying manageable amounts?

• 52:40Speaker 01

  Yeah, a few thousand. Yeah. And then I had merchandising units made. So it was pretty much every single dollar I could scrape together turned into either merchandising units or these blotting papers. And they ended up hitting stores the day that I was in labor with my daughter. So we officially launched the day that my daughter was born.

• 53:02Guy Raz?

  What was Eric doing? What was his job at the time?

• 53:05Speaker 01

  Eric had found a job at that point, I think he was with Cisco. We were fortunate. We had one income.

• 53:13Guy Raz?

  So you're a brand new mom.

• 53:17Guy Raz?

  How were you guys dealing with childcare?

• 53:19Speaker 01

  I was taking care of her myself, but I also was really lucky. My mom had visited and she helped me find a nanny,

• 53:28Speaker 01

  Mrs. Liu, who didn't speak English. She's originally from China. And she took care of my daughter in my one bedroom apartment while I worked. And then when my daughter napped, she would help me pack out orders. And then she became our first employee.

• 53:44Guy Raz?

  Was it clear to you that you could make a go of it just by selling blotting paper? That that could be a sustainable business?

• 53:53Speaker 01

  No, it was not. I was making far less revenue doing that than than my lowest paid salary job I had ever had. It was not. It was not a business. It was a hobby business at that point.

• 54:05Guy Raz?

  And did you have huge ambitions for it? Or did you think it was gonna kind of be a side hustle? Because it sounds like in a way.

• 54:12Speaker 01

  It was definitely not a side hustle in the sense that I worked 70 hours a week doing it. I took one day off in the hospital when I gave birth and then I went back to work. So about two weeks after that, I flew.

• 54:26Guy Raz?

  After the birth of your.

• 54:27Speaker 01

  After the birth of my daughter. Maybe it was more like three weeks. I was flying again, either consulting or going to Japan and continuing to research this. And it was horrible to leave a newborn.

• 54:40Guy Raz?

  Yeah. Wait, you were you were doing part time consulting gigs like to make ends meet in addition to running the company?

• 54:47Speaker 01

  Yes.

• 54:48Guy Raz?

  And how long did you do that? Like, how long was it? Was it before you were able to stop doing outside work and just focus on the company? Was it like two years, three years in?

• 54:58Speaker 01

  Three to four years.

• 55:00Guy Raz?

  Wow.

• 55:01Speaker 01

  And then about a year into it, I had exhausted my search for those other ingredients that I had found in Japan and used. The rice powder, the mineral powders, the camellia oil, the things that had healed my skin were not available in the US.

• 55:20Guy Raz?

  Even in San Francisco was an incredible Japan town.

• 55:24Speaker 01

  Japan town, no, Japan, I went to Japan town, Chinatown, Koreatown. I went to traditional Chinese medicine places because they, there's a lot of herbal treatments there. I went to eBay. I mean, I went everywhere. It was, it's just not here.

• 55:35Guy Raz?

  You were looking for that like rice bran, whatever like foaming powder that you were using and the camellia oil and you could not find, I'm surprised you could not find that.

• 55:44Speaker 01

  Could not find it. And then even, even then I did not realize how unique it was. And so on one of my trips back to Japan, I actually flew to Tokyo. And I just went to the department stores and I went straight to the cosmetics counters for the Japanese brands. And they, they all sort of looked at me like I was crazy too. And Yoko was like, yeah, they don't sell that kind of stuff. The people don't use that kind of stuff here in Japan anymore.

• 56:09Guy Raz?

  It's for like old, it's like what, for like old fashioned people or like?

• 56:13Speaker 01

  Yeah. It was things that like their great grandmothers or grandmothers had used.

• 56:17Guy Raz?

  And you're like, no, no, this is actually really great stuff.

• 56:19Speaker 01

  Yeah. And I'm like, no, this is super legit. I have no idea why it's super legit, but it is.

• 56:24Guy Raz?

  So it seems like, like at this point, Vicky, you were thinking of selling these products because you knew you couldn't make a go of it just, just doing the blotting papers?

• 56:35Speaker 01

  That's exactly right. And then I started working with scientists to develop these formulas.

• 56:40Guy Raz?

  Yeah. So you found a lab in Tokyo.

• 56:43Speaker 01

  Yes. And I got really lucky because it turns out that they're some of the most famous skincare scientists in Japan.

• 56:48Guy Raz?

  By the way, from what I understand, like the three main ingredients in a lot of these products are green tea, rice and algae seaweed.

• 56:59Speaker 01

  Yeah, that's exactly right. Those were the ingredients that I had first used that healed my skin. And then we went really deep. So we interviewed a dozen geisha. We went to old texts, including the oldest beauty book ever written in Japan, which was written in 1813. And the more that we dug, the more that we realized that the Japanese traditional approach to beautiful skin was not some sort of exotic flower that only grows on the dark side of the moon. Like many other cultures, hundreds of years ago, when women found that their skin was dry, or patchy, or breaking out, they go to what's within reach. And what's within reach is in the kitchen. And so the basis of the Japanese diet is the basis of their beauty. And that's it.

• 57:43Guy Raz?

  It's amazing. It's amazing.

• 57:44Speaker 01

  It is. Straightforward.

• 57:45Guy Raz?

  So they started tinkering with different products. And what did you say? You said, I want to do a lotion. I want to do a face cream. Was it that specific?

• 57:54Speaker 01

  I brought them things that I had been using, that the geisha had shown me.

• 57:59Guy Raz?

  And this was to wash your face, or to clean your face, or to do what?

• 58:03Speaker 01

  Yeah, there's a camellia oil that you use to melt off your makeup. There is a rice powder that you use to enzymatically exfoliate your skin. And then a moisturizer that was made out of silk extracts. And when I showed them the things that I was hoping to create, I remember that they laughed a little bit, because they said, why do you like these old fashioned things? Nobody will like this. Nobody uses these anymore. And I was like, because they work. I don't really care what's sexy. It works for me.

• 58:32Guy Raz?

  But it's interesting, because they were old fashioned, right? But you understood that if you just updated the design, it could appeal to people in the US. Because so much of these things is about design, right? You have great product, and the design sucks, no one's gonna notice it.

• 58:48Speaker 01

  That's exactly right. You know, the way that most beauty brands come to life these days is, you know, if you've ever wondered, how does this model or this actress suddenly come out with an ADP skincare collection? What does she know about skincare? It's pretty easy if you want to do it the fast way. You go to a contract manufacturer, they have stock formulas and stock packaging. You pick it, you put in 0.01% of a marketing level ingredient, you put your name on it, you pick a fragrance, and it's out the door. And that is how the vast majority of skincare is made in the world. And I will be completely honest, I did go to labs in Japan and say, do you have formulas like this? Because no brands are making anything like this.

• 59:27Guy Raz?

  Right.

• 59:28Speaker 01

  And they said, no, we don't make formulas like that.

• 59:29Guy Raz?

  You were looking for like a potential white label product?

• 59:33Speaker 01

  Because that's the way you make things in the beauty world, yeah.

• 59:36Guy Raz?

  Sure.

• 59:37Speaker 01

  And so they would take me to their, like, glass cases, where they would say, we used to make something like that 120 years ago. But no, we don't make that anymore. And so that's why I had to find my own scientists.

• 59:50Guy Raz?

  How were you able to, I mean, at this point, did you get some outside money? Because how are you able to pay that lab and those scientists?

• 1:00:00Speaker 01

  At that point, I had gone and started doing a friends and family round. By friends and family, it was mostly my family.

• 1:00:06Guy Raz?

  This is like 2010, 2011?

• 1:00:09Speaker 01

  Mm-hmm. And so I went to my mom and my dad, Stanley, my co-founder, and then some people who eventually started working for Tatcha, they invested as well. And so it really was, it was just us.

• 1:00:21Guy Raz?

  Were you able to raise more than a million dollars?

• 1:00:24Speaker 01

  I think it was, I think it was, over the course of a few rounds, it added up to a million.

• 1:00:29Guy Raz?

  And that was going to be, certainly going to be enough to get the lab to come up with?

• 1:00:34Speaker 01

  The formulas.

• 1:00:35Guy Raz?

  The formulas, yeah.

• 1:00:35Speaker 01

  We also did custom packaging, which is unusual as well. So building our own molds from scratch and...

• 1:00:42Guy Raz?

  Molds for bottles and tubes?

• 1:00:45Speaker 01

  Mm-hmm. And the molds are expensive because they're huge and they're made out of steel. And so having custom molds made and the engineering and the design that goes into that, that's quite expensive as well.

• 1:00:56Guy Raz?

  So in those first, like, you know, while you were developing the product line, like, what was you, were you burning through cash?

• 1:01:04Speaker 01

  Yes, and, you know, you asked me about the fundraising and I mentioned that over the course of a few rounds, it was, it came to maybe a million dollars, eventually two, but it was not an organized affair in any way.

• 1:01:18Guy Raz?

  Yeah.

• 1:01:19Speaker 01

  It wasn't like we had a thoughtful business plan despite having multiple Ivy League MBAs on the team.

• 1:01:25Guy Raz?

  Yeah.

• 1:01:26Speaker 01

  We were all finance people. We should have known better.

• 1:01:29Guy Raz?

  Right.

• 1:01:30Speaker 01

  And been able to stick to a budget and a forecast and a business plan. And that didn't happen at all. And we ran out of money over and over and over again. I couldn't afford a salary. My partner couldn't afford a salary. I couldn't afford rent anymore. My parents had bought a place in, near the airport at that point.

• 1:01:50Guy Raz?

  In San Francisco.

• 1:01:51Speaker 01

  In San Francisco, in Milbrae. And they let me move into there.

• 1:01:55Guy Raz?

  Wait, where was your husband?

• 1:01:56Speaker 01

  My husband moved with me, but we couldn't afford the apartment in the marina anymore.

• 1:02:01Guy Raz?

  But he had a job.

• 1:02:02Speaker 01

  He did, but every single dollar that he had, I took and I put into the company.

• 1:02:06Guy Raz?

  Right. So you, so you moved into their apartment for how long?

• 1:02:11Speaker 01

  Into their house for seven years.

• 1:02:13Guy Raz?

  For seven years?

• 1:02:14Speaker 01

  And worked out of their garage with no salary.

• 1:02:16Guy Raz?

  So, I'm just, I'm just curious. You were making essentially a high-end brand, right? You were making a beauty product that was gonna appeal to people who had money to spend. And you, you could not live that kind of life, certainly at the beginning. But I guess at the same time, didn't you kind of have to present yourself that way a little bit? Like, kind of as glamorous and, you know, just to, at least to, to people you were talking about the product to?

• 1:02:50Speaker 01

  I tried to hide and not meet them in person and only speak with them or send them letters. And you're right, one of our first customers, and I don't normally mention our customers, but one of our first customers was Donatella Versace. And like, we had this really, really incredible high-end clientele. And, and I was, I was working on my mom's garage.

• 1:03:13Guy Raz?

  Wow. All right. So you, you launched the product line and...

• 1:03:18Guy Raz?

  You already had a customer base. Were people buying the product in 2012 when it started?

• 1:03:25Speaker 01

  No. When we launched the skincare, this little four-piece collection with just a cleanser, an exfoliant, a serum, and a moisturizer, I was so fortunate in that I had sort of the Holy Grail of press hit the same week or weekend that the products launched online. And so that was, it was like a two-page spread in vogue. It was a feature in Oprah. It was the Today Show again. And we had this website set up and it was beautiful. And I remember we sold exactly one serum. And then, that was maybe on a Friday. And then that weekend, I was trying to figure out how to create a promotion code. And I made a mistake and I zeroed out all the pricing on the website. And I didn't know it for two days.

• 1:04:10Speaker 01

  Finally, a woman that I knew from Starbucks, who had seen a Facebook plea that I had put up, like, please come check out my website. She went through the website and saw that everything was $0, purchased, made an order, and then forwarded the order to me and was like, hey, girl, you shouldn't give your stuff away. And I realized, gosh, even with-

• 1:04:29Guy Raz?

  Wait, sorry. There was like a glitch on your website?

• 1:04:31Speaker 01

  Yes. And so the weekend after we got the Holy Grail of press, the only order that I got for $0, because I had zeroed out all the pricing, was from someone I know.

• 1:04:42Guy Raz?

  Got it, okay.

• 1:04:43Speaker 01

  And no retailers wanted to carry us. And they said, I don't think this is interesting or compelling. I don't think that anybody will think that Asian beauty is compelling.

• 1:04:51Guy Raz?

  And you needed retailers. You needed it to be in Sephora and in the department stores for it to work? You couldn't just do direct-to-consumer?

• 1:04:59Speaker 01

  I had hoped that I could do a combination of direct-to-consumer in retail, but there was no traffic to our website. Even when I made the prices zeros, nobody came. Even when I had great press, nobody came. And then all of the retailers said that they weren't interested.

• 1:05:15Guy Raz?

  When we come back after a quick break, Vicky faces a difficult decision about her role at Tatcha, just at the moment she feels like the company is finally stable. Stay with us. I'm Guy Raz, and you're listening to How I Built This.

• 1:05:43Guy Raz?

  Hey, welcome back to How I Built This. I'm Guy Raz. So it's around the end of 2012, and Vicky Tsai has been grinding away at Tatcha for years without a salary, living and working out of her parents' house. And by the way, at this point, how many people are working for you, like in your mom's garage in Millbrae?

• 1:06:04Speaker 01

  Up to 15.

• 1:06:06Guy Raz?

  Every day?

• 1:06:07Speaker 01

  Every day, yeah. And the orders, because then around that point, I started going on QVC, and QVC volume is significant.

• 1:06:14Guy Raz?

  How did you get onto QVC?

• 1:06:17Speaker 01

  I begged and begged and begged and begged for an introduction, and I was turned down swiftly, at least four times, to even get a meeting. And then finally, this one merchant was kind enough to take a meeting with me, and then they gave me a chance to go up there, and we sold out.

• 1:06:36Guy Raz?

  You went onto QVC as like the pitch person?

• 1:06:39Speaker 01

  Mm-hmm, yep.

• 1:06:41Guy Raz?

  What was that like? Were you nervous? Because it's live TV, right? Were you just like, yep, I'm here, I'm ready to go?

• 1:06:46Speaker 01

  I wasn't nervous about the TV part of it, because I just, when I get too stressed out, I just sort of leave my body. But I was nervous about whether I would hit my sales, because if I didn't hit my sales goal, I didn't know how I was going to make salary. And I had already called my mom, probably by that point, four times for an emergency loan to pay salaries. Because 15 people means 15 salaries, or 14 salaries, because I didn't take one. And then I would come home, and my house would be full of half-packed boxes. And they would go from floor to about five feet up in every single room of my house. There was inventory coming in from Japan, and then there was orders going out through tatcha.com and then for QVC. And so it was just boxes halfway up the wall.

• 1:07:30Speaker 01

  At one point, we lost the baby in the boxes.

• 1:07:37Guy Raz?

  Wow. All right, when you went on QVC and you're talking about the product and the story and how much of a turning point was that? I mean, did the QVC sales like lead to, you know, online sales from your website?

• 1:07:54Speaker 01

  It was symbiotic. But what happened in between, which I think I jumped over, is that after we launched the blotting paper, we had two acquisition offers within a few weeks of starting the company.

• 1:08:08Guy Raz?

  In 2009?

• 1:08:10Speaker 01

  Mm-hmm, 2009, 2010.

• 1:08:12Guy Raz?

  Wow. And what was the story? I mean, that's pretty great.

• 1:08:17Speaker 01

  One was a retail partner and the other one was a large strategic acquirer. And I had no intention of selling the company, but one, the strategic acquirer said, and it was a mentor of mine who I really, really respect, he's a beauty veteran, and said, "You have lucked into a brand that has the potential to be one of the greats. And if you love it like you love your child, then you'll give it to a mother who knows how to raise it, because you do not have what it takes. You don't have the money, you don't have the know-how, you don't have the team." And I had a newborn child at home when he said that to me.

• 1:08:55Guy Raz?

  Wow. I mean, if it was me, I would have taken the deal. I would have said, "Yes, please, throw me a lifeline." And I mean, I think it would have been crazy of you not to have considered it at that point.

• 1:09:08Speaker 01

  I did consider it, and it would have been just enough to pay down the debt. And that's what was crushing me at that point was that I had been, I'd taken my parents' retirement. I had taken money from my friends and family who were not rich.

• 1:09:24Guy Raz?

  Yeah.

• 1:09:25Speaker 01

  We were probably $800,000 in debt at that point. It maxed out all of our credit cards. And then, when he said, "You don't have what it takes," I felt terrified that I had bitten off more than I can chew and that I would lose people's money and disrespect a culture that's not my own. And so, I was going to do it for no personal profit, but just to get out.

• 1:09:50Guy Raz?

  Just to pay everybody back.

• 1:09:51Speaker 01

  And to let the brand live on.

• 1:09:53Guy Raz?

  And you would have no equity in it.

• 1:09:55Speaker 01

  No.

• 1:09:57Guy Raz?

  So you were gonna do it and why didn't it happen?

• 1:09:59Speaker 01

  Um, right when we thought we were going to do the deal. I wake up one day and I turn on the news and there had been a tsunami. And then a radioactive incident with the nuclear.

• 1:10:12Guy Raz?

  This is after the earthquake in Japan.

• 1:10:14Speaker 01

  This is the earthquake in Japan. And then, um, the acquirer pulled out.

• 1:10:20Guy Raz?

  They pulled out?

• 1:10:21Speaker 01

  They pulled out.

• 1:10:22Guy Raz?

  Because of the earthquake in Japan?

• 1:10:24Speaker 01

  You know, they didn't really give me a reason at that time. They just, within 24, 48 hours, they were out.

• 1:10:31Guy Raz?

  Wow.

• 1:10:32Speaker 01

  Yeah.

• 1:10:33Guy Raz?

  And, and so you would have taken that deal had they not pulled out?

• 1:10:37Speaker 01

  I would have taken the deal.

• 1:10:38Guy Raz?

  And we would not be talking about Tatcha today?

• 1:10:40Speaker 01

  Uh-uh, not with me, with them, yeah.

• 1:10:43Guy Raz?

  Yeah, wow.

• 1:10:44Speaker 01

  And so I think the reason I told you this story is because you asked if I was ever scared or did I know that it was gonna work out? And no, at no point did I think it was gonna work out. I just, at some point, I realized that, um, the fear finally went away when, about three years into it, we formed a partnership with an organization called Room to Read. And they are one of the leading nonprofits globally for children's education. And they have a special fund for girls and fund girls' education, including, um, second skills, life skills training throughout Southeast Asian Africa. And I always knew that I wanted anything that we created to give back. And so we created a one-to-one model, um, where every single purchase funded a day of school.

• 1:11:30Speaker 01

  And before we started that partnership, I wanted to make sure that what we were going to tell our clients we were doing was actually happening. So I flew to Cambodia and I spent a few days with the girls in their schools, with their teachers, in their houses, um, seeing what Room to Read was doing firsthand. And when I saw that, that's when my fear evaporated because I was surrounded by children who had no electricity, no running water, maybe no parents, not a lot of personal safety over their bodies. And yet, they showed up every day with hope and with courage about the fact that their past wasn't going to define their future. And they, they look like my daughter.

• 1:12:13Guy Raz?

  Yeah.

• 1:12:14Speaker 01

  They look like me. And so that completely reframed for me what risk is and what sacrifice is and what's dangerous.

• 1:12:24Guy Raz?

  And how did the brand, I think by like by 2014, I think your revenue was like $12 million that year. I don't know, once people started to buy the product, did it just, was it just kind of like a self generating process where it just grew and grew just organically?

• 1:12:41Speaker 01

  No.

• 1:12:45Speaker 01

  We were not profitable for the first eight years. So we had to personally finance the losses. And then when we ran out of money, we would have to go to friends and family and ask for help. But no, every step of the way was like figuring out from scratch again how to, how to make sure that people knew that we existed.

• 1:13:04Guy Raz?

  If you started the business in 2009, it took you like eight years to get to profitability. So you weren't really profitable until like 2016, right?

• 1:13:14Speaker 01

  Correct.

• 1:13:15Guy Raz?

  Or 17. I mean, like, at what point did you start to kind of breathe a sigh of relief a bit? I mean, at what point were you able to say, okay, because you had been through, you know, periods where you almost accepted a deal, right, to basically take care of your debt. And you had to borrow money and you were constantly worrying about paying your team and nobody was making a whole lot of money. They were all, you know, promised equity. Like, at what point did you start to feel like, okay, this is going to be okay? Was there a point?

• 1:13:47Speaker 01

  Every year, it felt like a high wire act where the wire was getting moved higher and higher and higher. And it was probably only when our private equity company came in. And it was the only institutional round of capital that we did, that I started feeling less alone.

• 1:14:09Guy Raz?

  Yeah.

• 1:14:10Speaker 01

  So.

• 1:14:11Guy Raz?

  And it was probably easier to attract that at that point because you had proven the concept.

• 1:14:15Speaker 01

  Exactly, exactly. And they, they were wonderful partners. And so that, that was the first time I started to breathe a sigh of relief. But it came with its own different pressures because private equity doesn't invest for very long. And so I knew that the second that they invested, the clock started. And there would have to be another capital event to buy them out. And it was at that time that one of the operating partners

• 1:14:41Speaker 01

  told me that he thought I should hire.

• 1:14:46Speaker 01

  A real CEO. And it was, it was a gut punch.

• 1:14:54Guy Raz?

  This is in 2017?

• 1:14:56Speaker 01

  This was in 2017 or 18. I have to double check the timeline.

• 1:15:00Guy Raz?

  And, and it was a gut punch because you were like, I'm the CEO.

• 1:15:07Speaker 01

  Yeah, I, I had founded this company and been the CEO for, at that point, nine years and had led it to, you know, pretty meaningful growth and meaningful in our industry and meaningful to our customers.

• 1:15:23Guy Raz?

  I mean, I think 2017, you're probably doing like 30, 40 million dollars in sales a year.

• 1:15:28Speaker 01

  Probably. I would have to go look at the numbers, so.

• 1:15:32Guy Raz?

  I mean, you had a degree from Harvard Business School. I mean, you clearly were qualified. So what,

• 1:15:39Guy Raz?

  and I'm not trying to disparage this person. Maybe they were really genuinely trying to give you advice in your best interest. But what was it that they felt you didn't have?

• 1:15:48Speaker 01

  I asked that question and the only answer that he gave me was, if you are willing to hurt the company for your own ego, then we can have that conversation.

• 1:16:01Guy Raz?

  But why, but why would you be hurting the company?

• 1:16:04Speaker 01

  And that's what I said. I said, I would never hurt the company. I love the company like I love my, my family. It is my family. It's in my house. I mean, what are you talking about? So I never actually got an answer, but it, it took the wind out of my sails.

• 1:16:15Guy Raz?

  But what was it? What do you think? I mean, if you could step out of your own body and get on the balcony and look down, what would you have said about your leadership if you were being critical of it?

• 1:16:26Speaker 01

  I was definitely learning on the fly, but I would say that most founder CEOs do learn on the fly because the job changes every day.

• 1:16:33Guy Raz?

  Yes.

• 1:16:35Speaker 01

  I was trying to negotiate between being Vicky and Victoria. Victoria is, is what a lot of people see on QVC and in magazines. And Victoria is always zen and Victoria is always grateful. But, you know, Vicky is an executive leader who needs to manage. An agile and demanding business. And I didn't have a model of female leadership that I had seen before that I could look up to.

• 1:17:10Speaker 01

  And so I never really felt comfortable asking my team to do things if they didn't want to do it.

• 1:17:19Speaker 01

  I think I needed to be liked too much. I didn't want to come across as a difficult female leader. So I hadn't grown into my own skin, I think, as a leader. The results were there, but the confidence was not. And so when, when he suggested that I go and find a real CEO, I, I, I did.

• 1:17:43Guy Raz?

  I mean, that must have been really hard. It's your baby and your company and. But at the same time, you want what's the best your, your company in the future and all these people who'd invested some money into it and hadn't seen a return yet. And not just the, forget about the private equity guys, but the, you know, the employees and your parents and the friends and right? I mean.

• 1:18:04Speaker 01

  Yep.

• 1:18:04Guy Raz?

  And I'm sure that was a lot of pressure on you.

• 1:18:07Speaker 01

  It was. It was a ton of pressure. I was, I was burning out. I was on the road 250 days out of the year, missing my child's childhood.

• 1:18:16Speaker 01

  I miss Thanksgiving. I've left my husband and daughter in line at Disney World to catch a flight to go on QVC.

• 1:18:25Speaker 01

  And I would have never told the story. You're the only person I would ever tell the story to. And it's because your listeners are thinking about starting their own company or they're running their own companies right now. And if I could do anything over again, I would have told myself at that time that you're actually doing a great job. And if you want to hire a new leader of the company for all sorts of reasons, that's okay. But you shouldn't doubt yourself, especially just because you're a woman and especially just because this is your first time at the rodeo. So if I have one regret at the company, it's that I didn't believe in myself. And the good news is it did lead me to hire a new CEO who is. The light of my life, the best partner I could ever ask for, for this stage of

• 1:19:09Speaker 01

  growth of the company. And it gives me the freedom to focus on what I love most, which is taking care of our clients.

• 1:19:16Guy Raz?

  Yeah.

• 1:19:17Speaker 01

  And creating formulas. So it all ended up great, but it gutted me at that time.

• 1:19:25Guy Raz?

  Yeah. In 2019, you get acquired. I'm assuming that this was a long, drawn-out process. Unilever bought Touchouts. It's been reported for about half a billion dollars. How did that happen? Did they approach you? Were you guys, did you at this point feel like, look, the investors are all in. We should shop our brand around and see if we can partner with a bigger brand at this point?

• 1:19:55Speaker 01

  We were not intending on selling the company at that point. We had gotten acquisition offers or interest almost annually from our first year. And every time, we said no, outside of the one time where it just fell apart. And after we did a private equity deal, we assumed that we would be independent and with a private equity company for five to seven years.

• 1:20:17Guy Raz?

  Right.

• 1:20:18Speaker 01

  But then I had to sit back with myself and really have one of those heart-to-heart conversations with yourself about, why did you really start this?

• 1:20:25Guy Raz?

  Yeah.

• 1:20:25Speaker 01

  What was this all about? We know it wasn't for the money. And what I realized was that I created it because at that point in my life, I very much felt empty. And when I went to Japan, I had experienced a beauty and a kindness and a humanity and a craft that I had never seen in my life. And it healed my skin, but it healed my soul. And I created this thing to share what I was learning because I needed it in my life. I needed it in my heart. And I have always believed that a brand is a promise. And it's a promise that I can't break. And I want it to live 100 years. I want it to outlive

• 1:21:09Speaker 01

  me. And so while I love running it and I wish it could be independent forever, I have no intention on living forever. Like, dying is definitely on my bucket list. And so I know that eventually I have to find it a home. And then I met Unilever. And I knew nothing about Unilever and had certainly never thought about them as a strategic partner. But there was this woman, Vasiliki. Who was creating a group within Unilever and the rule was that they had to be purpose-driven brands and they had to have a purpose above commercial. And we had a conversation and she brought me to tears. And she's a mother and she's a female leader that I admire.

• 1:21:51Speaker 01

  And one of the things that she loved most about the brand was the giving model. And so that's when I decided while I would love to run this myself independently forever, I know that's not possible. So I would, I would rather than get it into a forever home where it can be protected and I stay with it, but then that's, it's a forever home.

• 1:22:15Guy Raz?

  Do you, when you think about all the things that have happened to you and the success of the, of the brand, the business, do you, do you attribute most of that to your, your intelligence and your, your work ethic? Or do you think a lot of that had to do with luck?

• 1:22:30Speaker 01

  For sure not intelligence. I am no smarter than anybody else. I think when you start any company, the most important thing is to show up every day. You just, you just have to, you just have to keep showing up for the game. I did get very, very, very blessed with amazing people who believed in us when there was nothing to believe in and who stayed with us. So our scientists from day one are still our scientists today. Our packaging partners from day one are still our packaging partners today. Our retail partner Sephora, who did believe in us in day one, I just couldn't afford to be with them until year five because it requires more investment. They're our best partners today.

• 1:23:13Speaker 01

  So I, I've been really blessed, but I'm definitely not smarter. I'm definitely not more strategic and that's why I love what you do. And that's why I love this podcast and I wish, I wish it was around when I first started because it would have been my lifeline to believe in myself and it would have felt less lonely to do this. And so I'm so grateful for this opportunity to tell you this story because the

• 1:23:38Speaker 01

  Other hundreds of times that people have asked me over the last 10 years about building this company, they've only asked about the highlights. And so I think about the entrepreneurs and hopeful entrepreneurs out there who read stories like the ones like mine and think that it was sort of leaping from one gilded lily pad to the next that just got getting better and better and easier and easier, and that I'm at home meditating, and it's all been very zen and beautiful. And it has been very zen and beautiful, but it has also been death-defyingly difficult and treacherous. And it has broken me down to my very core and caused me to question who I am as a person and what I'm made of.

• 1:24:22Speaker 01

  So I'm just a really big believer that if I can do it, and it's in the cards for you, then anybody can do it.

• 1:24:31Guy Raz?

  That's Vicky Tsai, founder of Tatcha. We first interviewed Vicky back in the summer of 2020. And by the way, two years after Vicky stepped down as CEO, Unilever asked her to come back because things were kind of heading in the wrong direction at Tatcha. And just like her former boss at Starbucks, Howard Schultz, Vicky came back to the company she founded and quickly turned things around. In fact, she talked with me about this last fall when she came back as a guest on the How I Built This advice line. And you should check out that episode as well. Vicky gives some great advice to three up-and-coming entrepreneurs. Anyway, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show.

• 1:25:13Guy Raz?

  And if you're interested in insights, ideas, and lessons from some of the world's greatest entrepreneurs, please sign up for my newsletter at guyraz.com or on Substack. This episode was originally produced by Jed Anderson and updated by Casey Herman, with music composed by Ramtin Arablouei. It was edited by Neva Grant. Our production staff also includes Alex Chung, J.C. Howard, Carla Estevez, Chris Messini, Sam Paulson, John Isabella, Kerry Thompson, and Elaine Coats. I'm Guy Raz, and you've been listening to How I Built This.