How Dollar Shave Club, eSalon Built a 'Billion Dollar Brand'

Lawrence Ingrassia

Lawrence Ingrassia is an award-wining journalist and the author of " Billion Dollar Brand Club."

How Dollar Shave Club, eSalon Built a 'Billion Dollar Brand'
  • Relying on analytics, the founders of eSalon who knew nothing about hair dye, built a trendsetting personalized hair color brand that did $30 million in sales
  • The e-commerce brand uses individual data, machine-learning algorithms and predictive analytics to create formulas that keeps customers coming back
  • The Takeaway: Retail is being upended by direct-to-consumer companies that can acquire key metrics to customize products and retain shoppers

In recent years, you no doubt have seen a growing number of new brands pop up everywhere you go online – and you've probably bought some. Where did they come from? Who are the entrepreneurs behind them? Why did they think they could take on long-dominant brands?

This is an excerpt from " Billion Dollar Brand Club," authored by award-wining journalist Lawrence Ingrassia and published on January 28 by Henry Holt and Company.

The book explores how an unlikely band of entrepreneurs launched a business revolution in the way new brands are created and sold online. One of the most successful direct-to-consumer brands, Dollar Shave Club, was founded in Los Angeles and got its initial seed funding from Science Inc. in Santa Monica. This excerpt from Chapter 6, "The Algorithm is Always Right," tells the story behind eSalon, based in El Segundo, and how it tapped data analytics to create customized hair coloring.

The customer, a woman in her mid-to-late forties, knows what she wants when she logs onto eSalon.com to order its customized hair coloring for the first time: dye to match her natural blonde color – and cover up her grays – with the lightest blonde shade it offers. As she clicks through a series of about a dozen questions, the algorithm inside eSalon's computers starts churning away. Without anyone from the company having met or even talked to her, it will understand her hair coloring better than she does by the time she finishes answering the questionnaire.

How long is your hair? it asks. How much gray do you have? How straight or curly is your hair? How thick is your hair? What is your ethnicity? What color are your eyes? What is your natural hair color? What is the closest shade to your natural color? Would you like to maintain your current color?


To help her, the questionnaire shows thirty-one photos of different shades of blonde, with very small gradations from lighter to darker colors. At the end, she selects the lightest blonde color eSalon offers, just as she intended. But that's not exactly what she will receive.

eSalon has collected data from more than five million people. Based on this woman's answers, it knows the best color formulation to achieve the blonde look she wants, regardless of what she thinks. eSalon's computers have learned from crunching the data that many first-time customers who fit her profile and order the lightest blonde dye have been disappointed; they felt their hair came out looking too blonde – too "hot" in hair coloring jargon. The numbers show that eSalon has a higher reorder rate from customers who asked for a slightly darker color for their next order, so that their hair wouldn't come out looking quite so light.

Knowing all of this, eSalon automatically sends the customer – without telling her – a formulation that has 98 percent of its lightest blonde share with 2 percent blue added to soften the color, or cool it, rather than 100 percent blonde. "After seeing this data, we adjusted our algorithm so that new customers who are a natural pure blonde and want to keep that look automatically get that little bit of blue added," explains Tom MacNeil, eSalon's chief technology officer. "They're happier with the result, even though they're asking for the blondest of blonde that we have."

For eSalon, and almost all direct-to-consumer brands, data is the coin of the realm. The data they collect directly from each customer provides a significant advantage over bigger, long-established brands. Clairol doesn't have this data, because the customers they deal with directly are retailers. The people who use the product are largely anonymous to Clairol; they walk into a drugstore, pick a box of hair coloring off the shelf, pay for it, and walk out.

eSalon's shelf is its website, and it collects information about each customer who walks through its digital door and answers its questionnaire. The longer a woman remains a customer, the more eSalon knows about her – and not just her. eSalon aggregates all of that individual data and uses machine-learning algorithms and predictive analysis to inform virtually everything it does: from adjusting its product formulations to introducing new products (like color for highlighting hair) to testing seemingly insignificant word changes on its web pages. "In the end, we're a tech company selling a beauty product," says Tamim Mourad, one of eSalon's co-founders.

Data mining is critical to the biggest challenges facing all direct-to-consumer brands: holding down the cost of attracting customers and keeping them after a purchase or two. Using the data it has gathered, eSalon has improved its retention rate from below 50 percent to about 70 percent on its customers' initial orders. One of the key metrics, especially for subscription companies, like eSalon, Dollar Shave Club, and Hubble, is a customer's lifetime value, or how much she will spend over time. The cost of acquiring customers can be offset only if a lot of them become repeat customers who buy month after month or, even better, year after year. "It's all about retention, because nobody makes money on the first order," explains Francisco Gimenez, another co-founder.

Businesses have used predictive analytics for the past couple of decades, but the growing power of computers, along with the ability of online brands to gather huge amounts of data, has made machine learning central to their success.

Tamim Mourad and several of his colleagues at eSalon discovered from experience the importance of technology to a startup. In 1998, before the direct-to-consumer brand revolution began (indeed, before many of the entrepreneurs behind many of these startups had graduated from college or even high school), they started an internet company, while they were in their twenties. The company, PriceGrabber, was one of the original online price comparison sites. In 2005, Experian bought the company for $485 million – yielding a huge gain on the founders' total investment of $1.5 million.

After taking a couple of years off, the PriceGrabber founders began brainstorming about starting another business.

In the fall of 2008, Mourad and his wife were having dinner with a couple who owned a beauty salon in Beverly Hills. The other woman, who was a hair colorist, tossed out a business idea. "She said that women who color their hair at home don't do it well, because there is a dearth of information," Mourad says. What about starting a web site that explained how to dye your own hair? He didn't see a way to make money from that. But he asked her, "Is it possible to formulate color for someone sight unseen, and mail them something they apply at home? If that works well, then you're delivering a product that is better than the standard hair coloring in a box at drugstore, that would approximate what someone could get at a hair salon. If you could do that, you could charge a price that was a premium. There's a business model."

He went back to his former PriceGrabber colleagues, all men who knew nothing about hair coloring. But the more they thought about the idea, the more they liked it.

It was a business ready for disruption, they decided. Off-the-shelf packaged brands were fine, but most offered only around fifty pre-mixed shades. "Many people who color their own hair at home in general are not happy, because the results are mixed," Francisco Gimenez notes. "But it is affordable, which is why they do it. At the high end, salons charge on average around $60 for base color, though it can go as low as $45 in some cities and is more like $100 or $150 in bigger metro areas."

The PriceGrabber guys concluded there could be an opening for a new brand priced about $25. In today's global marketplace, it would be easy to find suppliers to sell them professional-grade ingredients that go into hair coloring formulations – dyes, modifiers (to stabilize color tones), vitamins (to moisturize the hair), antioxidants, hydrogen peroxide (to remove the old color and activate the new dye), among others. The biggest challenge would be to figure out how to combine all these ingredients to mimic what a stylist does in customizing color for each woman who comes into a salon. "Can you formulate hair coloring for someone sight unseen?" Mourad says. "We had to figure out how to test that idea."

They first did a proof-of-concept test to see if women might be interested in buying customized color online. They created a rudimentary web site and then hand-mixed colors for about fifty women who had signed up, submitted a photo, and said what color they wanted. Then the women were asked if they liked the color better than the results they got with a do-it-yourself kit at a drug store. "We recruited people who were willing to put this product on their hair, with no idea who we really are. The results were positive enough for us to say we have something," he recalls.

The next step: tapping their knowledge of tech and data science to figure out how to replicate color customization on sale, for fifty thousand women, not just fifty. "We wanted to do something that was really innovative, not bullshit innovative," Mourad says.

Omar Mourad, Tamim's younger brother and another of PriceGrabber's co-founders, read everything he could about dyeing hair. "I didn't have any tangible color experience applying it on any person's hair. But I became a theoretical expert," Omar says.

Over the next several months, he and Gimenez took the lead in translating the rules of hair coloring into software that would determine the right customized mix to get the desired color. That can depend on a numerous variables: a woman's natural color, her current dyed color, how recently she dyed her hair, how much gray hair needs to be covered up, the texture and length of her hair. "You basically look at all of the combinations, and then build out a matrix for how to formulate," Omar explains. Using that knowledge, the team developed a questionnaire that included queries a stylist would ask a first-time customer. The questions themselves aren't rocket science. The rocket science happens when hundreds of thousands or millions of people answer the questionnaires, enabling you to gather more and more data to analyze.

The final step was to automate the formulation. In September 2010, the product was launched. As with an apprentice stylist, eSalon's formulations improved over time as the company got more customers and was able to gather more information. As of 2018, eSalon had dispensed 165,000 different formulations. That's out of a total, it calculates, of 2.2 octooctogintillion pigment variations (that would be 22 followed by 266 zeroes).

In 2019, rival L'Oreal introduced a new brand, Color&Co, that copied key features of eSalon, including an online quiz or a consultation with a colorist to help determine the "a unique custom-blend [color] made only for you." With competition ratcheting up, eSalon – with sales still a modest $30 million a year – agreed to sell a 51 percent stake to the German multinational Henkel. It cited the growing trend toward personalization and eSalon's "valuable customer insights" as reasons for its investment.

Lawrence Ingrassia's "Billion Dollar Brand Club" goes on sale January 28. He is a former business editor of the New York Times and managing editor of The Los Angeles Times.

The $260M Robot Revolution Happening in Torrance

🔦 Spotlight

Hello Los Angeles,

Forget rockets. This week, the loudest move in the defense tech scene came from a factory floor in Torrance, where Hadrian secured $260 million to fuel its robot-run revolution.

The company, which builds AI-powered, robot-run factories for America’s aerospace and defense industries, announced the massive Series C raise, led by existing investors like Lux Capital and Founders Fund, along with a factory expansion loan facility arranged by Morgan Stanley. The funding will power Hadrian’s third factory (in Arizona), unlock full product manufacturing, and accelerate its mission to bring American manufacturing roaring back faster, smarter, and more automated than ever.

And here’s what makes them fascinating: Hadrian isn’t just churning out parts. They’re reinventing what a factory is. Their facilities look more like giant humming circuit boards than the smokestacks of old, packed with robots, AI, and ambition to move at the speed of software.

It’s the kind of vision you’d expect from a founder who speaks about reshoring U.S. manufacturing as if it were a moral obligation and then backs it up with billion-dollar contracts and steel-and-silicon proof.

We’ll be watching closely to see what Hadrian assembles next. One thing’s certain: the robots are already working overtime, and if you’re smart (or a robot whisperer), you might want to join them.

🤝 Venture Deals

LA Companies

  • Boulevard, a SaaS startup that helps salons and self-care businesses manage scheduling and operations, has raised an $80M Series D led by JMI Equity at a valuation near $800M. The funding will fuel enhancements to its AI-powered scheduling tools and support continued product innovation and market expansion. - learn more
  • Rwazi has raised $12M in Series A funding to expand its AI-powered decision-making platform, which helps businesses replace gut-based decisions with real-time insights and simulations based on consumer behavior. The round was led by Bonfire Ventures and will support the growth of Rwazi’s simulation engine and data infrastructure to help companies make more precise, data-driven decisions across marketing, product, and operations. - learn more
  • Lexington Bakes, an artisan bakery known for its gluten-free, organic oat bars and luxury brownies, has raised $1M in a seed round. The investment was led by Rainfall Ventures. The funding will help the company transition to co-manufacturing, expand its retail reach from about 100 to a projected 1,000 doors in the next year, and scale up its team and operations. - learn more

LA Venture Funds

  • TCG (The Chernin Group) participated in Substack’s latest $100M funding round, joining Andreessen Horowitz, and other investors. Their investment underscores confidence in Substack’s vision to grow its subscription publishing platform and expand its tools for independent writers and creators. - learn more
  • Acre Venture Partners participated in Zucca’s $5M funding round to help the Seattle startup scale its platform, which uses AI to design and develop plant-based food products faster and more efficiently. Their investment will support Zucca’s mission to create sustainable, health-focused foods and expand its operations. - learn more
  • Sound Ventures joined XMTP’s $80M Series B to back its vision of redefining how people communicate in the web3 world. With this funding, XMTP plans to scale its decentralized, privacy-focused messaging protocol, enabling secure, wallet-to-wallet conversations across the blockchain ecosystem. - learn more
  • Morpheus Ventures and Sage Venture Partners participated in Datavations’ $17M Series A funding round, with Morpheus joining as a new investor and Sage returning as an existing backer. Datavations, an AI-driven analytics platform for the building materials and home improvement industries, uses machine learning to deliver actionable insights on pricing, inventory, assortment, and supply chains. The funds will be used to grow the team, accelerate development of its Commerce Alert Hub, and expand its presence across North America. - learn more
  • Mucker Capital led the $3.3M seed round for Bidbus, an AI-powered consumer-to-dealer used car marketplace in the U.S. The platform enables car owners to auction their vehicles online and receive competing offers from dealers, while dealers gain access to high-quality inventory more efficiently. The funding will help Bidbus enhance its AI capabilities and expand into new markets. - learn more
  • Creative Artists Agency (CAA) participated as a strategic investor in Moonvalley’s $84M funding round, signaling strong industry confidence in the company’s development of a fully licensed, AI-powered video generation platform tailored for professional filmmakers and studios. CAA’s investment reinforces Moonvalley’s commitment to ethical AI practices and provides it with a direct pipeline to top-tier creative talent and entertainment partners. - learn more
  • MANTIS Venture Capital joined Zip Security’s $13.5M Series A funding round, backing the company's mission to deliver automated, AI-driven cybersecurity and compliance solutions. Their participation supports Zip’s efforts to expand its engineering team, build deeper platform integrations, and scale into regulated industry verticals like defense, finance, and healthcare. - learn more
  • Rebel Fund participated in Apolink’s oversubscribed $4.3M seed round, joining other notable backers such as Y Combinator and 468 Capital. By investing in this 19‑year‑old–led space tech startup, Rebel Fund is supporting Apolink’s mission to deliver continuous LEO satellite connectivity and facilitate its planned demo missions and constellation build‑out. - learn more

    LA Exits
    • Retina AI is to be acquired by Onar in a deal that will enhance Onar’s AI-powered customer analytics and personalization offerings. By integrating Retina’s predictive customer lifetime value technology, Onar aims to provide businesses with deeper insights into customer behavior and more precise targeting. The acquisition highlights Onar’s commitment to delivering data-driven solutions for optimizing customer relationships. - learn more
    • Nearsure, a U.S.-based tech services company with over 600 professionals across 18 Latin American countries, has been acquired by Nortal to bolster its AI and enterprise solutions in the Americas. Known for its AI-driven transformation, custom software, and partnerships with major platforms, Nearsure will merge into Nortal’s U.S. operations and rebrand later this year. The acquisition allows Nearsure to expand into U.S. and European markets while enhancing its AI, cybersecurity, and enterprise offerings. - learn more
    • InsideOut Sports & Entertainment, the event production company behind high‑profile sports events like The Pickleball Slam, Pro Padel League, and Major League Pickleball, has been acquired by GSE Worldwide, marking GSE’s first foray into live event production. Founded by tennis legend Jim Courier and Jon Venison, who will now serve as EVP and head of the new GSE Productions division, InsideOut’s team will integrate into GSE to help scale its live-event operations into new markets. - learn more

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      From Sunset Boulevard to Outer Space: LA’s Latest

      🔦 Spotlight

      Good Morning Beliebers and Los Angeles!

      While Justin Bieber’s new album dropped last night, here’s what else is making headlines in Los Angeles this week.

      Luma has opened its Dream Lab on Sunset Boulevard, boldly positioning itself at the forefront of AI-powered creativity. Known for transforming ordinary photos into cinematic 3D scenes, Luma is combining cutting-edge research with practical tools to build a playground for artists, engineers, and anyone ready to push the boundaries of visual storytelling. In their words: “From Hollywood blockbusters to the next generation of immersive media, this is where the magic happens.”

      Meanwhile, well beyond our skyline, SpaceX reportedly hit an eye-popping $400 billion valuation in a recent share sale, making it one of the most valuable private companies ever. The milestone reflects both investors’ fervor for the commercial space race and LA’s unrivaled role as the launchpad of aerospace innovation.

      LA continues to prove it can deliver on the ground, in the cloud, and far beyond the stars. See you next week.

      🤝 Venture Deals

      LA Companies

         
      • Varda Space Industries, the El Segundo–based company manufacturing pharmaceuticals in microgravity, has raised $187M in a Series C round led by Natural Capital and Shrug Capital, bringing its total funding to approximately $329M. The funds will support an increased launch cadence of robotic drug-production capsules, expansion of its El Segundo lab for biologic drug crystallization, and broader efforts to scale commercial microgravity-driven drug formulation and hypersonic reentry testing. - learn more

      LA Venture Funds

      • Rebel Fund participated in Vellum’s $20M Series A round, which was led by Leaders Fund. The company helps businesses build and optimize LLM-powered applications. Vellum plans to grow its team and speed up product development with the new funding. - learn more
      • Bold Capital participated in a $31M Series B funding round for Aqtual, a Hayward, California based precision medicine startup developing a cutting edge cell free DNA (cfDNA) multiomics platform. The capital will help commercialize Aqtual’s flagship rheumatoid arthritis diagnostic, currently being tested in a 1,300 patient trial, and support expansion into other chronic and autoimmune diseases. - learn more
      • Strong Ventures invested in VERAMORE, a skincare brand focused on addressing early signs of aging in women. Since launching in March 2022, VERAMORE has grown over 300% annually, expanded to more than 16 products, and entered markets including Japan, Singapore, Vietnam, Taiwan, Europe, and Korea. The funding will support its D2C growth, product-driven marketing, and planned global expansion starting with Japan in 2025 and the U.S. and Europe in 2026. - learn more
      • Mucker Capital joined a $3.7M seed funding round for Velvet Capital aimed at launching its DeFAI operating system and $VELVET governance token. Velvet’s vertically integrated DeFi toolkit combines AI-powered trading, portfolio management, APIs, and a native token to streamline on-chain investment for funds, DAOs, and individual traders. The funding will accelerate platform development, the rollout of its tokenomics, and broader adoption of its intent-based DeFi suite. - learn more
      • Btech Consortium Fund participated in a $8.5M Series A funding round for Castellum.AI, a New York based financial crime compliance platform that uses in‑house risk data, AI, and screening tools to help financial institutions manage AML/KYC compliance. The funds will be used to expand their team, enhance integrations with financial institutions, and accelerate adoption of their AI‑powered compliance solutions. - learn more
      • Bold Capital Partners joined the oversubscribed $45M Series A round for Centivax, a South San Francisco biotech company dedicated to developing a universal flu vaccine using a proprietary mRNA-based immune-engineering platform. Led by Future Ventures, the funding will help Centivax advance its lead candidate into Phase I clinical trials and expand its broader universal immunity pipeline targeting pathogens like RSV, HIV, and malaria. - learn more
      • Alpha Edison participated in Honor Education’s $38M Series A funding round for the San Francisco–based learning platform. Honor uses AI‑enhanced, mobile-first courses and credentialed programs to improve engagement and leadership development. The funding will be used to scale AI capabilities, personalize learning experiences, and expand the company’s operations and customer‑success teams to meet rising demand. - learn more
      • Wasserman Ventures participated in a $7M seed round for Fantasy Life, the fantasy sports platform founded by Matthew Berry. The funding will support the launch of Fantasy Life’s revamped platform, featuring new “Guillotine Leagues,” a modernized app experience, and enhanced content and tools to scale its audience and technology offerings. - learn more

      LA Exits
      • El Segundo based Kaye Capital Management, a fee only RIA with approximately $700M in assets under management and $300M in assets under advisement, was acquired by Modern Wealth Management, marking its 17th acquisition and pushing its total AUM over $8.5B. The deal strengthens Modern Wealth’s presence in California and adds Kaye’s institutional retirement plan expertise to its suite of financial and retirement solutions for clients. - learn more
      • NIRx Medical Technologies was acquired by Gilde Healthcare’s private equity fund and combined with Artinis Medical Systems to form a world-leading neuroimaging group. Both companies will retain their brands and locations while collaborating on R&D, product development, and global expansion of their functional near-infrared spectroscopy (fNIRS) tools to advance research in mental health, neurodegenerative diseases, and stroke rehabilitation. - learn more
      • Emotive, a conversational SMS marketing platform, has been acquired by Privy to create a unified solution for e-commerce brands that combines email, SMS, pop-ups, and real-time customer conversations. The integrated platform will help over 10,000 merchants simplify their marketing, personalize customer interactions, and strengthen relationships with dedicated strategists and transparent pricing. - learn more

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      Tinder, Starlink, and Apple’s New Studio: This Week in LA

      🔦 Spotlight

      Happy Independence Day, Los Angeles! 🇺🇸

      While you're celebrating freedom, here are some electrifying updates lighting up LA’s tech, satellite, and music scenes:

      🔥 Tinder mandates Face Recognition in California

        Image Source: Tinder

      Tinder is now requiring all new users in California to complete a biometric face check, a brief video selfie processed via FaceTec, to verify profiles are genuine. The video is deleted post-verification, though an encrypted face map remains while the account is active. This West Hollywood based move could redefine trust, safety, and privacy in mainstream consumer apps.

      🌐 Starlink clears hurdle to launch in India

      Elon Musk’s SpaceX backed Starlink has cleared most regulatory and licensing hurdles with India’s Department of Telecommunications, marking a key step toward launching satellite broadband in one of the world’s fastest growing markets. Final approvals from the national space regulator are pending, and services, expected to deliver high speed connectivity to underserved regions, could launch in the coming months. This is a major milestone for Starlink’s global expansion.

      🎧 Apple Music opens Culver City creative hub

        Image Source: Apple

      Apple Music is celebrating its anniversary by launching a brand new 15,000 square foot, three story studio in Culver City. The facility, featuring a 4,000 square foot soundstage, spatial audio suites, podcast booths, and more, is designed by Eric Owen Moss and slated to open mid August. It solidifies LA’s reputation as a creative powerhouse and reaffirms Apple’s commitment to investing in and nurturing our city's cultural ecosystem.

      From dating apps to deep space to sound stages, LA isn’t just watching the future unfold, we’re building it.

      Here’s to independence, imagination, and everything this city dares to launch next. Happy Fourth, Los Angeles.

      🤝 Venture Deals

      LA Companies

      • Castelion has raised a $350M Series B round led by Lightspeed Venture Partners alongside Altimeter Capital to scale its hypersonic missile production capabilities. The El Segundo-based defense startup plans to use the funds to expand manufacturing, accelerate testing through its SpaceX-inspired rapid development model, and position itself as a cost-effective supplier of hypersonic weapons to the U.S. military and its allies. - learn more
      • Earth Sama, a Calabasas, California–based climate-tech platform that helps rural farming and Indigenous communities generate and manage carbon credits, secured investment from Omtse Ventures. The funding will support the rollout of Earth Sama’s blockchain-powered field app, climate-creator platform, and smart-contract tools to scale community-led carbon credit projects globally under the Paris Agreement’s Article 6.4 framework. - learn more

                LA Venture Funds

                • Plassa Capital participated in Metafide’s $3.275M funding round. Miami based Metafide, the creator of SURGE, a gamified trading platform that combines AI neural networks and human insight, will use the funds to scale and launch SURGE into the market. - learn more
                • BOLD Capital Partners participated as a founding investor in Syntis Bio’s $33M Series A round, with an additional $5M in NIH grants. The Boston-based biotech is developing oral therapies for obesity and rare diseases, and the funding will help advance its SYNT platform, moving its lead obesity treatment, SYNT-101, into Phase 1 trials and supporting development of SYNT-202 for homocystinuria. - learn more
                • BAM Ventures participated in Cred’s $15M seed round for its predictive intelligence startup. San Francisco based Cred uses AI to unify company data with real time market signals and deliver actionable insights for sales and operations. The funding, led by defy.vc, will be used to scale Cred’s platform, expand its customer base, and grow team and product capabilities. - learn more
                • BOLD Capital Partners participated in Gallant’s $18M Series B round to advance its ready-to-use stem cell therapies for pets. The funding, led by Digitalis Ventures with additional support from NovaQuest Capital, will help Gallant bring its off-the-shelf regenerative treatments to market. - learn more
                • Rebel Fund joined the seed round for Rocketable, contributing to the $6.5M raised to build a portfolio of fully automated SaaS companies. San Francisco-based Rocketable, backed by True Ventures and others, uses AI agents to operate acquired software products, and Rebel’s support will help scale both the platform and acquisitions. - learn more 
                        LA Exits
                        • Leasepath, a cloud-first provider of equipment lease and loan management software, has been acquired by Solifi to enhance its mid-market offerings. The deal allows Solifi to expand Leasepath’s Microsoft Dynamics-based platform into new global markets while keeping Leasepath’s team and leadership in place. - learn more

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