An Honest Conversation With Jessica Alba and Brian Lee of The Honest Company

As the keynote speakers at South by Southwest (SXSW) on Sunday, The Honest Company's Chief Creative Officer Jessica Alba and CEO Brian Lee offered an open, honest and frank assessment about their eco-friendly e-commerce startup's future goals, challenges and secrets to success.

The Honest Company, which launched in 2011, generated $150 million in revenue last year, triple the company's revenue in 2013, and is now valued at nearly a billon dollars. In the past six months, it's grown its employee base from 250 to 320, expanded its total number of SKUs from 450 to 625, and widened its wholesale retail presence from 2,800 to 3,500 stores, including Target, Whole Foods, Nordstrom, Costco, Buy Buy Baby and independent boutiques. While three-quarters of The Honest Company's revenue is generated online, 80 percent of that is via subscriptions to one of four monthly bundle options.

The discussion, which was moderated by Lindsay Blakely, Inc.'s Los Angeles-based features editor, started out with Alba talking about how the idea for the company came about. She explained that when she was pregnant with her first child, Honor, she got an allergic reaction from a laundry detergent, so she dove into research about toxic chemicals. But when she shopped for products she thought were better, it turned out that only the packaging was better, not the ingredients, Alba said. Therefore, she set out to create The Honest Company, which would offer people safe, non-toxic products.

People didn't get it at first, however, Alba said. "It took three years of people not getting it," she said. "It was too big of an idea — my pitch was long and confusing."

Alba explained that she kept refining her idea and condensing her pitch. She also reached out to Lee, who had started LegalZoom and ShoeDazzle, but he rejected her idea at first, too.

"The first time she approached me, I didn't have children," Lee said. "Once I did, I saw the way my wife changed her behavior, making organic purees for the baby." He began thinking about all the other women doing the same thing. "The first time you hold a child, you realize that you're responsible for this being for the rest of your life. That was the epiphany for me. It's not that I wanted to [help start the company], it was that I needed to."

During the conversation, Alba said that while The Honest Company's recent launch of baby-feeding products is going "really well," it's just the beginning.

"Our customers are demanding we go even further and offer solids and snacks and later stage foods as well," said Alba. "And our customers have also asked us to do more personal care, so feminine care is a vertical we're launching in the summer, and in the fall, beauty. Both of those verticals we've been working on for years, it's just now that we're at the point we can finally launch them."

Alba noted that The Honest Company relies heavily on social media as a marketing channel, and believes it's helped the company grow.

"Our social media is about inspiring, listening, educating," Alba said. "We have over 1 million Facebook fans, and none were bought. We also have over 20 percent engagement, which is off the charts." The Honest Company also works closely with mommy bloggers, sending them new products to test regularly as well as attending their events.

Alba and Lee also discussed some of the many mistakes they made along the way. One involved not testing the website until 20 minutes before it was going to launch via an appearance by Alba on "Good Morning America" (everything turned out OK, though) to faulty laundry pods that kept breaking in freezing temperatures. Customers also complained early on about the first baby wipes the company made, which weren't thick or big enough. The retailer took what customers said to heart and fixed the issues quickly, however, Alba said, which is key to keeping the customer's trust.

More tidbits from the conversation with Jessica Alba and Brian Lee at SXSW include the following:

• The Honest Company's original name was Love & Honor, inspired by Alba's daughter. "But that just sounded too bridal," she said.
• The Honest Company will expand internationally later this year. "We're starting to make inroads into Asia and are looking at China in particular because we believe our brand will really resonate with the Chinese family looking for nontoxic lifestyle choices," Lee said. "We believe it's a very large market for us."
• The topic of a possible IPO "kind of freaks" Alba out. While Lee said there are no plans at the moment to file for an IPO, especially since the company has a strong balance sheet, Alba said the idea "kind of freaks me out. I live kind of in a fishbowl anyway, and I feel like that's even more of a fishbowl," adding that she tries not to think about it too much and instead focuses on growing the business.
• The Honest Company paid $400,000 for its URL. When the company started to seek out its current domain (www.honest.com), it was "very cloak and dagger," Lee said. "The name was owned by a squatter and it was for sale for $400,000, and that's what we paid for it." The company could have gotten "www.thehonestcompany.com" for free or close to it, but Lee said it wouldn't have been right for the brand.
• One place you won't find Honest Company products is on Amazon.com. Alba said she wants to maintain the one-on-one relationship with the customer and doesn't want to give up control of the customer experience to Amazon. Lee agreed. "We love Amazon. I've personally been an Amazon Prime member since its start. But when we launched Honest, we wanted to build our own community."
• Honest is more than a nontoxic version of Unilever or Procter & Gamble. "We're not just a CPG [consumer product goods] company," Alba said. "It really is a lifestyle and a way of life. And we're also an education platform. In so many ways it's a different idea."
• Part of The The Honest Company's business strategy is to put employees first. When hiring, one of the factors it considers is the "airport test," where the company tries to gage whether that employee would be pleasant to be with if you were stuck with them at an airport for six hours. The likeability test has been important to the company's growth.
• Alba works for The Honest Company on a day-to-day basis. She helps train customer service reps and is involved in everything "from product development to designing marketing assets to helping design and build out wire frames and flow. I do all of the creative stuff, but do not balance any kind of sheet. I know what my strengths and weaknesses are and where I can add value."