Gen Z entrepreneurs launch $2.6M skincare brand, Topicals

Olamide Olowe and Claudia Teng are two 23-year old female entrepreneurs who recently launched a new skincare brand, Topicals. The former pre-med students hope to offer an affordable solution for people with eczema and hyperpigmentation. Olowe and Teng join Yahoo Finance's The First Trade with Alexis Christoforous and Brian Sozzi to discuss.

Video Transcript

ALEXIS CHRISTOFOROUS: Changing the world of skin care. These two 23-year-old female entrepreneurs just launched their new skin care brand called Topicals. They are two former premed students. And they say they're offering an affordable solution for people with chronic skin conditions, like eczema and psoriasis.

So far, their company is not doing too badly. They've raised $2.6 million to date. Here to discuss are Topicals' co-founders Olamide Olowe and Claudia Teng. Great to have you both with us. Olamide, I'll start with you. The two of you saw a need in the marketplace for something like this. What was that need? And then how did you go about selling it?

OLAMIDE OLOWE: Yeah, I think for Claudia and I, we both grew up with chronic skin conditions. And in growing up, we never saw products that served us or kind of represented how we felt about what we were going through. And so when we looked at the data, 1 in 4 people in the United States suffers from a chronic skin condition.

But we saw that everywhere in the beauty world, it was always focused on perfection on that destination with clear skin. And what we want to do with Topicals is transform the way people feel about skin by having our community have [? funner ?] flareups versus focusing on that perfect skin.

BRIAN SOZZI: And Claudia, what are in some of the products?

CLAUDIA TENG: So we call our products medicated botanicals. We focus a lot on botanicals and herbals that have been clinically proven to be effective against these conditions. And then we combine them with safe synthetics to create our products.

ALEXIS CHRISTOFOROUS: Now, what about distribution? I know you've got a pop-up shop coming to Nordstrom-- that's a big deal-- in October. Where else can people get your products? Or is it just direct to consumer?

OLAMIDE OLOWE: We actually launched on Friday with Nordstrom both on Nordstrom.com and in popular locations. And we sold out the product within 48 hours. You'll see us in Nordstrom for the next couple of months until October and then in some more exciting places. We're always about being where our customer is. So you'll continue to see us in those places. We're really excited that at launch, we were able to ship to not only the USA, but also to Canada.

BRIAN SOZZI: Now, Claudia, you're very much in the growth phase right now. Where else are you looking to take the brand? What other types of products?

CLAUDIA TENG: I think we always say that we want to sort of take over the ointment aisle. We want to take all of the conditions that are typically really stigmatized, not really talked about, but a lot of people have and bring them to the light, create products that are comprehensive and effective against all of the skin conditions that you are considered sort of unappealing or taboo but that, you know, everyone needs to treat.

BRIAN SOZZI: Is there a reason why some of the bigger brands haven't reinvented the ointment aisle, because now, you have me thinking when I go down to Target or Walmart, you're right. You know, a lot of these products still look the same. Packaging is a little different but still look the same as they have the past 25 years.

OLAMIDE OLOWE: Yeah, I think that when you think about the industry, we think about what happens with the FDA. So the FDA is the controlling body for this kind of category. And a lot of their formulas haven't been updated in about 30 years. And so we look at that FDA monograph. And since 1991, that's the last time we've had a big kind of reconfiguration of that list.

And so what we saw from our premed study and also from personal experience is that a lot of those ingredients are extremely outdated. Claudia has an extremely big expertise in the clinical research field. She's actually been working at Stanford since she was 14 in the Department of Dermatology and just had [? previan ?] access to a lot of information when it comes to chronic skin conditions.

And when she shared those with me, we kind of had that light bulb moment about the fact that we could bring a lot of these clinically proven ingredients to the mass market, particularly to the Gen-Z demographic that is ready and open to have these kind of conversation about stigmatized skin conditions.

ALEXIS CHRISTOFOROUS: What has raising money been like for the two of you, because if you just look on the face of it, right, two women-- two minority women-- we know how difficult it is for those demographics to raise money with venture capitalists. You also have little experience having been out of school just a few years. You're both 23 years old. How are you getting names, like Warby Parker and Casper and Allbirds, interested in your brand and giving you, you know, hundreds of thousands of dollars?

OLAMIDE OLOWE: Yes, our fundraising process is actually two years long, which is a lot longer than typically people would take. We really first wanted to find the best kind of partners. We always look for operational CEOs, which is why we love, so Warby Parker and Allbirds and Casper CEOs. We're really fortunate also to really lead with having black women as part of our cap people.

Most companies don't have a lot of black women either on their cap table as advisors or as investors. But we're really excited to have people, like Issa Rae, Yvonne Orgi, Bozoma Saint John, CMO of Netflix, Hannah Bronfman, the DJ and entrepreneur, join our investment round. Our round was led by Lerer Hippeau, which is one of the best consumer funds in the business. And so we're really excited because we found the right kind of people to help us push this vision forward.

ALEXIS CHRISTOFOROUS: I have to ask, though, I mean, on practically speaking, how do you even get the ear of these people?

OLAMIDE OLOWE: Yeah, I think you do the work. I think both Claudia and I have been in the industry. I mentioned she's been working at Stanford since she was 14. Previous to this business, I co-created a beauty brand called SheaGIRL in partnership with SheaMoisture, which is a really big multicultural beauty brand. And I think people see our work ethic. And they see what we've done before. And I think that's exciting to them.

And then they tell their friends. And someone else tells someone. And then you're sitting in front of, you know, the manager for Issa Rae and Yvonne Orgi, or sitting in front of the guys from Warby Parker. And so we're really excited that other people see our vision. And they see us. And they see the brilliance that, you know, we've put a lot of work into it to getting to this point.

INES FERRE: Ines here. How do you go about researching for these products that you're making as well? I know you have a premed background. But as far as the testing is concerned and also as far as the supply chain issue, did you have any supply chain issues during COVID-19?

CLAUDIA TENG: Oh, absolutely. We had lots of supply chain issues. I'll answer your first question. So I think it's really helpful that Olamide and I both grew up with chronic skin conditions. So we recognize a lot of the pain points in the user experience. And we can sort of speak to that and create products that address those concerns that we've always had.

And then luckily, we were able to create a community of people who has skin conditions from really early on. We focused heavily on building that community first and having them tell us what they needed out of their products. And then when it comes to the pandemic and how that's impacted our supply chain, back in March, we were actually supposed to launch in May.

And because of the delays from overseas and also within the United States, the fact that manufacturing facilities that we were using we're quarantining. And we should have pushed back until August for our launch. We experienced a ton of delays in terms of getting the right ingredients to our manufacturing plants and things like that.

But I think, luckily, we were able to pivot really quickly. We focused on building an online community, which I think we've been able to do really successfully. And thankfully because of that, we were able to build up a ton of anticipation for August 1 which has been really great.

OLAMIDE OLOWE: Yeah.

BRIAN SOZZI: Target has been very experimental and giving a lot of upstart brands a try. You know, chief among them, I look at Bevel. And they're one of the first brands-- first companies-- big box retailers to put that brand in the store now. They're division of Procter and Gamble. Have you talked to Target about getting your products in there?

OLAMIDE OLOWE: So we've talked to a couple of different retailers. I think for us, we're excited about taking these ointments and bringing them to the beauty aisle. So we talk to a lot of really fun retailers because those are the people that we're really interested in kind of being on their shelves. We talk about transforming the way people feel about skin. And that's making conditions that have typically never seen-- been kind of seen by the beauty industry-- we're bringing those into that category.

ALEXIS CHRISTOFOROUS: I also love what you guys are doing to help mental health nonprofis. I understand that you're giving 1% of your profits away to mental health nonprofit organizations. So far you've donated-- I think it's $10,000. Why did you choose to back that initiative?

OLAMIDE OLOWE: People with chronic skin conditions are two to six times more likely to suffer from depression and anxiety because they grew up with a lot of misinformation. I mean, stories between Claudia and I that we share about-- you know, not being able to go to sleepovers because of our ointments. Or, you know, being made fun or thinking that our skin condition was contagious really affected how we saw ourselves as we were growing up.

And we knew that our company wasn't just going to be a product company that we really wanted to build what we call the Topicals world, which is a world where this customer can come in and find products, find experiences, find community that really makes them feel seen. And we knew that mental health was going to be a really big component of that. And for us, you know, we grew up hearing the phrase, you put your money where your mouth is. And we believe in doing the same thing.