This story appears in the October 3, 2016 issue of Forbes. Subscribe
A vast loft space with polished herringbone floors, wall-mounted bike racks and desks of trendy twentysomethings (mostly), Harry's headquarters in Manhattan could easily pass for the Hollywood set of a fictional, well-funded hypergrowth upstart.
But venture inside the razor company, which is taking aim at
In an era when businesses are touting asset-light, e-commerce models, Harry's has gone against the grain. In 2014 Katz-Mayfield and Raider paid $100 million for a 96-year-old German factory to make high-quality blades. And now, as traditional brands scramble to strengthen their online sway (this summer Wal-Mart paid $3 billion for e-retailer Jet.com,
On Aug. 21 Harry's began selling shave sets on 4 feet of aisle space in every one of
Katz-Mayfield and Raider grew up in different Boston suburbs and met as interns at
Seeing an opportunity, he called Raider. The pair decided it was a market made for a Warby Parker-type disruption. During nights and weekends they went deep on grooming and learned that making razors is complicated. Steel molecules have to be rapidly heated and cooled (from 2,000 degrees to -100) to produce metal hard enough to grind to a perfect edge. "Quality and performance count when you are taking a knife to someone's face," Katz-Mayfield says.
With Raider's Warby connections and cachet, they raised $4 million from Thrive Capital and contracted their first products with a German company, Feintechnik. While
"We knew our growth would be significant, the capacity concerns were real, and we already wanted to make the product better," Katz-Mayfield says. "The only way we could solve all those problems is to be vertically integrated." In January 2014 they closed a $122.5 million funding round, convincing their investors that they should buy Feintechnik and its 500-employee blade factory in Germany. "They probably thought we were a little crazy," says Katz-Mayfield.
This year Harry's expects $200 million in sales. All told it has raised about $300 million in equity and debt--including the $75 million round that was led last summer by Wellington Management and gave Harry's a $770 million valuation.
The Target partnership began to take shape two years ago when Raider spoke at the retailer's design week. His talk caught the attention of John Butcher, Target's senior vice president of beauty and personal care. "This industry is ripe for disruption," Butcher says. "We have the second-biggest shaving business in the country, and Harry's is bringing cool to shaving."
The big question is whether that cool will translate to the Target aisles. "Of all the big-box stores, Target was most aligned with the Harry's brand," says Miro Copic, principal partner at BottomLine Marketing.
"For Harry's the deal grows their addressable market, builds brand awareness, and lets people touch and feel their product," says Ken Cassar, principal analyst at Slice Intelligence. "And Target gets first dibs on an exclusive brand."
The partnership, which sells Harry's products on Target.com, too, got off to a strong start, with $5 promotional starter kits selling out in stores and online. The deal could produce 2017 sales of over $20 million for Harry's, according to a source close to the company. And then there are the possible add-ons like face scrubs, cleansers and the other 50% of the market: women's razors.
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