There are any number of Internet start-ups that seek to conquer new and untapped markets. Then there are those companies that take aim at existing markets and vow to make them dramatically better.
Include Harry's in the second group. This year-old New York City-based company, started by co-founders Andy Katz-Mayfield and Jeff Raider, wants to make shaving a much more pleasant experience for men. Its sleek ergonomically correct handles, five-blade razors and shaving creams are sold in kits directly to consumers through its website, Harrys.com, and start at just $15.
That Harry's is looking to take on consumer products giants like Gillette and Schick—two companies that have long dominated the men's $2.4 billion shaving market—is audacious enough. But now consider that in January the fledgling firm plunked down $100 million to buy Feintechnik, a nearly 100-year-old German company and factory that makes the shaving products Harry's sells.
The money for the purchase was part of $122.5 million in venture capital financing the company raised from Tiger Global, Thrive Capital, Highland Capital and other private equity firms.
"We've always viewed Harry's as a grooming brand and knew from the start we would eventually be bigger than just razors," explained Raider, who is also a co-founder of Internet darling Warby Parker, the online eyewear company. "If we want to execute on this really big vision, owning our own manufacturing is an important piece of the puzzle, and our investors understood that."
Raider and Katz-Mayfield believe the key to Harry's growth lies in this vertical integration, or what they like to call v-commerce. Simply put, the company now owns the entire process—from R&D to manufacturing to selling direct to the consumer. "It creates this virtuous cycle that makes for really happy customers, and then they become our best advocates," says Katz-Mayfield.
Owning the factory also means Harry's can respond to its customers in record time. For instance, not long ago a customer wrote in to say he really liked the audible click that was made when a new razor cartridge locked into place. In fact, the customer—an engineer by training—liked it so much that he drilled into the connector on the razor handle so the sound was more pronounced.
Katz-Mayfield liked the change and figured other customers would, too. "I spoke to him on the phone for an hour, he sent pictures of what he did, and we were able to take that idea back to factory to our manufacturing partners and make the change," he said. "That wouldn't be possible if we didn't have integrated manufacturing."
Before launching Harry's, Katz-Mayfield and Raider spent six months trying razor blades from all over the world. They finally chose the German factory because of its long history of making blades and its ability to turn out the more complicated five-blade razors bearing the Harry's name. "In the end we realized this was the only factory that could make the kind of blades we'd be proud to sell," said Raider.
Harry's believes its razors—indeed, its whole take on the male ritual of shaving—will appeal to young, tech-savvy men who appreciate design and performance but understand value. "These are guys who are forward thinking, reasonably well educated, and they care about what they wear and how they look," said Raider. "They're entrepreneurial in the sense that they're always thinking of ways to do things better."
As of now, there are more than 100,000 Harry's customers in the U.S. and Canada, 90 percent of whom reorder, the company claimed. Not surprisingly, its two biggest markets are Los Angeles and New York, but not by as big a margin as the company would have predicted, according to Katz-Mayfield. "We're encouraged that guys from all over the country are buying from us," he said. "That's why the tagline on our website is: 'Every man deserves a quality shave at a fair price.'"
Harry's isn't the only new company looking to disrupt the men's shaving market. Dollar Shave Club is a Venice, California-based subscription service that delivers razors starting at $1 a month. It's using rock-bottom prices (and funny ads starring its co-founder, Michael Dubin) to convince men they don't have to spend a fortune to get a good shave.
Still, Katz-Mayfield and Raider are convinced that a quality shave at a fair price will win the game. "We stand by our blades and feel they are highly differentiated from our competitors," Raider said. "We offer both great value and great quality. As a company, we're thinking less about market share and more about the impact we can have on people by giving them a better choice when it comes to shaving."
The Harry's co-founders have known each other since their college days when they were both interns at Bain & Co. After graduation, they worked full-time for the consulting firm and then went on to join private equity firm Charlesbank Capital Partners, where they worked for four years.
After earning MBAs—Raider went to Wharton and Katz-Mayfield to Stanford—the pair linked back up to start Harry's. In trying to come up with a name for the company, they wanted something solid and down to earth. "Jeff had someone in life who was like a grandfather to him, and his name was Harry," Katz-Mayfield explained. "When he said the name out loud, we both liked it."
Both men said there will be no celebrity endorsers or other high-profile figures as part of Harry's marketing plan. Rather, they want credible sources—such as grooming editors at major magazines and satisfied customers—to spread the word. Said Raider: "If we can take people one by one and give them an incredible shaving experience, then over time we think we can capture a really big audience."