Company founder didn't take a salary for 9 years: 'Every time I get a paycheck, it feels like I've won the lottery'

Vicky Tsai, founder of Tatcha

In 2009, Vicky Tsai had quit her job on Wall Street, sold her engagement ring, moved back home with her mom and started a beauty company out of her San Francisco garage.

Within six years, her company Tatcha was named the No. 2 fastest-growing, woman-led company on the Inc. 5000 list. The luxury skin care brand with fans in Kim Kardashian and Meghan Markle would go on to make $70 million in sales in 2018, according to Bloomberg, and was acquired by Unilever during the summer of 2019.

For most of this time of growth, Tsai never took a paycheck, and instead reinvested any earnings back into the company. She says this decision was fundamental to Tatcha's start.

"Even if I wanted to, I couldn't raise money in a meaningful institutional way," Tsai tells CNBC Make It.

Part of this, the Harvard Business School grad says, is because there wasn't a precedent for the type of company she wanted to build.

Tatcha products draw from generations-old beauty rituals of Japanese geishas and focus on a less-is-more approach. Tsai, who was on a flight layover in Japan and was at the time suffering from acute dermatitis, was drawn to the simple ingredients of the Japanese skin care ritual and wanted to create similar products free of parabens, synthetic fragrances, mineral oil and other potentially irritating ingredients.

"When we first started out, direct-to-consumer beauty wasn't a thing, Asian beauty wasn't a thing, clean formulas were not a thing," Tsai says.

Plus, her experience was a common one among women-led businesses: Women founders face greater barriers funding their businesses.

A recent study from Crunchbase found that in 2019, for every $100 invested by venture capital firms, just $3 went to companies founded by women.

That's where self-funding became essential to Tatcha's start. At most, Tsai estimates she accumulated up to $1 million in debt across remaining student loans from undergraduate and business school, as well as credit cards used to float the company.

For a time, Tsai worked four jobs on the side, including cleaning and showing apartments, while her husband, Eric, became the single-income earner for their family. Most of their earnings went back into launching and growing Tatcha.

However, "at one point it wasn't about necessity anymore," Tsai says of self-funding. "It was about maintaining control."

Not having to rely on investor dollars meant Tsai could prioritize research and development (Tatcha has a Tokyo-based R&D center), customer service and incorporating a giving model into her business. For every purchase made, Tatcha funds a day of girls' education in partnership with the non-profit Room to Read.

Now, after Tatcha's commercial success, Tsai has only recently started taking a salary.

"Every time I get a paycheck, it feels like I've won the lottery," she says. "It's amazing."

However, even after bouts of barely being able to afford groceries, Tsai says her favorite way to spend her money isn't on things.

"The first thing I did when I started taking a salary and moved out of my mom's house is I gave everything away — like, [I was] down to seven pairs of underwear," Tsai says. "I find 'stuff' to be a huge burden, so I don't buy stuff."

She finds spending on experiences for herself difficult because of her work schedule but tries to invest in ones to help her daughter, Alea, see the world.

"I take her to Room to Read markets with me," Tsai says, explaining that Alea will accompany her on trips to visit the schools around the world that receive education funding from the organization.

"We matched the money she raised and she built her own library in Cambodia last year," Tsai continues, "so we made a family trip out of it visit her library and keep in touch with the person who made it happen. So that's philanthropy and experiences all in one."

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