These Gen Z founders just launched a skincare brand from their apartment—it sold out within days

Claudia Teng and Olamide Olowe are the co-founders of Topicals, a new skincare brand that treats chronic skin conditions.

Ahead of their company debut on Friday, August 7, Olamide Olowe and Claudia Teng were running on fumes.

They were hours away from the official launch of their new skincare brand, Topicals, which offers science-backed and clinically tested products for the one in four Americans who experience chronic skin conditions, such as eczema and hyperpigmentation. Their brand, which launched online and in select Nordstrom stores that day, has been years in the making and had to delay its 2020 debut twice.

The first time was in March, when the coronavirus pandemic swept the world and disrupted, among many other things, the Topicals supply chain. Then, just ahead of the brand's rescheduled launch, came the powerful uprisings against racism and violence following the police killing of George Floyd in May.

With each national reckoning Olowe, 23, and Teng, 24, have taken the change of plans to make their products and their business even better. Their growing momentum in recent months has led Topicals to secure $2.6 million in funding, the company says, from investors including Netflix CMO Bozoma Saint John, entrepreneur and DJ Hannah Bronfman, and the Emmy-nominated leads of the HBO show "Insecure" Issa Rae and Yvonne Orji.

Despite recent setbacks, "we're really launching at the perfect time," Olowe tells CNBC Make It. "At this point, [it] feels like a dream."

Here's how the two Gen Z founders built their skincare brand despite surmounting challenges posed by the pandemic.

A company built on a change of plans

While Olowe began raising money to launch Topicals two years ago, the origins of the brand take root in her experience growing up with hyperpigmentation and post barbae folliculitis, a type of skin inflammation. Olowe, who is Black, recalls countless appointments with dermatologists who said they didn't know how to treat her darker skin.

She found a common bond with Teng after meeting through a mutual friend last year. Teng, who is Asian American, also spent her childhood in and out of doctor's offices seeking treatment for her severe eczema.

In high school, Teng worked as a dermatology clinical research assistant and witnessed the disparity in access to health care for people of color. There were instances, she says, that not a single Black patient was enrolled for clinical trials she worked on, meaning there was no representation to see how certain treatments would work on darker skin.

So, in the fall of 2019, the Olowe and Teng decided to forgo their plans to apply to medical school (they were both pre-med in college with dermatology careers in mind) and instead set out to build a skincare line that catered to people like themselves: individuals of varying skin tones and conditions who didn't want to feel like treating their skin was a source of shame.

Rather than being relegated to pharmacy aisles or doctor's offices, they wanted to create balms and salves that made treating their skin (in both a literal and figurative sense) an act of self-care, rather than a chore to "fix" their concerns.

"Everyone's aspiration is to have clear skin," Olowe says, noting that Teng's product formulas do, in fact, help minimize the effects of certain conditions. However, on the whole, "we want to take the focus off of having perfect skin and put the onus on making treatment more fun. I'm going to live with this skin condition for my whole life — I don't want to dread taking care of myself."

They got to work, with Olowe in Los Angeles and Teng in Palo Alto, initially using FaceTime to do business long-distance. In 2020, the two moved into an L.A. apartment together. Their commitment to customers: "Funner flare-ups ahead."

A new player in the $5.9 billion skincare market

The U.S. prestige beauty industry generated $18.8 billion in sales during 2019, according to the market research company NPD. Americans spent $5.9 billion on skincare alone last year.

But just like access to health care and dermatology, the beauty industry has its own problems serving people of varying skin tones and textures. Just three years ago, artist and entrepreneur Rihanna challenged the beauty industry's standards when she launched her eponymous Fenty Beauty, complete with 40 shades of foundation that went well beyond the color range of competitors. Its impact in calling for more inclusivity in beauty has been dubbed the Fenty Effect, and companies in the years since have followed by expanding their makeup lines to cater to more people of color.

What Fenty did for cosmetics, Olowe and Teng want Topicals to do for skincare. Olowe already has start-up skills to draw from. While in college at UCLA, she co-founded beauty brand SheaGIRL, a younger sister line under SheaMoisture, alongside fellow student and former roommate Rechelle Dennis, the daughter of SheaMoisture founder Richelieu Dennis. The skincare brand was sold to Unilever as part of its Sundial Brands acquisition in 2017.

After graduating in 2018, Olowe began building Topicals. As CEO, she found a partner in Teng, who was working in clinical research at Stanford's Department of Dermatology. Teng now serves as the Topicals chief product officer to develop and test formulas alongside a team of experts, including the head of pediatric dermatology at Stanford.

In order to cater to a customer base with varying skin tones, the founders are reexamining what are considered to be "gold standards" in the beauty industry. For example, Teng points to the use of ingredients like hydroquinone, a depigmenting agent used to lighten and "even" skin tones. However, this ingredient can be damaging to darker skin and has been linked to the permanent death of skin cells in some severe cases. Beyond the medical risk of prolonged or damaging hydroquinone exposure, Teng sayss that its use in skin-lightening products perpetuates harmful cultural ideals of beauty.

The Topicals founders also want to reshape what it looks and feels like to use products that treat chronic skin conditions. Don't expect their branding to have an ultra-white, clinical aesthetic or frowning "before" pictures of people experiencing skin flare-ups. Instead, their first products are encased in bright, colorful packaging that reads more "boutique pop-up" than "dermatologist's office."

"The doctor's office isn't the only place that people with skin conditions live," Teng explains. "Treatments don't have to be focused on the medicinal all the time. People who have skin conditions are multifaceted and live in color."

Topicals launched to the public with two products: "Like Butter," a hydrating mask, and "Faded,"  a discoloration-treating gel serum, both of which retail for under $40.

The Topicals line sold out on within hours of its launch; on their own site, inventory was snatched up within days.

Third time's the charm

Olowe wholeheartedly believes that "everything happens for a reason," including the Topicals twice-delayed launch.

The extra time allowed the duo to ship their very first mass product — an interactive game called "Sun, Skin and Stars" that plays like a mashup between a horoscope reading and a quiz about your personal skin concerns. For every play, the brand donates $1 to Sad Girls Club, an online community that provides mental health services to girls who don't have access to treatment. The game raised over $10,500 in donations.

A commitment to mental health access is fundamental to the skincare brand, Teng says: People with chronic skin conditions are two to six times more likely to experience anxiety or depression. With this in mind, Topicals donates 1% of profits to various mental health organizations. To prioritize their own mental wellness, both Olowe and Teng sought therapy as they began their business partnership.

After George Floyd's death in May, Topicals and a collection of beauty brands teamed up with Therapy for Black Girls to help sponsor 150 memberships to their virtual group therapy community. As protests followed in the weeks after, Topicals posted an educational Twitter thread about how to handle skin irritation from tear gas, which was retweeted more than 900 times.

Tear gas Tweet

The pair knew, in building their community, how to respond to the current events and what was naturally on the minds of their audience, much like their own.

"We're both women of color, so we immediately shifted our energy and resources as a company to supporting the movement," Olowe says.

With all the changes, Olowe and Teng are comfortable moving at rapid speed, meeting the needs of their community at a moment's notice, even while staring down a once-in-a-generation world event.

The uncertainty "gave us more time to build community and home in on what we wanted to do for customers," Olowe says. "Now, our customers feel like they have a stake in brand. They built the brand with us."

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