Clarisonic Cracks Big-Time With $100M Sales, Riding Rave Reviews From Lady Gaga, Oprah

3/30/11Follow @xconomy

One of Seattle’s hottest tech startups has nothing to do with the sizzly Internet trends you read about a lot—social media, location-based marketing, or mobile apps.

It has everything to do with making more than 2 million women so far—Lady Gaga and Oprah among them—look good and feel good about themselves.

Unless you read fashion magazines, you’d never guess such a success story is unfolding at a Bellevue, WA-based company with a boring official name like Pacific Bioscience Laboratories. The same engineers and scientists who put sonic wave technology inside the Sonicare toothbrush have applied their skills to the systematic removal of makeup, dirt, surface bacteria, dead skin cells, and oils from the skin, through a handheld tool called the Clarisonic. The sonic-wave skin care device, which debuted in 2005, surpassed $100 million in annual sales for 2010, according to president Jack Gallagher. That’s more than double the sales it produced two years earlier.

The company doesn’t disclose detailed financial numbers, but it is “very profitable,” and has added about 100 employees in the past 18 months, bringing its staff up to almost 300 people, Gallagher says. Clarisonic now has gotten big enough that it has a budget to run ads in major beauty magazines—Vogue, Allure, InStyle. The success of Clarisonic has even inspired a health and beauty product giant, Procter & Gamble (NYSE: PG), to throw its weight into a competing product. And given the relatively low level of market awareness of sonic skin care, and the overseas sales potential, this new market has a lot of room to grow, Gallagher says.

“When this story is told, Clarisonic will be one of the great success stories of Seattle entrepreneurship,” says Dan Rosen, the chairman of the Seattle-based Alliance of Angels, and an early investor.

“We’re very fortunate,” Gallagher says. “We’ve invented a new product category.”

Clarisonic was founded in 2001 by electrical engineer David Giuliani and a team of people he had previously worked with at Optiva. That was the company that developed the Sonicare toothbrush, which was sold to Royal Philips Electronics for an undisclosed sum. As I noted in Xconomy’s last profile of Clarisonic back in September 2009, Robb Akridge brought his immunology skills; Steve Meginniss was the mechanical engineer; Ken Pilcher, the electrical engineer; and Ward Harris, the chemist.

The founders chipped in some of their own cash in, and raised some more from local angel investors, including the Alliance of Angels and San Francisco-based private equity firm Rosewood Capital. Pacific Bioscience Labs hasn’t taken any venture capital, Gallagher says, and has pulled in less than $20 million to get where it is today.

Gallagher is the former president of Optiva/Philips Oral Healthcare, where he oversaw the effort to drive Sonicare toothbrush sales from $130 million to $300 million a year within three years. He says it’s now clear that Clarisonic has the potential to be significantly bigger than Sonicare. About 98 percent of women in the U.S. still clean their faces the old-fashioned way—manually, with a washcloth. The task is to sell some greater percentage of them on a luxury product—which sells at prices of $149 to $225. It may cost a lot, but you don’t have to look very hard online to find women raving about how smooth and clean it makes their skin feel. This, after all, is a culture where people find it very important to have skin that looks and feels young.

“Once people use it, they are our best advocates. Word of mouth is our best friend,” Gallagher says.

Quite a bit has happened since I last wrote about Clarisonic back in September 2009. The company was riding high on a string of celebrity pronouncements. Without Clarisonic writing checks, Oprah, Courtney Cox, Cameron Diaz, Tyra Banks, and Justin Timberlake all said publicly they are fans of Clarisonic. Word spread fast through social media, and a few key YouTube clips.

Since then, the company’s profile has only gotten higher. Lady Gaga, the pop star with an uncanny ability to grab and maintain a hold on the spotlight, specially ordered a Clarisonic for herself and one for her mother, Gallagher says. Some old Hollywood actors whose names you might recognize—guys like Dustin Hoffman and Colin Firth—are also Clarisonic fans, Gallagher says.

Part of the secret of the Clarisonic is that while it’s a serious tool with lots of science and engineering inside, the company has carefully avoided making any specific claims about its ability to improve any medical condition, like say, acne or psoriasis. Clarisonic’s marketing copy talks about how it “revolutionizes skin care” with technology that uses “300 sonic movements per second to gently, yet thoroughly remove six times more makeup and two times more dirt and oil than cleansing with your hands alone.” Get past the technology description, and here comes the punch line on Clarisonic’s website: “Cleaner skin is the first step toward healthier skin. And healthier skin is smoother, more radiant and more beautiful.”

There’s a fine line Clarisonic has to walk here if it wants to stay on the good side of medical regulators with its marketing. If Clarisonic ever wanted to go the route of making medical claims, it would have become a medical device in the eyes of the FDA, and therefore, subject to long, expensive clinical trials to prove its safety and effectiveness.

Fortunately for Clarisonic and its investors, regulatory risk has never part of the equation. It’s been more about execution and marketing risk. And the company has definitely cleared some of the early hurdles to adoption of its product.

The company started on its current path by introducing the Clarisonic to highly influential skin professionals—dermatologists and spas like Gene Juarez. Clarisonic then branched out into luxury retail stores—Nordstrom, Sephora, Saks Fifth Avenue. Over the last year and a half, Clarisonic has spread into other prestige retail outlets, like Neiman Marcus and Bloomingdales, Gallagher says.

The product has benefitted from the cachet that comes from being in those high-end retail shops full of affluent consumers, but it has thrived in part by going up and down in the market with three distinct product segments. Its original product, now called Clarisonic Classic, retails for $195. But the company has diversified its lineup by adding an entry-level product it calls Clarisonic Mia for $149 (which comes in nine different colors). Then there’s a top-of-the-line Clarisonic Plus for the face and body at $225. The low-priced model, the Mia, is now Clarisonic’s top-selling product, Gallagher says.

The company has done all this in a nondescript light-industrial area of Bellevue’s Factoria neighborhood. Clarisonic does all of its manufacturing locally, and plans to continue to do so, although it has grown so fast that it is “bursting at the seams” and looking for more room to grow on the Eastside, Gallagher says.

Getting to the next level, and making this company a true household name probably be even harder than reaching its first $100 million in sales. Procter & Gamble (NYSE: PG) is now aggressively pushing a tool it calls Olay Professional Pro-X, which sells for $29.99. My wife ripped out an ad the other day from Real Simple magazine—isn’t she helpful?—in which P&G’s ad touts “a revolution in cleansing” that is “as effective as the system sold by skin professionals for nearly $200.”

When you look at the fine print of the P&G ad, it says “it took a team of dermatologists along with Olay to design this instrument that delivers supersonic cleansing.” The marketers add: “The Pro-X Advanced Cleansing System sets your skin up for supersonic anti-aging moisturization.”

Clarisonic is undoubtedly the company being referenced in that ad. So I made sure to ask Gallagher if his rival is really using sonic wave technology that competes directly with Clarisonic. He had a terse reply.

“It’s a rotating device. Technology was invented back in the 1960s,” he says.

Given the still shaky state of the economy, I’d definitely be on high alert if I was a small company with a $149 device that was being challenged by a $29 tool pushed by a Fortune 500 consumer products power. Then again, Clarisonic is the first mover in the category, has hard-core evangelists on its side, and a management team that has already hit a home run by opening up a new kind of product category with sonic wave technology.

The opportunity is certainly there for Clarisonic to go public, with more than $100 million in revenue and a profitable income statement. But it doesn’t really need the extra cash, Gallagher says. The company, without any VCs pounding the table demanding a return on their money, isn’t in any rush to storm the IPO gates, he says.

“We’re very focused. We’ve very driven. We spend our time working on the business, focused on our customers. With our growth being what it is, we’re enjoying that,” Gallagher says. But it shouldn’t be a big surprise if Clarisonic makes some big business news in the not so distant future. “We are a privately held company, so at some point we have to monetize the investment for our investors,” Gallagher says.

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