How Michelle Phan Built a $500 Million Beauty Empire

The YouTube star embraced opportunity to envision a brighter future.
April 10, 2017

Michelle Phan is obsessed with pyramids.

Not in the “I think pyramids are pretty cool, but I also like hexagons” kind of way. She can name any documentary about Egyptian history, no matter how obscure. She has a pyramid-shaped copper chair in her apartment for meditation. And she just spent the last 10 minutes explaining to me why the Egyptians didn’t build the pyramids just to be aesthetically pleasing, and that they’re probably much older than we think. (I’ll have to take her word for it because I don’t know much about the pyramids beyond the fact that they exist.)

“If I had to do it over,” Phan says, “I would probably be an archaeologist.” She already has a tagline: “What does the carbon tell us?”

We’re sitting in the ipsy Open Studios in Santa Monica, California. Phan’s glam team is discussing which lip shade best complements an emerald blazer. They don’t seem to notice the massive gold-colored medallion around her neck until it’s time to select jewelry.

Related: Video: Michelle Phan’s SUCCESS Cover Shoot

“Oh this?” Phan says casually. “It’s a necklace that helps reduce the electromagnetic energy from phones. You can judge me, it’s cool.”

The gold-coated necklace is called a Sensor V, created by new age scientist and inventor Patrick Flanagan. A quick internet search reveals that the round, concaved medallion is adorned with different sizes of pyramidal structures that somehow protect the body from harmful energies, but that’s a story for a different day. Phan knows she sounds crazy for talking about do-overs and the healing power of pyramidal structures, but she stopped caring what other people think a long time ago.

How Michelle Phan Built a $500 Million Beauty Empire
JEFF KATZ

Her Vietnamese name is Tuyět Băng, which roughly translates to “snow exploding” or “avalanche.” Her father used to say that Phan lived up to her name by approaching life and challenges with an unstoppable energy—and her résumé supports that.

 

“If I see an opportunity that most people don’t see, it’s because I’m always looking for a way to take an idea and further it.”

 

For the past decade, Phan has worked tirelessly to build a multimillion-dollar beauty and lifestyle empire. The dynasty includes a monthly subscription beauty service, ipsy, reportedly valued at more than $500 million. There’s also a makeup line, EM Cosmetics, set to relaunch this year after Phan bought it back from L’Oréal in 2016. The root of it all is a multichannel beauty and lifestyle network on YouTube featuring more than 200 beauty influencers. She’s also written a book, has more than 1.1 billion lifetime views on her YouTube channel and was the first official video makeup artist for beauty giant Lancôme.

“I’m an opportunist,” Phan says. “If I see an opportunity that most people don’t see, it’s because I’m always looking for a way to take an idea and further it.”

Even as a child, Phan found unique ways to achieve the things she wanted. There was never enough money growing up, so she built her own Barbie Dreamhouse out of a cardboard box and used the blank pages at the back of the phone book as a sketch pad.

How Michelle Phan Built a $500 Million Beauty Empire
JEFF KATZ

“I don’t live with the idea that everything is scarce. Success is not scarce at all. Everyone can find their own version of success, but you have to define it in your own way.”

Phan’s way began with a grainy video, shot in 2007 from a living room floor in Tampa, Florida.

***

Phan looks directly into the camera and smiles just a little. She’s wearing a plain white tank top and her layered black hair is swept back behind a headband. Soft, melodic music plays and a black title card reads, “Natural Looking Makeup Tutorial.” For the next seven minutes and nine seconds, Phan details how to curl your eyelashes without pinching the eyelid and stresses the importance of minimizing, not erasing, dark under-eye circles because she says nine out of 10 people have dark circles. It’s a losing battle. She throws in a couple of still shots of the finished look and says “Good Luck!”—a send-off that would become her signature.

The picture is low quality. Mascara is misspelled in one of the title cards. The overstuffed sofa in the background draws the eye away and Phan looks repeatedly at the rear-facing video in the lower left corner. But she’s young, beautiful and has a voice so soothing, you could probably listen rapturously if she were giving a tutorial on changing a lightbulb. Within a week, the video has more than 40,000 views on YouTube (today it’s up to 11.6 million). It’s the beginning of something, of everything. And Phan seems to know it even then.

 

“You become successful based on everything that you encounter in life, good or bad. It shapes who you are and who you need to be today.”

 

The video was recorded during her freshman year at Ringling College of Art and Design in Sarasota, Florida. Her mom, Jennifer, wanted Phan to go to medical school, but a lifetime of drawing, doodling and creating led her down the artist’s path. Just a few days before the video, she interviewed for a job at the L’Oréal makeup counter at the mall. Her skills were on point, but they turned her down for lack of sales experience. It reinforced what Phan already knew: Life happens outside of your control. But you can control your response.

“I believe that you become successful based on everything that you encounter in life, good or bad,” Phan says. “It shapes who you are and who you need to be today.”

Related: 34 Things You Need to Know About Becoming Successful

***

Phan was an outsider. She was the kid who drew anime characters in class, played video games and mostly just kept to herself. Before stepping in front of the camera, she spent most of her free time sketching comics and blogging on her Xanga account under the username RiceBunny. The name doesn’t bear much significance outside of the fact that she likes rice and was born in the Year of the Rabbit. But that online persona was an escape route from a childhood fraught with instability and loneliness.

“RiceBunny was a character, someone I aspired to be,” she writes in her book Makeup: Your Life Guide to Beauty, Style and Success—Online and Off. “She came from a happy family, she lived in a nice home, she had nice clothes.” Real life was a stark contrast.

Born in Boston, Phan’s family of four moved where the money was—or the hope of money. Her father was in construction and work was always scarce. It led them from Boston to San Francisco, all around the Bay Area and eventually to Tampa, Florida. It wasn’t easy, but they were together. Until they weren’t. Phan’s father had a gambling problem resulting in the family’s eviction from apartments on multiple occasions. The constant upheaval meant always being the new kid at school. Michelle struggled to make friends, and her older brother, Steve, failed first grade.

How Michelle Phan Built a $500 Million Beauty Empire
CHAMBRAY BLAZER AND BELT: RAVEN + LI; MAROON HEELS: HUMA BLANCO; PHOTO BY JEFF KATZ.

When Phan was 6 years old, she woke up to find her father was gone. It would be nearly a decade before they reconnected. She got through it. She even jokes that if her childhood had been different, normal, then she might be leading a boring life as a children’s book illustrator somewhere.

“All these trials you go through really do forge you. They’ve forged me. It’s like bones: Every time you break your bone it becomes stronger.”

Phan has some dense bones. She was bullied at school, enduring racist taunts from kids as she walked to and from class. There weren’t many Asian-Americans in Tampa and school can be a cruel place. She couldn’t invite friends over to her house because at the time the only “house” they could afford was a single bedroom in another family’s home. Phan’s bed was a sleeping bag on the floor. A cardboard box served as a dresser.

When the real world became too much, she escaped to her other life. RiceBunny was a happy, innovative and creative teen who saw a ninja costume where others saw a T-shirt. She started writing tutorials about her innovative crafts, using step-by-step photos. She also blogged about the real stuff, about wanting a better life and the crushing weight of loneliness. Her digital family responded with support and positivity. Here, she was normal, accepted, even popular. Here she could be anyone she wanted to be.

***

Phan’s videos were viral before viral videos were a thing. After the first one, subscribers began to request tutorials: how to get a smokey eye—a dark, dramatic blend of eyeshadow and eyeliner usually saved for nightlife—how to make your eyes look bigger, how to look like Lady Gaga for Halloween. It was a pivotal moment and the fan response pushed Phan to focus her energy exclusively on videos.

 

“There’s really no excuse; it’s just how hungry are you? How badly do you want this? Why do you want this?”

 

She wasn’t making any money, but that’s not what she was looking for at the time. The family living room served as a makeshift studio. It had the best lighting if you waited until 1 p.m. The iMovie app on her MacBook Pro—given to all incoming freshman at Ringling—had all the editing tools she needed. The rest was just hard work and dedication.

Related: Are You Willing to Do Whatever It Takes?

“There’s really no excuse; it’s just how hungry are you?” She says. “How badly do you want this? Why do you want this?”

How Michelle Phan Built a $500 Million Beauty Empire
JEFF KATZ

As Phan’s YouTube channel grew, her fans wanted more. They asked for love and life advice, which glasses go with different face shapes. Phan was connecting with her “subbies” (YouTube subscribers) in a real and genuine way. She continued to push herself. Everything had to be perfect, from the music choice to the voice-over to the video length. She still has three different versions of the very first video she ever created.

“I was so passionate about it,” Phan recalls. “It was just me sharing and passing knowledge. I knew this would be a safe space for me to open myself up and sure enough I made the right choice.”

Phan wasn’t the only video blogger out there and certainly not the only one creating makeup tutorials, but hers had a unique, personalized aspect. She is a storyteller at heart. She says we—humans—are all storytellers. The stories we tell ourselves and others are what connects us and makes us feel as if we’re not alone. The internet simply provided the platform to share her story with more people.

After that, things began to move quickly. Her professors at Ringling didn’t take her hobby seriously and classmates called her a nerd. But Google likes nerds, and before long, she began earning a percentage of ad revenue: 25 cents a day at first, but before long, $200 a week, enough that she quit a waitressing job to focus on creating videos full time.

How Michelle Phan Built a $500 Million Beauty Empire

You have to risk losing everything by getting rid of everything in order to invest in what you really believe in,” Phan says. It was a silver-lining skill she picked up from her father’s gambling addiction.

She wasn’t just making strides within the YouTube community anymore. Lancôme soon came knocking and former Vogue Editor-in-Chief Anna Wintour wrote that beauty bloggers such as Phan were “making a global industry sit up and take notice.”

When Phan was a little girl, she drew herself as a superhero and dreamed of the day that she could save her family from poverty and unhappiness. Makeup became her superpower.

***

Much of Phan’s current world is a direct response to her childhood, when her relationship with makeup and beauty began. First at family gatherings where she was caught and punished for drawing on the walls, only to do it again the next day. Then in the long hours spent at the nail salon where her mother worked. She would trace the rows of brightly colored nail polish and collect fragrance samples from the pages of her favorite magazine, Allure.

She loved the colors, yes, but she also loved how beauty can change a person’s perspective. How a new nail color, hair cut or shade of lipstick can make you feel as if you can face anything.

“My mom wasn’t someone that just made people look beautiful; she made them feel beautiful,” Phan says.

How Michelle Phan Built a $500 Million Beauty Empire
JEFF KATZ

Phan wasn’t allowed to wear makeup until her teens and then only just a little. It started with eyeliner, then mascara, then tinted lip gloss. It was like drawing, except her face was the canvas. Every day was a new opportunity to experiment. The possibilities were endless.

“I’m not trying to say I’m a makeup artist. I’m not a makeup artist; I’m a beauty creator. I create content and I use beauty as my vessel, as my palette, and that’s how I express myself.”

Her mom was careful to instill a healthy, empowering view of beauty in her daughter. She taught her about the transformative power of makeup but also why you don’t need makeup to feel  beautiful.

“We’re inherently born beautiful,” Phan says. “How we perceive beauty is different and that’s what is exciting and fun.” She adds: “It’s the expression of how we see ourselves from the inside out.”

When she wasn’t creating, Phan read and taught herself to paint and play the piano. Every new experience made her hungry for more. What she couldn’t afford to do, she read about doing. She read whatever she could get her hands on, encyclopedias and biographies. When other kids were having sleepovers and watching Full House marathons, she spent hours in Barnes & Noble, her personal library.

“Seeing how unhappy my mother and my family was because they didn’t have enough money encouraged and empowered me to better myself in every way,” Phan says.

Her goal was never to amass wealth or power, fame or notoriety; Phan simply didn’t want her mom to work 14-hour days in a chemical-filled nail salon just to put food on the table. And even as a young girl, she knew the beauty industry was ready for a little disruption. After all, her only access to beauty was through books or the 75-cent discount makeup bin at the local drugstore.

Those humble early years pushed Phan to set a a goal of facilitating her mom’s retirement by her own 25th birthday. She called her mom the day she launched her cosmetic line, EM, in 2013 (when she was 26) and told her not to go to work the next day. They both cried. But growing up poor also opened Phan up to being manipulated when she first moved to Los Angeles.

That was years ago, though. Phan is smarter, savvier and doesn’t really “do” the L.A. scene anymore. In fact, she doesn’t really “do” anything that doesn’t align with her current goals. She wants to cut out the noise, to surround herself with uplifting people, to have inner peace. And, simultaneously, she wants to bring light to the world.

***

For several years, Phan lived a life many only dream of. As the first Vietnamese beauty spokesperson for Lancôme, she traveled the world, wore designer clothing and makeup and met with the biggest names in the industry.

How Michelle Phan Built a $500 Million Beauty Empire
JEFF KATZ

But the grind wore her down. Phan split time living between Los Angeles and New York. She never took a day off, often only sleeping five hours a night because outside of her duties with Lancôme, she was still creating videos on her own and constantly dreaming up the next big idea.

Related: How to Turn Your Ideas Into Action

And then in 2015 she burned out. It wasn’t obvious. There weren’t any signs of a breakdown, no Twitter rant or dramatic Facebook meltdown. Phan simply decided it was time to step back, take a deep breath and re-evaluate why she was doing all of this. She calls it her Year of Deconstruction.

“I was always sad and crying and I didn’t know why,” Phan says. “I took a quiz online and I answered everything honestly and when I saw the result, it said, ‘You’re severely depressed.’ ”

She began traveling, but with a different destination in mind: to restore balance and peace. She began meditating, spending time in nature and visiting the places she used to love reading about, such as the Egyptian pyramids. She traveled where her phone wouldn’t work because that’s the only way she could truly get away.

“In a way, I kind of felt like I woke up from the Matrix,” Phan says. “Knowing that gave me the power to have the direction and clarity to take back the freedom and liberty of my life, and re-navigate it back to where I wanted it to be.”

Phan doesn’t make videos anymore. It’s been almost a year since the last one was uploaded to the Michelle Phan YouTube channel. It might not be forever, she says. But she’s been creating content for more than a decade. It’s time to think bigger. It’s time to look to the future and help others find their own niche. She still has the laptop, though. And the three versions of that first video from 10 years ago.

“I’ll never get rid of [the laptop],” she says. She calls it “The Brick,” a reminder of where she was and what it took to get here.

These days, Phan’s life is still busy but more balanced. She never used to have days off, incessantly fixated on planning to hit the next benchmark, the next rung of the ladder. It wasn’t until she began listening to her body that she found peace. Now she conducts regular progress reports with herself. For once, Phan needed to be her own superhero.

“You can’t really save other people. But you can save yourself and set an example for people to do the same. Be the best influence by being the best version of yourself.”

***

Phan is a surprising person. The petite, soft-spoken 30-year-old commands a room with a calm presence. She’s opinionated on politics and feminism (she’s not a feminist or even a humanist—because what about the animals?) and believes success should be measured by how often you can wear sweatpants to work. She’s calm, purposeful and talks about her ideas in flow, as if she’s always known her purpose.

“I want to empower everyone. I want to be inclusive to everyone who wants to solve a problem they see in society or an industry…. When you bring people along with you on your journey, you can share many paths and you can hop over and see a different point of view, and it just gives you a bigger perspective on where you want to go.”

How Michelle Phan Built a $500 Million Beauty Empire
JEFF KATZ

Before I met her, I imagined Phan never leaving the house without the perfect pair of heels and flawless makeup, but she really doesn’t wear makeup unless she needs to. She likes makeup, sure, but she’s just as comfortable going out bare-faced in running shoes and gym clothes.

“If I had focused on just one or two things, I probably would’ve been less burnt out, happier and less stressed,” she says quietly. “But I had to go through all the trials so that I can come back and tell people what I’ve learned.” She thinks of the depressed period the same way she thinks about those long days in the nail salon growing up. “These trials forge me into who I am today.”

After meeting Phan, it isn’t difficult to imagine her as an archaeologist, or a teacher, or the co-founder of a multimillion-dollar beauty company. She can do anything she wants, and that’s how she’s always lived her life. But it took a burnout to find the balance necessary to be happy while chasing her dreams.

How Michelle Phan Built a $500 Million Beauty Empire
JEFF KATZ

“I came from an immigrant family who didn’t have anything,” Phan says. “I became successful through the American dream and I still wasn’t happy. What made me happy was finding peace and knowledge and that’s something that anyone can have. And everyone should have access to that.”

***

The ipsy Open Studios space is like the cool big sister’s room that you’re never allowed to play in. One wall is lined with enough bottles of nail polish to stock at least three salons. Secretive gray filing cabinets line another wall and hold ideas for future Glam Bags—the monthly personalized subscription beauty bags. There are bins and boxes and drawers stuffed with makeup, racks of clothes you aren’t cool enough to buy but would love to wear, and walls filled with magazine cutouts, color cards and inspirational quotes.

Phan says the place is a “tribute to my younger self, the girl looking for samples in the pages of a magazine and buying other people’s unwanted products.”

Phan would have been perfectly happy living off the revenue from 1.5 million Glam Bags shipped each month. She could have continued traveling the world, living the peaceful life. But she has a vision for the future economy and it starts by creating a generation of what she calls “self-producers.”

“We offer free education to beauty influencers who want to get started but don’t really know how,” She says. “The more people that you have who are self-producers, the more chance they have of creating a business that provides meaningful jobs for more people.”

If her “teach a man to fish” philosophy seems overly generous, it’s because Phan believes in a form of karma: What you put into the universe, you get back. But she’s also a businesswoman and knows the digital age ushers in a wealth of opportunity. She believes not only in creating new jobs, but creating meaningful careers.

“I became successful, but I’m just one person,” Phan says. “Imagine if I can activate more people to see their inner potential?”

Related: 4 Changes You Can Make to Reach Your Full Potential

Ipsy was Phan’s niche, and her most successful business venture to date. The monthly beauty bag with “deluxe-sized” samples of makeup, hair, nail and skin products costs subscribers $10 for five personalized items chosen using a complex algorithm that matches products with personality and physical attributes.

The subscription concept is hardly new. Ipsy entered the scene competing against established brands such as Birchbox. But Phan didn’t just want to sell a monthly goody bag of sample-sized makeup. She wanted to build trust and a relationship with her fans. She employs beauty influencers to create personalized, exclusive tutorials to show users how to apply that month’s products. It’s more than a service; it’s a community.

“We need to be a country that produces again. It doesn’t necessarily need to be in Silicon Valley or Wall Street anymore; it could be everywhere in America because you have great minds everywhere.”

Even in a crowded market, Phan carved out a trust-building niche for ipsy, raising $100 million in a single round of funding in 2015, having previously raised only $3 million, while Birchbox has raised a total of $71 million over multiple rounds of funding.

“I see a shift. Everything has changed. It was all about beauty editors five or six years ago,” she says. “Today we don’t have beauty authorities; we have a beauty community.”

***

When we talk about the future, Phan’s face is earnest, her dark eyes intense. She isn’t chasing a dream anymore. She’s already achieved her dreams. This is different. This is her job, her mission. She calls it her Year of Light.

“There is so much darkness here that I want to be the light, and I want to inspire other people to be the light,” Phan says.

I ask her what that really means, assuming I’m going to hear about the legacy she wants to leave behind for future generations. But Phan doesn’t care about legacy. To her, a true legacy is the impact you have on the world. You’re remembered not for the things you created, but for the opportunities you created for others, for the lives you touched.

“You don’t really think about Steve Jobs when you turn on your iPhone or think about Thomas Edison every time you flip on your light switch.”

This is why she opens the doors to the ipsy Open Studios. She doesn’t charge for the camera equipment, the overhead costs or the snacks in the kitchen. She works one-on-one with beauty influencers who are trying to make their own mark on the world and have their own stories to tell.

“I’m disrupting beauty, but there are other spaces out there that need major disruption. We’re just at the beginning of all this disruption because now people are seeing that they don’t necessarily have to follow the standard paradigm that’s been set for them.”

But it’s bigger than that. ipsy, like YouTube, was just a means to an end. She’s always looking at the bigger picture. She wants to help others see the big picture.

“Look what I was able to build. And I’m just one person,” Phan says. “Imagine if more people followed their calling. We are all called every day, but don’t all answer.”

Phan starts talking about a new ecosystem with the same intensity as her story about the pyramids. She spent weeks in China studying its economy and now she’s talking about the future of ipsy—retail—but it’s not e-commerce and it’s not brick-and-mortar shops. It’s something of a hybrid between commerce and social commerce.

How Michelle Phan Built a $500 Million Beauty Empire
JEFF KATZ

“[Ipsy] was a way for us to build trust and show the people who subscribed to us that we bring value to their lives.”

She wants to hasten a world where people create their own futures. Where they not only work for themselves, but within an interdependent community. Where everyone has their own niche space, where niche no longer means small, just different. It sounds magical, but she says we’re already on our way there.

“Life is like a blank canvas,” Phan says. Her eyes are sparkling but she doesn’t give too much away. “What you put on the canvas is up to you.”

Related: 5 Steps to Achieve the Life You’ve Always Dreamed Of

 

This article originally appeared in the May 2017 issue of SUCCESS magazine.

 

CLOTHING CREDITS: Blue Business Casual Look: Navy Blair Blazer (Reiko), Party at the Back Top (Dyspnea), Boyfriend Charlotte Jeans (BROCKENBOW), wedge heels (Finders Keepers); Green Jacket Santa Monica Look: gold earrings (Vintage), 3 Zoe Ring Set (BYCHARI), Meal L/S Jacket (Noisy May), Kite-back button-down shirt (Silence + Noise), Salem Obi Belt (Raven and Lily), Reina Jeans (BROCKENBOW), Maribela—Huma Blanco Sunglasses (Thrifted); Blue Blazer Santa Monica Look: Party at the Back Top (Dyspnea), The Reina Jeans (BROCKENBOW), Eliza Blazer (Raven and Lily), Maribela—Huma Blanco

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