Why buy any old product when you get one that's made just for you?

That's the premise of a growing breed of companies using technology to make better shampoos, makeup accessories, and perfume. Powered by advances in machine learning and industrial automation, they're now able to create customized grooming products formulated specifically for each individual customer.

The opportunity is large: Deloitte estimated in 2017 that the size of the prestige beauty market was $78 billion and growing, noting that "digital channels have become the primary arena for consumer decision making." Beauty is one of the few luxury categories with burgeoning demand.

One buzzy startup riding this wave is New York City-based Function of Beauty, founded in 2015. The company, which developed a hair quiz that has been taken 1.5 million times, has raised $12.2 million from venture capitalists, including Y Combinator and GGV Capital. Function of Beauty has general blueprints for its shampoos and conditioners, but the exact components in each bottle are determined by a customer's quiz responses, which provide information on texture and other hair traits. The company's ever-more-refined machine-learning algorithms factor in all the variables and concoct the most effective recipe.

Function of Beauty founder and CEO Zahir Dossa.
CREDIT: Courtesy Function of Beauty

Founder and CEO Zahir Dossa came up with the idea for Function of Beauty while pursuing his PhD in computer science at MIT. He then teamed up with engineer Joshua Maciejewski, also from MIT, and Hien Nguyen, a cosmetics chemist. Less than a week after beginning their discussions, the three formally started the company. Within half a year, they had started initial product testing and sales.

While most beauty companies contract with factories to do the final manufacturing, Function of Beauty is vertically integrated. Given that every product it ships is made for an individual consumer, the company was practically required to build and run its own labs. "There are no off-the-shelf components to really do what we're doing," according to Dossa. The process is "a logistical nightmare," he says half-jokingly. "It's not like we have a silver bullet, by any means."

No two bottles are alike.

The majority of Function of Beauty's 67 employees are focused on production, including 10 formulation specialists and their assistants, even though nearly the entire process is automated. Some aspects aren't worth automating yet, or still require a human touch, like making sure every package is beautifully assembled. But machines handle the final, delicate customization work.

"We come up with all the different blends and bases that a customer could possibly want or need in their formulations," Dossa says. "We source from 500 different ingredients that include most things you can imagine." A robotic system dispenses specific amounts of each component, using anywhere from 20 to 50 inputs per bottle. 

The company, which sells exclusively through its website, takes its promise of individualized formulas seriously: The chance of answering the 12-question hair quiz exactly the same as another person is 1 in 24 billion. But if it were to happen, the formulating algorithm is designed to randomly vary a component, even by a gram, so that no two bottles are identical.

Another benefit of Function of Beauty's approach is that it's able to constantly test formulas and then iterate based on customer feedback. The company is not designed to have perfectly consistent predefined product lines, so improvements can be launched immediately.

Dossa says he dislikes the traditional beauty approach of segmenting customers into different types--those looking for curl definition, or those looking for increased volume--because it ignores each person's unique needs. Function of Beauty usually focuses its marketing on its products rather than on people to avoid defining who and what is beautiful, because of the stereotypes and self-esteem problems that can create. Dossa calls conventional beauty-industry marketing imagery "super dangerous and even toxic to our society."

The real question around Function of Beauty is just how big the demand is for personalized products. Prestige beauty is a healthy market overall, but how much are people willing to pay for the promise of a unique formula? Currently, the brand's prices are roughly on par with what you'd find at a cosmetics retailer like Sephora or a department store. (Function of Beauty declined to share its financial metrics.)

The company also is facing a growing number of competitors. A new entrant called Prose, which has a similar concept, raised $5.2 million in late 2017. Joe Segel, founder of QVC, last year co-founded dual customized hair care brands: HairRx, aimed at middle-aged women, and Millennial-oriented Cloud 10. (Function of Beauty's customers mostly fall in the 18- to 34-year-old range.) "Customization in the beauty space is really something that is growing," says Ellen Langas, co-CEO of HairRx and Cloud 10.

Personal care products have long been considered relatively affordable luxuries. You may not be able to frequent a high-end salon or spa, but technology has made it possible to buy shampoo and conditioner mixed to satisfy your exact hair preferences. In fact, anyone can do it, if she's willing to spend $30 or more for a bottle. That is how Function of Beauty sees the future: A world of scalable uniqueness.