The Fall of Pheramor

Exclusive: Promising Houston-born DNA dating startup shuts down; founder shares story

Brittany Barreto founded the first nationwide DNA-based dating app, and she shares her story of its unexpected, and unavoidable, downfall. Photo courtesy of Pheramor

When Brittany Baretto was 18 years old and sitting in an undergraduate genetics seminar, she raised her hand. She asked, to her professor's point, if particular DNA trait differences between two people can result in attraction, could she, based on that logic, make a DNA-based dating tool. With that question, she set in motion a series of events.

These events included teaming up with Bin Huang to start a dating app, called Pheramor, that factored in user DNA; raising millions for the company; hiring a team from across the country; and signing up users in all 50 states. Though, Pheramor's hockey stick growth came to a sudden stop this year when Apple pulled the app from its store, and there was nothing the founders or their investors could do about it.

"They are gatekeepers in innovation," Barreto learned the hard way.

InnovationMap recently spoke with Barreto to discuss the rise and fall of Pheramor and lessons learned.

Launching the first nationwide DNA-based dating app

Barreto mulled over the idea for the company through college and through her genetics PhD program before starting the company in 2017.

"I actually formed the C-Corp the same month that Accenture put out its report on Houston needing more attention on its startups and innovation," she says. "I didn't know about that report. I was really lucky with Pheramor to ride the wave of Houston growing its startup community."

She went on to fundraise $1.3 million, and, at its height, Pheramor had 10 employees working out of WeWork in the Galleria. Pheramor was the first nationwide DNA-based dating app, and for that she will always be proud, Barreto says.

"We were growing something not necessarily unicorn status growth, but we were doing something really different," she says. "And we knew we were growing something valuable. At our peak, we had 250 downloads a day."

Venture capitalists were taking note, Barreto says, and she was on her way to closing another round — this time for $2.2 million.

Getting the call

In March, Barreto and Huang attended Enventure's bioventure pitch event, where, just three years prior, the duo had pitched and won thousands of dollars. It was a real turning point, Barreto remembers.

Earlier that day, they had seen some issues with Apple's app store and filed a service request. As she left the event, Barreto's phone rang, and it was an Apple representative explaining that the Pheramor app had been pulled from the store. New rules for the App Store had been set in place — rules that forbid dating apps from procuring DNA samples from users.

Once the DNA element was removed from the app, Pheramor would be allowed back on, Barreto was told.

"That was our differentiator," she says. "That was the thing that made us Pheramor."

For the next three weeks, Barreto called every app reviewer at Apple and challenged each "no" she got.

"I had that internal founder drive. I was like, 'No, I just need to talk to someone. I'm going to hustle around this.'"

Her request went to the very top, before receiving one final, inarguable "No."

Barreto knows why Apple instituted the new policy — biohackers are the newest cyber threat in the world. But she was being dragged through the ringer while watching her startup slowly slip away, and the anonymous Apple employees on the other end of the phone had no sympathy for her inner turmoil.

"It felt like they just kept reading a script," she says, adding that it was the most painful experience for her. "The insensitivity of the app review people was salt in the wound."

Throwing a Hail Mary

The Pheramor app was still live on Google, Barreto says, but with only 10 percent of the market, and data showing that Android users are historically non-buyers, she knew she had to pivot.

Huang and his team turned around an idea for a couples' compatibility test based on DNA, and WeHaveChemistry.com was born. Barreto tapped an acclaimed relationship expert, Laura Berman, as a strategic adviser. She made a deal with her board — if they could sell 100 of these kits in 60 days, they'll make new goals and keep the testing live.

Barreto says they sold some, but ultimately in June, after not meeting that goal, she suggested to the board the company should sell its assets, if possible, to help pay back her investors.

While the investors of Pheramor's $2.2 million round had pulled out at this point, Pheramor still had $100,000 in the bank. Barreto says she budgeted about $30,000 to legally close the company. At this point, she had laid off her staff, and it was down to the co-founders. Both got new jobs — Huang is now the head data scientist at Houston-based BrainCheck, and Barreto joined Capital Factory as its Houston-based venture associate.

Since Barreto was actively trying to sell the assets, she kept quiet about Pheramor's downfall. While she had some interest, ultimately, people told her the technology was too complicated or that they wouldn't buy unless Barreto came with the company.

"I realized that over the past two years, I had already been ad hoc coaching and mentoring founders and loving it," Barreto says. "Now, I was doing it and getting paid for it, on a bigger scale, and with more resources. I knew it was the journey I wanted to continue down."

Lessons thoroughly learned

Barreto's past six months have been a rollercoaster, to say the least. Losing Pheramor felt like an identity crisis for her.

"I was very personally involved with the brand," she says. "So when Pheramor was gone, it was like, 'Who am I?'"

She had to keep most of her inner turmoil hidden from the startup community, especially since she was trying to sell Pheramor's assets. She battled an eating disorder and lost chunks of her hair, all the while she felt like she had to keep a smile on her face.

"As a female founder, I felt so much pressure to win. It felt like stakes were higher for me," Barreto says. "I felt really nervous to let my insides show."

She did find a few entrepreneurs that helped to guide her with their own perspective and careers, and Barreto says she leaned on her lawyer, Nicole Moss, a Houston-area startup lawyer, to help talk her through things. One surprising confidant was one of her investors, Jack Gill.

Barreto remembers meeting with Gill and thinking she was about to have to apologize for losing a ton of his money, but instead, he hugged her and congratulated on her first failure — that Pheramor's demise made her a real entrepreneur.

"His pride was a big turning point for me. I realized, 'Wow, this is really a jumping off point,'" she says.

This, of course, was directly contrasted by other investor's extreme disappointment. In the end, Barreto paid back investors by about 5 percent. She also realized the difference of working with investors who are new to the process.

"I learned a lesson of taking money from people who are not experienced investors will cause you headaches along the way," she says.

What's next? Funding femtech.

These investor lessons learned are especially important to Barreto, who wants her next startup to be a venture fund focused on empowering the marginalized entrepreneurs — female founders, the LGBT community, minorities, etc.

"I want to be someone of influence for social good," she says. "This crazy idea I had for a dating app was just a way to propel me to becoming that person. I felt like it did that."

Flipping to the other side of the investor table is appealing to Barreto, because she feels like she's able to make more of an impact.

"What I learned from Pheramor is I put all my eggs in one basket, and something happened and all my eggs broke," she says. "As a VC, you put your eggs in lots of baskets. If I want to make big change, I can probably do that more effectively if I'm empowering 20 different companies instead of doing only one thing."

Her idea is to raise a femtech fund that invests in startups and entrepreneurs with products or services within women's health.

"For me, as long as you're working on a technology that improves women's health and wellness, I want to invest in you," she says.

It's taken her a long time to get to this point, but ultimately, Barreto has realized that she did everything she could do, and she's better for this journey — no matter how rough it is. More importantly to Barreto, she sees this as an opportunity to share her story of failure — though, she wishes there were a better word for it — so that other entrepreneurs don't feel so alone in the process. She hopes that Pheramor's legacy can fill that need.

"We need to get comfortable with failure and support each other in the journey," she says.

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Building Houston

 
 

Cheers Health has expanded its product line as it evolves as a wellness-focused brand. Photo courtesy of Cheers

Houston-based startup Cheers first got a wave of brand devotees after it was passed over by investors on Shark Tank in 2018. In the years since, Cheers secured an impressive investment, launched new products, and became a staple hangover cure for customers. When the COVID-19 pandemic disrupted businesses, the company rose to the occasion and experienced its first profitable year as drinking and wellness habits changed across America.

Cheers initially started its company under the name Thrive+ with a hangover-friendly pill that promised to minimize the not-so-fun side effects that come after a night out. The capsules support the liver by replacing lost vitamins, reduce GABAa rebound and lower the alcohol-induced acetaldehyde toxicity levels in the body. The company's legacy product complemented social calendars and nights on the town, providing next day relief.

With COVID-19 lockdowns and social distancing measures, the days of pub crawls and social events were numbered. Cheers founder Brooks Powell saw the massive behavior change in people consuming alcohol, and leaned into his vision of becoming more than just a hangover cure but an "alcohol-related health company," he says.

When the pandemic first hit, Powell and his team noticed an immediate dip in sales — a relatable story for businesses in the grips of COVID-19.

"There is a three day period where we went from having the best month in company history to the worst month in company history, over a 72 hour stretch," he remarks.

He soon called an emergency board meeting and rattled off worst-case "doomsday" scenarios, he says.

"Thankfully, we never had to do any of these strategies because, ultimately, the team was able to rally around the new positioning for the brand which was far more focused on alcohol-related health," he says.

"We found that a lot less people were getting hangovers during 2020, because generally when you binge drink, you tend to binge drink with other people," he explains.

He noticed that health became an important focus for people, some who began to drink less due to the lack of social gatherings. On the contrary, some consumers began to drink more to fill the idle time.

According to a JAMA Network report, there was a 54 percent increase in national sales of alcohol for the week stay-at-home orders began last March, as compared to the year prior.

"All of a sudden, you have all of these people who probably aren't binge drinking but they're just frequently consuming alcohol. Their drinks per week are shooting up, and they're worried about liver health," explains Powell.

Outside of day-after support, Cheers leaned into its long-term health products to help drinkers consume alcohol in a healthier way. Cheers Restore, a dissolvable powder consumers can mix into their water, rehydrates the body by optimizing sodium and glucose molecules.

For continued support, Cheers Protect is a daily supplement designed to increase glutathione — an antioxidant that plays a key role in liver detoxification — and support overall liver health. Cheers Protect, which was launched in 2019, became a focus for the company as they pivoted its brand strategy and marketing to accommodate consumer behavior.

"The Cheers brand is just trying to reflect the mission statement, which is bringing people together through promoting fun, responsible and health-conscious alcohol consumption," says Powell. "It fits with our vision statement, which is a world where everyone can enjoy alcohol throughout a long, healthy and happy lifetime,."

At the close of 2020, Cheers had generated $10.4 million in revenue and over $1.7m in profit — its first profitable year since launch.

During the brand's mission to stay afloat during the pandemic, the Cheers team was also laying the groundwork for its entry into the retail space. When Powell launched the company during his junior year at Princeton University, bringing Cheers to brick-and-mortar stores had always been a goal. He envisioned liquor and grocery stores where Cheers was sold next to alcohol as a complementary item. "It's like getting sunscreen before going to the beach, they kind of go hand in hand," he says.

"When we spoke with retailers, specifically bars and liquor stores, what we learned is that a lot of these places were hesitant to put pills near alcohol," he says. Wanting an attractive and accessible mode of alcohol-support, the Cheers team created the Cheers Restore beverage.

Utilizing the technology Cheers developed with Princeton University researchers, the Cheers Restore beverage incorporates the benefits of the pill in a liquid, sugar-free form. The company states that its in-vivo study found that the drink is up to 19 times more bioavailable than pure dihydromyricetin (DHM), a Japanese raisin tree extract found in Cheers products and other hangover-related cures.

"What we figured out is that if you combine DHM — our main ingredient — with something called capric acid, which is an extract from coconut oil, the bioavailability shoots way up," says Powell. He notes the unique taste profile and the "creaminess" capric acid provides. "Now you have this lightly carbonated, zero-sugar, lemon sherbert, essentially liver support, hangover beverage that tastes great in 12 ounces and can mix with alcohol," he explains.

The Cheers Restore beverage is already hitting the Houston-area, where its found a home on menus at Present Company. The company has also run promotions with Houston hangouts like Memorial Trail Ice House, Drift, and The Powder Keg.

Currently, the beverage is only available in retail capacity and cannot be ordered on the Cheers website. As Powell focuses on expanding Cheers Restore beverage presence in the region, he welcomes the idea of expanding nationally in the future to come. While eager customers await the drink's national availability, they can actively invest in Cheers through the company's recently-launched online public offering.

Though repivoting a company and launching a new product is exciting, the process did not come without its caveats and stressors. While Cheers profited as a business in 2020, the staff and its founder weren't immune to the struggles of COVID-19.

"I think 2020 was the first year that it really became real for me that Cheers is far more than just some sort of alcohol-related health brand and its products," says Powell. "Cheers is really its employees and everything that goes into being a successful, durable company that people essentially bet their careers on and their family's well-being on and so forth," he continues.

"It really does weigh on you in a different way that it's never weighed on you before," says Powell, describing the stress of the pandemic. The experience was "enlightening," he says, and he wants others to know it's not embarrassing to need help.

"There is no lack of great leaders out there that at long periods of their life they needed help in some way," he says. "For me that was 2020 and being in the grinder and feeling the stress of the unknown and all of that, but it could happen to anyone," he continues.

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