Your face is his fortune

By Vikram Barhat | June 4, 2013 | Last updated on June 4, 2013
5 min read

Beauty may only be skin deep, but for Parham Aarabi, 36, it’s a multimillion-dollar business. His software lets users see the results of cosmetic corrections without the pain of the procedure.

His company, ModiFace, makes more than 80 mobile apps that provide customized makeup and hair simulations. The most popular include MakeUp, Virtual Dentist and Face-Lift.

Aarabi, the firm’s founder and CEO, counts L’Oreal, Marie Claire, Cosmopolitan, Vogue, NBC and Verizon among his clients.

The tech venture started in 2006 and was based on the web. But in 2008, after the launch of the iPhone, Aarabi realized smartphones were the ideal vehicles.

“The iPhone was a great device because it had a camera and a screen; so it made perfect sense for us to enter the mobile app market,” he says. “We were among the first in the beauty space in Apple’s App Store in 2009.”

Aarabi’s love of technology goes farther back.

He was only 24 when he got his Ph.D. in electrical engineering from Stanford University in 2001. Later that same year, the University of Toronto hired him, and he still teaches electrical and computer engineering there.

His critical acclaim, like his commercial success, grew across Canada and south of the border. In 2005, the MIT Technology Review named Aarabi one of the world’s top innovators under age 35.

Referrals are great, cold calling is not. I’d consider an advisor substantially more if she came to me through a referral.

Even as a student, he eschewed an ordinary life.

“When I was an undergrad, I worked two jobs and saved all my money,” he says. “Since [childhood I’ve known] that if you save you can do many things with money.” Plus, “All my schooling was based on scholarships, so I didn’t have any school debt,” he says. “And as soon as I graduated, I [got] a faculty position at the University of Toronto.”

That let him sock away $100,000 while still doing his master’s. However, the 1999 tech crash separated him from his hard-earned wealth. “I’d started investing in stocks without doing due diligence and all those savings were wiped out. Now, when I invest in anything, I dig deep into the company to understand its financials and its market.”

On how he made money

Before the 2008 crash, my investment focus was Canadian housing. Then, I bought U.S. real estate after the collapse. I now have properties both in the U.S. and Toronto.

Given my involvement in technology, I mostly invest in tech startups. Because these are mostly seed-stage investments, the returns or losses will show themselves in the next two-to-five years.

Licensing patents also paid rich dividends. Patents, which can be registered at an average cost of $20,000, have been a good choice for us. I tend to be on the more aggressive side when it comes to seeking patent protection.

When you patent an idea, you can license or sell it to a different company. The average patent sale fetches around $500,000. Currently I have two issued patents and 13 pending. Ten of those are related to ModiFace, including both issued patents, and the other three are part of future ventures.

Since its inception in 2006, ModiFace has grown at between 50% and 70% per year. Today, it employs 33 people in Toronto and New York City.

Creating ModiFace

ModiFace’s success was built on two previous ventures that were commercially unsuccessful. My first business venture in 2000 was a collaboration with three other students at Stanford. It was a facial recognition startup. We’d analyze people’s faces and recommend cosmetics and makeup.

But each of us had personal goals. Mine, being away from my family, was to return home to Toronto and obtain a faculty position. To do that, I had to focus mostly on research and publications. So things fizzled out.

The second venture in 2003 was much bigger, with more money riding on it. It was based on a technology that combined images from multiple surveillance cameras and made a 3-D representation of the entire space. It failed because it provided a solution to a problem that didn’t yet exist. Our target market perceived it as gimmicky, not game-changing.

Personal net worth

  • Four real estate investments, each worth a bit less than $1 million
  • Stakes in tech startups worth between $20 million and $50 million
  • Negligible cash, stocks

I consider the current environment safe, so my focus is on the riskier bets, which are tech startups. I choose companies I know well.

I have a majority stake in ModiFace. To [determine my worth], look at sales of similar companies. That gives us two numbers. One is a company that was competitively put out of business; it sold for $15 million. That number is smaller than ours. Another competitor was recently valued at $65 million.

On seeking advice

I’ve worked with a business advisor since the day I launched my first company. I wanted someone with a background in corporate affairs, legal and finance. Because he’s always been able to answer my questions, over the years my dependence on his knowledge has grown exponentially.

For our second venture, we worked with a few advisors, including one who was either very nice or not very vocal. I wanted him to say, “This idea looks great, but where’s the business in all this? How are you going to make money?” Those two questions would have avoided a lot of pain; honest feedback helps people make sound business decisions.

Good teacher

Has won lecturing awards, including one from the Institute of Electrical and Electronics Engineers in 2004. Later, the Ontario government awarded him the 2007 Premier’s Catalyst Award for Innovation, a $200,000 prize for young innovators.

Origin story

Born in Tehran, Iran. He was only five when his parents, both civil engineers, left Iran to escape the effects of war. Came to Canada via Japan and Switzerland at age 11.

Lessons learned

“A business must be rooted in consumer interest rather than just cool technology. Also, get customer feedback early in the process and use that insight to adapt, improve and update.”

I get template emails from advisors every day. They don’t work. I’d react to a simple note explaining what they do better than other advisors.

I also have a personal advisor. The more I discussed things with her, the more I began to rely on her expertise. It helped that the relationship started with the two of us making joint investments in real estate. Someone who advises without personal risk is more difficult to trust than someone who’s personally vested.

Neither of my current advisors is too pushy. Even when there’s a difference of opinion, they show me options and their likely outcomes and leave the decision to me. It’s a passive approach, but tends to work really well.

During stormy stock market conditions, it’s better if the advisor is calm. I’m proactive and if there are two people jumping up and down, the end result won’t be good.

I appreciate listening skills, experience and a sense of composure. I tend to be a risk taker, and I need someone to rein me in.

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Vikram Barhat