Among direct-to-consumer brands, there’s a lot of talk of technology stacks or all the different tools used to run e-commerce and digital consumer interactions, but financial stacks or all the different mechanisms brands depend on to fund their businesses from revenue-based e-commerce financing options to personal savings are as or more important than tech stacks.
To provide an understanding of how brands assemble their financial stacks, for the latest edition of our ongoing series posing questions relevant to indie beauty, we asked 23 beauty entrepreneurs the following questions: What different ways have you funded your business? Is there anything you would change about how you’ve put together funding if you could?
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Nadine Joseph Founder, Peak and Valley I didn't fully grasp how cash-heavy running a CPG business would be when I first got started. As Peak and Valley has grown, we've utilized different ways to fund the company.
Early on, I opted to grow the company without bringing on outside investors. The main source of funding for our growth has been from grants. Peak and Valley has been awarded over $200,000 in grants over the lifetime of the business, whether through accelerator programs, pitch competitions or standard grants with coaching.
Earlier on, I also relied on my family to fund some of our inventory as we grew in retail, amounting to roughly $100,000 in loans broken up over a few years. Then, once we got bigger, I started working with a PO financing firm to finance over $150,000 in inventory.
A huge breakthrough was working with Daintree Capital, which provides loans to underrepresented early-stage founders. Peak and Valley has received three loans from Daintree, amounting to about $150,000. Of all the loan companies I've worked with, Daintree has been the best. You can learn more about them here, and sign up here.
Cash flow is the lifeblood of a CPG business and one tool that's been particularly helpful has been Cash Flow Frog, a cashflow planning software. If you're like me and planning your cash flow on a spreadsheet isn't ideal, then you might want to check out this app. It has made cash flow planning a breeze, and I log in every week to update our numbers to make sure we're all set.
- Benjamin Feys Co-Founder, PrettyBoy
Kevin [Niehoff] and I have entirely self-funded PrettyBoy ($250,000 investment from both), which is one of our strongest advantages. This has allowed us to stay highly focused on the organic development of the brand, messaging and value proposition without dealing with the external pressures of any institutionalized venture capital money or the risk of damaged relationships from taking friends and family money.
Although we were cash-strapped for a long time, our primary issue was profitable acquisition. Over the holidays and the beginning of this year, we have cracked that code, which has generated positive cash flow in the business.
That said, as is the case for most businesses at our stage, cash flow management is our biggest inhibitor. At any given point, we have $ 100,000 to $200,000 tied up in inventory, which restricts our ability to grow the company. It is ridiculously difficult at our stage to be profitable enough for sales to fund operations and inventory strictly out of cash.
To address this, we've recently started sourcing financing offers from some of the e-commerce-focused lenders in the space (WayFlyer, Uncapped, Ampla, etc.) to get a working capital growth line of credit or loan to keep inventory moving at a pace that supports our current growth without restricting our cash too much.
We're currently looking at offers in the range of $200,000 to $400,000, which would completely satisfy our inventory needs for the foreseeable future.
As I mentioned, our biggest advantage is our self-funding of the business. The only caveat is that there would probably be a decent case to be made for exploring a working capital friends and family round at some point in the past, but that would have required either equity or a better-than-market average return rate committed to our investors.
The world of VC has dried up, and DTC companies are different from the dream children they used to be. The focus is on operational excellence, predictable growth and incremental profit.
Our approach allowed us to focus on these things instead of being strictly top-line sales-driven, which, if not managed, can catch up to you quickly. It is also a way more stressful way of running a business.
- Tami Blake Founder, Free + True Skincare
To start Free + True Skincare, I got a small business loan of $70,000 from Pacific Community Ventures, a small community-driven impact investor, and used about $30,000 from my savings. I paid the loan off in three years.
I would not change a thing as I assumed the type of debt that I was comfortable with. It is important to note that I also have a professional sugaring brand that had a positive cash flow to help stay afloat.
Most of the $70,000 went into brand development, packaging and the website. The other $30,000 went into R&D and marketing.
- Justin Seidenfeld Co-Founder and CEO, Canopy
Canopy got off the ground initially with capital from Doris Dev, the product design and development company that incubated our brand. We also took strategic investment from partners in the form of services (a branding agency, PR consultant, performance marketing agency) and angel investment from strategic operators, friends and family.
We tapped founders of operators and brands in our network such as the founders of Magic Spoon, Lalo, Status Audio, Great Jones, Fable Pets and others who were existing Doris Dev clients. Once we were officially in market, we leveraged revenue-based lenders to scale our working capital needs, including Settle, Wayflyer and Uncapped.
We've been working in consumer goods for 10-plus years and have seen plenty of pitfalls for hardware/brands raising too early in their lifecycle. Because of this, we have been very mindful about raising equity capital too early for the business. We have shied away from taking institutional capital in order to control as much of our destiny with regards to pace of growth (i.e., not getting forced into the equity capital treadmill).
- Ray Arias Founder, Yudoyu
We are a self-funded startup. We believed in the concept and spent some early dollars on idea testing and market research, then proceeded to speak with friendly VCs who we connected with via friends. We relied on these connections to share with us what they would need to see in terms of risks and opportunities for any investment.
We were very naive thinking that all you need was an original idea and money would flow in. Skincare and beauty are so crowded with new emerging brands entering the space in what seems like every day, so there is a lot of noise. We tweaked the investment pitch based on what we learned from our interviews and did some road VC roadshows as well as online pitch portals.
Short story is that we were not ready for investment, so we self-funded the product buildout stage, and now have a highly functioning site with a well-developed technology behind us lacking only the need for marketing dollars. This process took us two and a half years, and we misspent lots of money learning things.
Now, we are starting to search for marketing dollars with a much clearer story to tell investors. We will see what happens from here.
- Julie Longyear Founder, Blissoma
Blissoma was entirely funded through family and individual investment in the beginning, then debt and bootstrapping ourselves by reinvesting from what we sell. I've been extremely cautious of investors as I've seen too many situations over the years where investment money really changed the trajectory of a business.
We have used credit cards, PayPal Working Capital, an inventory secured line of credit with our business bank, equipment loans, Small Business Administration loans and loans from individuals to grow. Each year we put basically all our profits back into additional inventory and improvements.
I launched our skincare line in 2009 using a $25,000 SBA loan that I got due to former President Barack Obama's economic stimulation policies early in his presidency. Some debts have been less advantageous than others, but you do what you have to do to make progress.
I recommend keeping credit card debt to a minimum since the rates are usually pretty bad. Most of our credit cards we use primarily for very short-term debts and to build rewards like airline miles that we can use for sales trips.
We are finally at a point where we have enough collateral and history to be able to get loans with decent rates, which I feel is a real accomplishment. About 17 years ago I could not get a bank loan at all, so it feels like arriving to be taken seriously by banks now. I had two competing to give me credit recently!
- Kimberly Currie Dunn Founder, Oui Beauty
Initially, I kickstarted my product line with a $10,000 inheritance from my late father. However, as that sum quickly dwindled, I made the decision to establish a small spa in order to generate funds for my product venture. Fortunately, a friend of mine graciously offered me 250 square feet of space within her boutique to set up the spa.
To finance the spa's launch, I utilized $2,000 from my personal savings and charged $8,000 to my credit card. American Express was kind enough to extend my first business credit card, which I utilized for regular ordering and to facilitate growth once I got the ball rolling.
As my spa and product line began to flourish, I relied on the spa's profitability and also took advantage of small loans offered through my point of sale (POS) system. However, I firmly believe that, at some point, every business requires substantial funding to break through to the next level.
Consequently, I have explored various funding options and even pitched my ideas to potential investors. Through this process, I have learned that regardless of whether you secure a large loan or investment, budgeting for business expansion is absolutely crucial.
Unless you are completely satisfied with the current state of your business, it is imperative to budget for growth rather than solely focusing on present-day expenses. Building your dream and achieving your desired salary takes a lot more time and money than most entrepreneurs expect.
- Matt Mullenax Co-Founder and CEO, Huron
While the “finance” stack receives less fanfare, it's the most important infrastructural pillar for any brand. At Huron, we've used both traditional and creative measures to fund the business. My co-founder Matt and I both invested in the business in its early days. We've also raised from angels, family offices and venture capital firms. The common thread: alignment in vision across all stakeholders.
In addition, we have partnered with non-dilutive financial partners—Settle and Wayflyer, to name a few—to help accelerate growth initiatives and manage working capital. Early-stage teams must have an understanding of the terms of these deals, but if it works for your business, it's a great way to scale your company without incurring dilution associated with an outside capital raise.
- Chantal Tremblay Founder, Denéva Skincare
At Denéva Skincare, we have taken a bootstrapping approach to our financing. We fund each step of our growth from a combination of personal savings, credit cards, and lines of credit. We reinvested the profits from phase one into phase two and continue the journey.
In phase one, the research and development phase, we funded the raw ingredients, materials and equipment costs from our savings. In phase two, our proof of concept and refinement phase, we added funding from our credit cards and lines of credit.
In phase three, we partnered with a manufacturer who could produce our products at scale. Our funding for this phase was primarily from lines of credit. In phase four, where we are now, with our e-commerce platform, upcoming retail partners and an additional product line in the research and development phase, we have been able to start reinvesting our profits back into the company. This has allowed us to take the next step and start growing at an increased pace. We have also been able to start paying back a larger portion of our upfront capital investments.
In phase five, we will be working on a crowdfunding campaign, building strategic partnerships with non-competing companies and beginning exploratory talks with potential silent partners who are interested in impact funding and aligning with our corporate culture and vision.
If I was starting over from scratch again, I’d like to win a lottery and have unlimited funding LOL. Seriously, I would meet with my lending institutions earlier and request higher lines of credit to allow me to build the business faster with less funding-based restrictions.
In our next phase, we’ll be looking at alternative funding options as I mentioned previously. The nice thing about this phase is I have colleagues who have been there and done that and have plenty of stories to tell.
One colleague was on the “Dragons' Den” and partnered with one of the dragons who brought the money to the table, but also an overbearing personality, demands that did not align with her company and a focus on only the bottom line and not the well-being of her company.
Another colleague borrowed very expensive money, another one sold part of her company to an investor who did not share her vision, and all of them had experiences that I do not want to duplicate.
Although I don’t have any personal funding horror stories to share, I have a fantastic network of colleagues who have experiences that I can learn from, and I am happy to listen to their advice.
- Lin Chen Founder, Pink Moon
I initially self-funded Pink Moon and used internal capital/profits to grow the business. After one and a half years, I sought outside funding from friends, family and angels. From there, I was selected to receive Visa’s She’s Next grant. I didn’t apply for this one, it came as a surprise!
Since then, I’ve applied for various grants—was awarded Tory Burch Foundation X Fearless Fund recently—business loans from Shopify Capital and PayPal, and have personally loaned the company funds.
I learned that there are various ways to fund a business that doesn’t include venture capital. It’s not the right path for every founder, and it’s very glamorized. You can grow the company at your own pace and focus on profitability rather than accelerated growth.
- Nikki Huebner Founder, Endure Beauty, EndureLash and Endure Productive
Endure LLC, which houses the beauty brands-EndureLash (PRO lash extension supplies, retail lashes and lash aftercare) as well as EndureBeauty (organic facial skincare and under-eye gel masks) was originally and predominantly funded by my parents, Dennis and Susie Marion.
Alongside the family personal loan, the brand survived on funds from another company that I own, Endure Productive LLC, a 3PL fulfillment company. This company still provides all e-commerce drop-ship, kitting, packaging and distribution services for the two Endure Beauty brands today.
However, I partner and work with many and all types of brands at Endure Productive LLC in areas of big-box retail, QVC/HSN, global e-commerce and many types of domestic and international sales platforms.
Other funding avenues of funding were the dreaded credit cards, Small Business Administration pandemic loans, Employee Retention Tax Credit (ERCT) refunds and Paycheck Protection Program (PPP) loans for staffing. With the initial launch of the Endure Brands being just two and a half years pre-pandemic, funding became tricky for sure. The pandemic packages were a huge help in such uncertain times.
Currently, the brand is moving towards securing investors this year to scale at a much more rapid pace. EndureBeauty is honored to have this potential opportunity for 2024, but a ton of work is still yet to take place.
I do sometimes wish that I had investigated more of the capital options such as Shopify Capital and angel investors earlier on, but I also believe that everything happens in its own time, and I am extremely excited about the short-term future of the Endure Brands!
I have learned to always read the fine print as it pertains to any loan and to always have a great financial person by your side, a CFO/bookkeeper, because it is easy to tug at the purse strings and head down a financial disaster fast. I am speaking from personal experience, unfortunately! I feel like every entrepreneur has a risky personality, me included, and my financial success really started happening when my CFO, Betsy, would tell me “No!”
- Purvi Desai Founder, Zaaina
We have mainly relied on our savings in terms of startup investment and funding the business. As our business started to grow rapidly, we had to invest a lot into inventory to get ready for holidays (Thanksgiving/Christmas) and major gifting events like Mother's Day and Father's Day.
With our business growth in some instances, we were investing greater than $250,000 into raw materials and inventory upfront to prepare for the holiday season. Our return on investment takes much longer, and we have to ensure that we balance our production versus sales so we don't overproduce or keep the money on the table. Substantial funds being tied up puts stress on other investments and delays some of our decision-making for new products.
As a learning, we are exploring various avenues like private equity funding/angel funding to sustain our growth. We are also looking into bank loans/Shopify Capital, but the current rate environment is a challenge.
- Marisa Martino Co-Founder, Skinney Medspa + Wellness
When Adriana and I founded Skinney in 2010, we didn’t know that we would grow it to where it is today! We’ve always had big dreams, but we started one day at a time in one room in a doctors’ office renting space and putting marketing expenses on a Gold business American Express card. We quickly grew each year and continue to grow!
Along the way, we’ve learned a few tips:
1). Always have a good relationship with the building bank you bank with. This is essential for business credit lines and equipment loans.
2). Try to hold 100% of equity. This ensures you to do what you want without answering to anyone and grow at the pace you can keep up with.
3). Use internal financing with companies such as GE Capital (care credit) and Alpheon. They are great tools to pay as you grow.
I never look back, I always look ahead. Any mistakes are lessons you need to learn on your own. Growing my product line has been slower than I want. I use my own capital to grow it. I think looking back I would have chosen to partner with a larger skincare brand to utilize their contacts and well as company structure.
- Shreya Aggarwal Founder, Caftari
I’ve funded my business through private investors. I would consider diversifying your sources beyond private investors to mitigate risks and enhance flexibility.
Ensure thorough due diligence on investors to align with your company's vision and values. Prioritize clear communication, strategic partnerships and continuous learning to optimize your funding strategy for long-term success.
- Aishetu Fatima Dozie Founder, Bossy Cosmetics
Growing a CPG business takes a lot of capital to get right, and we are still on that journey. I’ve raised around $1.5 million from angel investors, many of whom are friends and family. Some of the smallest checks were $2,000, so you can imagine how many people I had to pitch to! My husband and I have also invested a big part of our savings in the company.
During the pandemic, we were able to access funds from the Small Business Administration, which we have paid back. We also got a revolving credit line from American Express, which was super easy to obtain and service. We are exploring a term loan with Community Development Financial Institutions (CDFI) now in the amount of $250,000 that will pay for working capital needs.
Your cash conversion cycle is your biggest bottleneck to running a beauty business. You have to pay a lot of money upfront, sometimes nine months ahead, before you get paid on a Net 30 to 90 basis. It ties up capital and having a revolving credit line can help you manage that process.
I have to say that our No. 1 capital source has been our customers though! They love our products, and they’ve kept us afloat.
I also got a $20,000 grant from Fearless Fund Foundation, which is now under attack for their focus on providing access to capital to women of color entrepreneurs. It’s been really hard navigating growing a small business and finding creative ways to fund it, but we are dogged and determined!
- Jacqueline Carrington Founder and CEO, People of Color
There's been a handful of ways I've funded People of Color since launching. I initially funded the launch from my last check at work prior to going on maternity leave believe it or not!
Since then, I've had to raise funds from family and friends when we first went into major retail with Urban Outfitters and Kohl's. Both retail launches were happening at the same time, and I had just started with a larger manufacturer and needed to fund the purchase orders (POs) myself as I worked to build a trustworthy relationship with them.
Discover and Capital One credit cards were also handy during harder times to help with working capital for everyday business needs like shipping materials, office supplies and smaller inventory orders.
As time progressed, we visited funding options like ClearCo and eventually qualified for Shopify Capital, which we've used twice without issue.
Thankfully, we've also been accepted into a handful of accelerator programs that also provided grant funding such as Goldman Sachs One Million Black Women: Black in Business, Visa She's Next Program and the Square Forward. Each of these provided educational/mentorship programming and a grant ranging from $2,000 to $20,000.
I wouldn't change anything about the way I've put together funding for People of Color because each level and way of funding has been a learning experience. It's pushed me out of my comfort zone and has helped prepare me to explore more options as the brand grows.
The only thing I would change with the knowledge I have now would be to have more funds available during the launching phase since just having money for the product itself isn't enough to properly launch, market and grow.
- Jessica Jade Founder, SunKiss Organics
As an organic skincare line, SunKiss Organics' funding journey has been a blend of strategic choices that align with our commitment to sustainability and ethical business practices. Here are the various ways I've funded the business:
1). Personal savings: A significant portion of our capital, around $60,000, came from my savings as the founder of SunKissOrganics, reflecting my dedication and commitment to the brand.
2). Friends and family: We received loans from close circles who believed in our mission and wanted to contribute to the growth of our organic skincare line. Their financial support amounted to $10,000.
3). Grants: We actively sought and secured grants from organizations supporting women and Black-owned businesses such as the Facebook Black Owned Small Business Grant amounting to $10,000.
4). Crowdfunding: We engaged in a crowdfunding campaign when we relaunched our brand to involve our community in our journey, allowing them to be a part of our mission while contributing $5,000 to our growth.
5). Partnerships with financiers: We secured additional funding by collaborating with financial players such as Accompany Capital and the Hebrew Free Loan Society, which provided us with $20,000 in loans at a 0% interest.
6). Government support: We explored and obtained $10,000 in support from government relief programs for small businesses during the COVID-19 pandemic.
7). Revenue-based financing: We considered revenue-based financing to align our growth with actual sales, ensuring a sustainable and responsible approach to scaling our operations. We acquired two loans amounting to $8,000 over three years from Stripe at a 19% interest rate.
If given the chance to revisit our funding strategy, we might have explored additional partnerships with environmental organizations to further enhance our credibility and support our commitment to transparency.
One crucial lesson we've learned is the importance of maintaining the integrity of our brand throughout the funding process. Choosing investors and partners who share our values has not only provided financial support, but has also strengthened our mission to provide organic and sustainable skincare solutions made in the U.S.A. at woman- and Black-owned facilities.
It's essential to stay true to our principles while navigating the complex landscape of funding opportunities.
- Katie Roering Co-Founder and CEO, Fontana Candle Company
In 2018, my husband and I founded Fontana Candle Company. Initially, it was just a hobby, and we self-funded the venture.
As we had other jobs at the time, we didn't need to draw any money from the business or take a salary. Instead, we reinvested all our earnings to fuel our growth. Personally, we have invested approximately $100,000 into Fontana.
By 2023, both of us had transitioned to working full-time for the business. We were now taking salaries and had expanded our team to 11 employees. However, we faced the challenge of seasonal fluctuations inherent in the candle industry. To overcome this, we sought additional funds to weather the ups and downs.
Starting in October 2023, we began securing rounds of funding from Shopify Capital. In total, we have received five rounds of funding, amounting to $474,000. Additionally, we obtained a loan of $73,000 from PayPal and received $50,000 in loans from family members. We have tried to obtain lines of credit from banks and have been extremely frustrated with both the process and the assets needed to secure funds.
Shopify Capital has been convenient, and they truly understand the e-commerce space, so we do not need to prove assets or place our home on the loan as collateral as banks are requesting us to do. Shopify Capital has been really helpful with short-term financing for items like inventory as you need to be able to get your money out with a return in a relatively short period of time.
Now, we are looking for longer term options that allow us to invest in slower return investments like equipment and certain marketing initiatives.
- Khadidja Toure Founder, Kubra Kay Skincare
I have funded my business through my savings and my mom. With my personal savings of $150,000 and $50,000 from my mom. I have wanted to explore other options, but have continued to forge forward with my personal finances.
If I could change anything, I would have saved more before launching the brand, even if it had taken me a few more years to launch. I underestimated the amount required for a really robust marketing execution.
If I was, for some reason, unable to save more, I would have liked to have raised some money before launching, especially if it was with an investor who would have guided some of the earlier marketing and retail/boutique store allocation efforts.
- Monica Watson Founder and CEO, Berlin Skin
We are seven and a half years in and haven't taken any traditional investment funding on purpose. While I think there is a time and place for taking on investment, we've chosen to grow Berlin Skin very organically and with a slower growth model.
My belief has always been that, if our products are amazing, people will tell their friends about them, and it would snowball from there. Thankfully, this is what has happened, and we've been able to fund the growth from having loyal repeat customers and wholesale accounts.
However, cash is always a consideration, and we've gone several routes over the years when we needed capital to purchase inventory, invest in product development and more.
We've done 0% credit cards, Shopify Capital and QuickBooks Capital. With the latter two, even though there's some interest tied to these, I just view them as my "investors," which is way less stress than having to report to an actual human.
There may be a moment where we choose to take on investors, but right now we love the freedom that comes from calling all the shots.
- Whitney Swales Owner and Perfumer, Wit & West Perfumes
My husband and co-founder Rob and I spent several years planning and building our personal savings and investment strategy to launch Wit & West Perfumes, a Colorado-based, artisan all-natural perfume brand. Our goal was and continues to be to remain a 100% self-funded and independent perfume brand.
Being a business that is completely self-funded through personal savings isn’t necessarily an easy or fast route, nor is it a route that works for everyone. My path to entrepreneurship came after spending more than two decades in corporate finance and marketing leadership roles, providing me not only the runway needed to be self-funded, but also the business and strategy background to grow and run a business.
When we first launched Wit & West, I was still working a full-time corporate job and continued to do so for about one and a half years. For me, this transitional approach worked as it allowed us to slowly build our brand, learn from our mistakes and mitigate financial risk.
The Wit & West vision and ethos is centered around authenticity as an independent perfume brand that values perfumery as an art and creations that don’t smell like everything else.
The upside to being a self-funded, independent and artisan brand is that my husband and I have full control over that artistic vision and growth strategy for our brand. The downside to this strategy is that we have had to be more conservative in our approach, which has meant that our growth has been slower than we might like.
When you are self-funded, it is personal. We took some big swings initially with branding and PR agencies, and we learned from that experience about what works and what doesn’t work for us.
Now, our focus is on striking the right balance to ensure steady but sustainable growth. This sometimes means saying no to potential opportunities if we feel that something doesn’t align with our brand or if we feel that the investment is not worth the financial risk.
While conservative, this approach has proven successful for us as it has allowed us to see steady growth of 1X to 2X over the prior year for the last three years.
- Marisa Garcia Founder, Lux Skin Studio
This business was fully self-financed with zero loans, partners or other funding. During the pandemic, I decided to take a job outside the beauty industry. This allowed me to save $20,000 for capital, which I used to open my business. I have one business credit card I use to track my purchases for the company. I pay it off every 30 days to keep the balance as low as possible and maintain an excellent credit rating.
Lux Skin Studio opened in February 2022 as COVID-19 restrictions were lessening with two clients. My first year I saw over 250 clients and obtained my goal of making $100,000. I now no longer accept new clients and currently have a waitlist for those that would like to become new clients.
Looking back, I wouldn’t do anything differently regarding my financial plan. I stayed committed to my decision not to exceed my budget of $20,000 and put myself in debt. I also made sure to rent a workspace that was well within my projected monthly budget.
By continually paying myself a small income and reinvesting the majority of my earnings back into the company, I was able to curate a brand of professional-grade skincare products. Utilizing a direct connection with a formulator, I am able to obtain my products at a lower cost and receive a much higher ROI on my sales.
- Cherice Williams Founder, Blaq Luxury
Our company has primarily been self-funded through personal savings. We have never sought venture capital or outside funding. However, when we recently expanded from a 2,400-square-foot warehouse to an 8,400-square-foot warehouse, we did apply for and secure funding from Shopify Capital to help with inventory, machinery and furniture purchases.
I initially believed that bootstrapping my company without seeking funding was the correct approach. However, I later realized that applying for a loan could have taken my company to the next level.
My biggest lesson learned is to not wait until I am halfway through my savings or less to seek funding. This is when the process becomes more difficult, and potential lenders may not believe in your vision or what you are trying to accomplish. It is important to be proactive and apply for funding earlier in the process even if it’s not urgent at the time.
If you have a question you’d like Beauty Independent to ask beauty entrepreneurs, please send it to editor@beautyindependent.com.
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