All Three Competing Brands Nab Prizes At BeautyX Capital’s Deal Appeal Competition
Everyone was a winner at Deal Appeal, the live pitch competition that served as the finale of Indie Beauty Media Group’s BeautyX Capital Summit last Tuesday.
Stylish and sustainable oral care brand Terra & Co. was the most decorated, chosen by two of the three investment committee members, L’Oréal group president of acquisitions Carol Hamilton and Castanea Partners managing director Janet Gurwitch, as the most desirable investment target. Palette producer Ace Beaute was favored by the third investment committee member, Elizabeth Edwards, founder and general partner of firm H Venture Partners. Women’s sexual wellness brand Quim claimed competition’s audience choice award.
The brand founders had 10 minutes to pitch to and field questions from the judges on the three-person investment committee. To prepare for Deal Appeal, the founders were each paired with a seasoned beauty finance professional. Ashleigh Barker, vice president at investment bank Michel Dyens, advised Quim founder Cyo Nystrom; Luc-Henry Rousselle, managing director at William Hood, counseled Ace Beaute’s Niye Aniekhan-Attang; and independent strategic growth advisor Nicole Massimi, a former Birchbox executive, coached Terra & Co. co-founder Azra Hajdarevic. Rousselle advised 2018’s Deal Appeal clean sweep winner, O’o Hawaii.
The information in the pitches included the amount the brands aim to raise, the purpose of the funding they’re looking for and whether they’ve raised capital previously. Quim, which makes CBD-infused lubes and vulva care oils, already raised $860,000 in seed funding on a $1 million goal through a simple agreement for future equity, known as a SAFE note, with participation Paul Rosen, founder of cannabis company Cronos. The majority of the funds are earmarked for salaries and operating expenses, with another 20% going towards marketing, research and development. Nystrom, who co-founded Quim with Rachel Washtien in October 2016, projected the brand will reach $163,000 in revenue this year and nearly $1 million next year. The increase is expected to be fueled by the brand’s direct-to-consumer channel and international expansion.
In the feedback portion of the competition, the judges lauded Nystrom for raising awareness about a consumer need that has long been underserved and is only recently being seen as viable white space by consumer goods investors. Nystrom pointed to deals like Procter & Gamble’s acquisition of organic period care company This is L. as a sign the overall feminine hygiene space is ripe for growth. The investors provided pointers on scaling the business.
“One of the things we look for when we invest is a $1,000 lifetime value of a customer,” says Edwards. “There are a lot of brands that don’t hit that. When we look at other brands in sexual wellness, This is L., Sustain, they have a lot of products on their platform that are adjacent, condoms [and] other things. I encourage you to look at your brand and product offering. If [your consumer is] coming to your site or shopping your brand for one particular need, she’s going to need other things, too.” Hamilton recommended Nystrom focus on a hero product and emphasize the medical community endorsements Quim has received.
During her pitch, Ace Beaute founder Aniekhan-Attang stressed her brand’s inclusivity and substantial social traction—the color cosmetics range boasts 207,000 Instagram followers. It is also expected to generate $5 million in revenue this year. Interested in drawing $3 million in funding, Aniekhan-Attang would put it toward product development, marketing, key hires and enlarging distribution. She’s keen to grow Ace Beaute’s subscription service partnerships, which have helped the brand acquire customers. When Ace Beaute’s Grandiose Palette was in a Boxy Charm collection last fall, Kim Kardashian shared a sponsored Instagram post featuring the product, causing a flurry of orders for the company.
“I’m looking for brands that put sustainability first. I admire very much that that’s the way you’ve approached a commodity category like oral care. It really separates you from the giants.”
Hamilton warned Aniekhan-Attang of challenges Ace Beaute will face as it expands. “I know a lot about eyeshadows,” said the longtime L’Oréal executive integral in the company’s acquisition of edgy color brand Urban Decay from her fellow Deal Appeal investment committee member, Gurwitch. “We’ve learned through promotional wars with Urban Decay and the saturation of the palette market that price is so important. You should think about [whether you] would you sell more [at a price point of] under $35. Do a price study. We’ve found that $40 is the top of the palette market, not for every single brand, but the market has become so price sensitive that your price-value relationship per pan is critical to keep evaluating to continue to grow.”
Edwards, who chose Ace Beaute as her winning brand, had a rosy perspective on Ace Beaute’s prospects. “The numbers don’t lie. The fact that you’re projecting $5 million in revenue is very impressive. You understand where color cosmetics can fit into a woman’s life and the joy it can bring. It really does strike me that joy is part of your brand,” she said. “I love brands that promote joy and playfulness.”
Edwards selected Ace Beaute as the winner because she believes the brand has a breadth of product possibilities. She also cited Ace Beaute’s ability to straddle the direct and retail channels. The majority of the brand’s revenue comes from its e-commerce site, but it’s also carried in Riley Rose. “When we’re doing our due diligence, current traction weighs heavily. While this may not be a color cosmetic that I would use, I would look at who is this consumer, what does she care about, is she coming back,” explained Edwards. “With very little capital raised and so much traction, that says you’re scrappy, you’ve got a following, you’ve got something.”
Azra Hajdarevic co-founded Deal Appeal’s biggest winner, Terra & Co., with her sister Amra in 2017. Hajdarevic didn’t disclose the brand’s revenues in her pitch, but asked for $1 million to fuel digital marketing, PR, social media, inventory and strategic hires. To prepare Hajdarevic for Deal Appeal, Massimi focused on the brand’s costs of goods sold, retail prices and sales by channel. “We discussed forecasts and how they plan to sell in each channel in detail,” Massimi said of her work with Hajdarevic. “Sales forecasts, analysis and overall sales organization analysis is one of the biggest reasons investors call me in for diligence and where I feel I can be most uniquely valuable in terms of figuring out how specifically they can get the most sales with highest ROI on spend.”
Though her obligations as advisor to Terra & Co. concluded on Tuesday evening, Massimi reports that she will assist the Terra & Co. team strategize for one-on-one investor sessions. As a result of its wins at Deal Appeal, Terra & Co. scored six hours of advising from Gurwitch and Hamilton. Massimi said, “We [will] put together a plan for how they can approach their advisor sessions with Janet and Carol to make the most of this invaluable time.” After advising Cannabliss Organic for the 2018 Deal Appeal competition, Massimi was formally hired by the brand as a consultant and works with Cannabliss today.
Terra & Co.’s upscale dental products are sold at Saks Fifth Avenue, Anthropologie and select Four Seasons hotels. Its four-product mix ranges in price from $10 for activated charcoal floss to $35 for a 6.7-oz. aluminum bottle of activated charcoal-infused oral pulling oil. Its bestselling biodegradable bamboo toothbrush retails for $12. The unisex line counts anyone who uses toothpaste, an estimated 300 million people in America alone, as a potential customer. The investors questioned the strategy of selling widely available commodity goods at a premium price.
“Oral care is a tough category,” said Edwards. “One of the things that struck me was distribution. Where do shoppers shop for oral care? One of the things I would look for as an investor is, is she thinking about Kroger, Walgreens, CVS? Are those on the radar? Or even Amazon or Whole Foods? It’s a tough category, but, if you can put yourself where people shop for oral care, even better.”
Hamilton was won over by Terra & Co.’s chic products and passion for reducing waste. “We believe at L’Oréal in putting sustainability on a much higher value platform,” said Hamilton. “I’m looking for brands that put sustainability first. I admire very much that that’s the way you’ve approached a commodity category like oral care. It really separates you from the giants.”
The sustainability angle resonated with Gurwitch, too. She agreed with Edwards that oral care is a tough segment, but asserted it’s a big enough one for a niche brand like Terra & Co. to thrive. “You probably don’t have to be the top brand to do very well,” she said. “You could be the indie toothpaste. I think dental care is of the time, it appeals to men and women. If you can get the dental endorsements, because that is key, you can really build something.”