At Beauty Independent’s Dealmaker Summit last month, Rich Gersten, co-founder and managing partner at beauty and wellness venture capital firm True Beauty Ventures, advised today’s emerging beauty brand founders to think about recruiting a CEO or GM for their brands sooner than their predecessors generally did.
He said, “That may not be the caliber of the CEO you hire into a $50 million brand, but that recognition is there might be someone better suited to run the business day to day than I can and to focus on what I can do best to benefit the business…We’re increasingly seeing that as a viable strategy and a preferred one actually for earlier stage brands to professionalize the team.”
To see if others agree with Gersten’s advice, for the latest edition of our ongoing series posing questions relevant to indie beauty, we asked 20 investors, brand founders, consultants and more the following: Do you believe emerging beauty brands should be hiring CEOs or GMs at earlier stages than they did in the past? At what stage or revenue level should they be doing so, and what should they be looking for in someone to fill those positions?
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Tina Bou-Saba Investor I have spent a lot of time thinking about this topic, and I have a great deal of experience with companies that have been thru it. As I sat down to answer, I found myself sketching out a decision tree. I ran with it. See below.
There is so much to think about here. The CEO for hire setup can work for emerging brands, but you have to be really careful about who you hire. I talk to so many beauty execs who think that they want to work at an emerging growth brand because they are tired of the corporate bureaucracy of big beauty companies, but the day-to-day work of running an emerging beauty brand is far from glamorous. The founder/CEO relationship is absolutely crucial.
One important thing. I view the CEO versus GM distinction as a very important one. Hiring a CEO is a huge commitment, and the CEO role comes with significant legal obligations. The GM role does not. In my opinion, the GM is No. 2 to the founder. The founder is the "boss" of the GM. On the other hand, CEO is No. 1. Unless the founder is the chairperson of the board, they are not the CEO's "boss."
- Amber Williams Independent Brand Strategy Consultant and Fractional Chief Brand Officer, The Board
After working with independent beauty brands for nearly a decade, I can see the benefit of recruiting a CEO or GM earlier than what we have found in the past. Many founders default to occupying the CEO seat because they believe it gives them ownership over their vision. In reality, they may not be the most equipped professionally to offer objective, data-driven decision-making that benefits the current and long-term health of the business they created.
For example, a founder naturally inclined to the creative side may inadvertently focus most of their time, attention and financial resources on aspects like brand identity, content creation and marketing. Over time, the brand will likely garner recognition, affinity and early sales, but that doesn't make it a healthy business. We've all seen the number of well-branded collections and media darlings shuttering for reasons related to business fundamentals: supply chain, finance, operations, team organization, etc.
As the stakes for brand growth and overall market relevance become higher and higher, emerging brands should consider creative ways to bring on general managers whose background and skill set are complementary (not competing) to that of the founder. If the founder is the visionary and creative force behind the brand, she should seek an integrator (in the form of a CEO, COO or GM) who is:
-Strong analytically
-Experienced in people strategy
-Attuned to maximizing operational efficiencies
-Capable of setting and managing budgets
While professionals with this skill set may come at a hefty price tag, I have seen many clients find creative ways to make this critical hire to help professionalize their fractional teams and set the business up for long-term success. The founder of one prestige makeup brand I supported in 2022 chose to hire a family member with a background in investment banking to work part-time in exchange for equity and a modest salary. After two years of consistent growth, the business could support her full-time.
There is also the option to work with organizations like The Board, which have vetted fractional talent available for contract hire, many of whom are former CEOs and GMs. Taking this route significantly decreases the financial burden of a full-time executive in the early years, allowing you access to the high level of talent needed to scale an emerging brand to a place of professional and financial stability.
In the first one to three years of a business, founders must seriously consider whether the vision behind the brand they created is best shepherded by them or someone else. No one wants to answer the latter, but quite often those who have the humility to recognize this are behind the brands whose success we continue to reference.
- Michelle Olsen CEO and Beauty Strategy Business Consultant, MNO4 Consulting
CEOs as they are growing and still in the early stages respectively. I’ve seen different brands spend money unnecessarily on brand guides or PR before they have a solid business roadmap or distribution strategy in place. When resources are limited, every dollar counts. Hiring a CEO or GM with brand building experience can help founders make wiser decisions concerning product assortment, profit margins, ad spend, 3PLs, etc.
I think it’s important to look for traits and experience different from the brand founder. Most founders are extremely passionate about the product or niche they hope to fill but understandably might lack the skills or expertise in finance, marketing, supply chain, product development and human resources.
Being able to lean on someone with industry experience, who’s brought products to market, negotiated with different retailers, and understands the talent pool while building a team with limited resources, is often worth its weight in gold. Brand building is a long, hard, crowded road and having someone who’s been through it can help the founder make wiser decisions, saving time and money.
- Rohit Banota Founder and Chief Accelerator, Jump Accelerator
I believe early-stage beauty brands need to hire specialists when entering the scaling-up/growth phase. Timing is everything, meaning don't make the mistake of hiring specialists too soon or too late and then don't make the mistake of hiring a sales and marketing head when you are in a serious scale- up or growth phase. Instead, hire both a marketing head and a sales head.
Whether the founder wants to/can be a CEO or GM or hire from outside depends on her strengths and inclination around various functions, mainly innovation, finance, marketing and sales.
The attributes of indie beauty brand founders exist on spectrum, but can be grouped into four categories:
- Critical creative designer and formulator: Most indie beauty brand founders are product- and innovation-focused founders with both a short-term and long-term horizon.
- Finance focused: Fewer indie beauty brand founders are number people. They are more short-term, but not very brand focused.
- Leader and team builder: Few indie beauty brand founders are generalists who aren’t very hands-on. They’re usually non-formulator/innovation/product founders and more long term.
- Brand focused: Very few beauty brand founders are designers and storytellers. They understand marketing, but don’t understand sales much and are more long term.
If the founder is more of a critical creative or brand focused, but lacks the functional expertise of finance and lacks leadership and team building skills, she needs to hire a CEO or a GM, who is likely to be great with numbers, people and understands omnichannel well. The founder would still need to hire specialists for sales, marketing, finance and innovation.
If the founder is more of a leader and team builder or is finance focused, which is not that common in indie/early-stage beauty brand founders, then she can hire functional specialists for sales, marketing and innovation.
Now, a GM is slightly different from a CEO. A GM is responsible for sales and distribution channels mainly and might lack a strong understanding of brand, finance and marketing. So, there still might be a need for a CEO and maybe the founder, depending on her strengths, can be the CEO until they find and can afford the ideal candidate.
Human resources is a neglected function that can become critical during the scale-up phase to help hire the right candidates, create and execute onboarding, KRAs and compensation plans and then design and implement talent development plans and preserve the culture.
As the industry matures and evolves, a need for specialists becomes imperative. So, with the evolution and expansion of beauty retail, the emergence of DTC and social selling, hyper-competition and segmentation into niches, the need for specialist CEO/GMs has become more relevant.
It’s difficult to pinpoint a single revenue number when they should be hired, but the complexity of the business starts increasing during the scale-up phase and could be as early as $5 million, but I'd recommend a revenue number between $5 million and $10 million as a stage to seriously start thinking of the CEO/GM role and hiring specialists, especially if you are funded since you don't have the luxury of sitting on the pile of cash and you are looking at speed of growth.
- Cristina Nuñez Co-Founder and Partner, True Beauty Ventures
I’m a firm believer in identifying and enhancing a founder’s superpowers. It is one of the first things we try to assess when getting to know a brand. Part of this exercise requires understanding a founder’s strengths and weaknesses and where their strengths can most positively impact the brand and business while aligning with their interests and passions.
We are seeing that, earlier on in a brand’s life cycle, founders are selectively choosing to bring on experienced executives in CEO, president and GM roles so they can best focus on what they love and are good at.
For example, a founder who is a dermatologist or makeup artist with a superpower in their craft or an incredible ability to create product or connect with their community may decide they are not the best suited person to run the day-to-day operations, report on financial performance or lead retailer/vendor negotiations. Bringing on an executive to take on those roles can also help accelerate the growth trajectory of the business, particularly important if the founder’s objective is an ultimate exit.
The stage at which some founders choose to partner with a CEO or GM varies, but we see this largely in connection with a capital raise (e.g., series A) to support the compensation expectations of high caliber candidates, though this is not always the case. We have seen some brands at the pre-revenue and seed stage with this type of structure as well.
However, no matter the stage of business, there are a few important considerations to ensure a successful partnership between founder and executive: 1) Defined roles and responsibilities between the founder and executive (know each other’s lane); 2) Clear and thoughtful reporting structure for the organization (everyone knows who they report into); and 3) Mutual respect and trust (let each other do your jobs).
- Deborah Benton Founder and Managing Partner, Willow Growth Partners
I believe that team and talent are the biggest differentiators between good, great and world-class brands. Team structure, organizational design, roles, required skill sets and experience, these areas should be constantly and consistently monitored and assessed against the brand's strategy and operational goals.
The needs of fast-growing brands are continually evolving, and the team structure and composition should accurately reflect those changes despite how painful it sometimes is to adjust the organization. There is no one-size-fits-all approach as to when to bring in a GM and/or CEO, and I've seen great success with first-time founders/CEOs effectively scaling a company to $150M-plus in revenue, and, conversely, first-time founders/CEOs hiring a GM/president from day one.
The key to effectively determining when, how and who to bring into the organization relies on a trusting and transparent relationship between the founder and investor/board and an abundance of open and honest dialog. My strong preference is that these decisions are founder-led and only occur after many conversations and a tremendous amount of founder input as to how and where they best see themselves adding value and spending their time.
There is no replacement for a founder's magic, and I prefer to keep the founder in the CEO/leadership role as long as it makes sense to ensure that the maximum amount of this founder magic is entrenched into the brand's DNA. In the early days, I would rather hire operational competencies and pair the founder/CEO with an experienced president/COO.
Arguably, today's beauty environment is more complex and more competitive than ever, and experienced business veterans can provide welcome "been there, done that" experience and skills. However, especially in the early days, this does not necessarily have to take the form of a CEO.
At Willow, we invest early and are truly backing founders. We look for strong founder values that include collaboration, transparency, self-awareness, low (but healthy!) ego, open and strong communication and a genuine belief that Willow, as their partner, is truly aligned with the founder's desire to build a world-class company and will support them in making the right decisions for the brand.
- Daniel Kiyoi Co-Founder and CEO, Magic Dusk
Determining the right time to hire a CEO for a small beauty brand depends on various factors, including revenue, business complexity, growth potential and the founder's capabilities.
Revenue milestones: While I think it's difficult to list a strict revenue threshold, I agree that having a strong CEO (or any highly experienced operator) earlier on is becoming more and more popular (and necessary). I would say roughly $1 million to 4 million. Within that range, the business should have enough financial stability to support an executive salary.
Operational complexity: As the company grows, operational challenges become more complex. This is especially true if the brand is taking on e-tailers or omnichannel. If the founder or current leadership team lacks the expertise to manage this complexity effectively, a CEO with relevant experience can be crucial to the brand's success.
Strategic direction: If the brand is not in any retail, then bringing on a CEO can help the brand to make the strategic shift from DTC into omni. Most new founders don't have experience navigating retail expansion, so finding a CEO at earlier stages can ensure that the company is set up for success. A lot of retailers also want to know that a brand can grow quickly and have stable inventory. Strong leadership can help convince a retailer that the brand is ready to expand.
Founder’s focus: More often than not, the founder wants to focus more on product development, creativity or other aspects of the business they are passionate about. Hiring a CEO to handle the day-to-day operations and strategic management can make a big difference in the balance between creativity and operations.
Investor expectations: If the company has raised or plans to raise significant investment, investors will likely expect a seasoned CEO to lead the company and ensure a return on their investment.
What to look for: Brands should look for a CEO that really understands supply chain and finance. They should be able to partner with the heads of finance and operations to build systems that are scalable and have good checks and balances. Has the candidate ever been a part of a brand that went from a system in excel to an ERP? Do they understand the complexities of inventory creation and run rate? Are they used to consistently reviewing cash flow? Have they ever fundraised before?
Omnichannel experience is also really important. Have they worked with retailers in their past jobs? Do they have a strong network of people that work in retail?
- Sharon Osen CEO, Brandifference
The beauty industry is rapidly evolving, and emerging brands need to adapt their strategies accordingly. One key aspect of this is recognizing the importance of hiring a CEO or GM at an earlier stage than in the past. This allows the brand to benefit from a professional who can focus on running the business day-to-day, while the founder can concentrate on their strengths and innovative ideas.
Founders often excel in big-picture thinking, product innovation and creative marketing. However, managing the day-to-day operations and staying on top of industry trends can be overwhelming. By hiring an experienced CEO, GM or even a fractional GM at the right time, brands can tap into more professional, strategic business management.
Emerging beauty brands should consider hiring a CEO or GM when they reach a stage or revenue level where the founder's expertise can benefit from a professional with more hands-on experience to manage the company's growth. For emerging beauty brands, the decision to hire a CEO or GM depends on various factors such as the brand's growth trajectory, team size and the founder's capacity to manage all aspects of the business.
While there's no one-size-fits-all approach, some experts suggest considering this hire when the brand reaches revenue milestones such as the $1 million to $5 million range annually. However, other factors like the company's growth rate and the founder's personal bandwidth can also influence the timing of this decision.
A skilled GM or CEO can help minimize risks, avoid costly mistakes, build out system and processes that facilitate scaling and foster a culture of continuous improvement, which is essential in the fast-paced beauty industry. As the business scales, continuing to invest in professional management and the C-Suite becomes increasingly important to ensure sustainable growth and long-term success.
When it comes time to search for a CEO or GM, founders should look for candidates with relevant industry experience, a proven track record of success and the ability to scale the business effectively. It's essential to find someone who can align with the brand's vision while bringing in new perspectives and skills to drive sustainable growth.
Additionally, they should possess excellent communication and interpersonal skills to maintain the brand's vision while collaborating with the founder and other key stakeholders.
In summary, emerging beauty brands must adapt to the industry's increasing complexities by bringing in experienced leaders who can effectively manage operations, drive strategic growth and maintain a competitive edge. Founders who recognize the value of this partnership are more likely to achieve success and build a thriving brand in today's dynamic beauty landscape.
- Sarah Woelfel Co-Founder, Cult Capital
The addition of a general manager or CEO has proven highly effective for accelerating the growth of early-stage beauty brands. This strategy allows founders to focus on scaling the brand’s vision, mission and values as well as expanding its reach, while the general manager oversees day-to-day operations.
At Cult, we've observed that the timing of when to introduce a general manager or CEO varies widely among brands. For example, Lawless Beauty made this move when they reached $2 million in revenue, while Nancy Twine, founder of Briogeo, continued as CEO through the company's successful acquisition by Wella.
Key factors in determining the ideal timing include the founder’s readiness to step back from operational roles and the alignment of the GM/CEO with the company’s mission and core values. A strong relationship between founder and GM/CEO built on trust, transparency and collaboration is crucial for sustained success. The GM/CEO should be the founder’s strongest advocate and supporter.
- Lin Chen Founder, Pink Moon
I firmly believe that hiring experienced CEOs or GMs earlier in the company's growth trajectory can significantly accelerate their journey to scalability and profitability, and this is something I actually was exploring for Pink Moon earlier this year.
While hiring a CEO or GM early in an emerging beauty brand's journey may represent a departure from past practices, it's increasingly necessary in today's competitive market in order to scale efficiently and effectively. By bringing in seasoned leadership at the right stage of growth and with the right skill set, brands can position themselves for sustainable growth, operational efficiency and market leadership in the beauty industry.
Having an extensive background in both beauty and business are essential for navigating the complexities of scaling operations, distribution and brand presence. Bringing in seasoned leadership with a proven track record in scaling beauty or consumer businesses becomes imperative once the company has reached a revenue milestone of at least $500,000. At this stage, the brand typically requires strategic guidance and operational expertise to capitalize on growth opportunities and manage complexities.
When searching for a CEO or GM, founders should prioritize candidates with hands-on experience in the beauty industry, ideally someone who has successfully scaled their own venture or contributed significantly to the growth of other beauty brands. This individual should possess a deep understanding of product development, marketing strategies, distribution channels and consumer behavior within the beauty sector.
Additionally, the ideal candidate should have a track record of operational excellence, demonstrating the ability to optimize supply chains, enhance product margins and drive revenue growth. Experience in navigating regulatory compliance (i.e., MoCRA), building strategic partnerships and leveraging digital marketing channels can also be crucial in today's competitive landscape.
Beyond technical expertise, cultural fit and alignment with the brand's values are paramount. The CEO or GM should share the founder's vision for the brand's growth trajectory and be able to inspire and lead the team through periods of rapid expansion.
- Nadia Lau Founder and Strategic Business Advisor, Aria Business Advisory
Different factors determine who runs the company. Considerations include individual founders’ innate skills, economic environment, needs of the business, where they are in their business growth cycle, and what each business wants to achieve to meet and exceed their next milestones prompt what action to take that is for the benefit of the business.
Having the awareness to reflect and ask the hard questions about founders’ own skill set, strengths and weaknesses versus company needs will determine the next course of action. Word of caution: Be mindful when distinguishing strengths and weaknesses and what one likes to do versus dislikes doing. There is merit in doing the hard things.
The key is staying true to your North Star, having the awareness and foresight to know the balance between what aspect should be outsourced and when. Answering the following question can be a great guidepost: Which will generate a stronger ROI than doing things on your own?
One thing is for sure: The most successful founders always surround themselves with smart people who have the right skills at the right time to help elevate them as leaders and their business to meet their next milestone and strengthen brand equity. If you don’t know of any, find people who know.
There are so many amazing ways to connect with consultants, advisors, mentors, merchants and investors who are passionate about helping founders, it would be negligent to forego their sage advice to help navigate next steps. Acknowledging the wisdom and perspective of Rich Gersten and the complexity in growing a business in the current business environment, waiting to bring on a full time CEO/GM can still be a viable option.
The inflection point to contemplate is when your business generates an annual revenue range between $2 million to $3 million and is ready to scale to $5 million to $10 million. Ask the following question: Am I able to lead and scale for profitability growth with my current team? At this point, the core focus should be to scale profitability growth.
Now more than ever, technology and platforms that offer highly vetted fractional C-Suite executives and contract freelancers can help bridge and fill in the gaps for emerging beauty and wellness businesses, allowing a founder to utilize their capital to invest in other meaningful and revenue generating opportunities.
Whether you’re looking for a full time CEO/GM or a fractional one, identify those who have characteristics that complement your needs, leadership style, company's needs, ambitious for your business to scale, and someone that has the capacity in today’s market to scale your business.
While track record is important, focusing too much on track record can potentially lead you down the wrong path because current economic and business environment, cultural resonance, and consumer behavior is drastically different from even three to five years ago.
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I wholeheartedly agree that the earlier you can professionalize your team and get a true operator at the helm, the better. I think 2012 to 2019 was the era for founder-led brands, and many were discovered to—or even self-proclaimed to—have a super strong brand vision, but be weaker in operations, finance and growth management.
I truly do see the founder seat and CEO seat as very different, and someone who is a brand visionary and a super precise, ruthless and meticulous operator all in one is a rare breed. They do exist, and I'm lucky to work for one and support one.
But in my 10 years of startup experience and meeting hundreds if not thousands of brand leaders, I think the earlier a founder/brand leader can cultivate self-awareness and build around their weaknesses, the better.
Now, more than ever before, the details matter: How much you're spending to acquire your customers, how you're building toward an eventual and powerful exit, how you set yourself up to scale into retail and maintain those partnerships effectively.
Brand-focused founders are remarkable, but may be interested in other details like community, brand perception, creative direction and differentiation. You need someone who is paying mind to both religiously every day.
- Paula Sutter Partner, Provenance
As a founder, it is challenging to excel in every aspect of your business, and it is essential to be self-aware of your strengths and weaknesses.
At Provenance, we’ve always been supportive of founders finding their complementary match. This may involve hiring a CEO, president, COO or others in the C-Suite.
If you have a strong board, you may be able to hire someone with a path to a CEO or president title. Who you choose to hire will depend on the strengths of the founder and what they want to focus on.
Regardless of the role, it is crucial to have a deep level of trust with your partner and be aligned on the strategic vision. This typically becomes critical for companies once they have achieved product-market fit or around $10 million to $15 million in revenue.
Executing on a clear strategic vision in the early days of a brand will save you time and money and should more than offset the cost.
- Manica Blain Founder, Top Knot Ventures
I don’t think there is a magic bullet answer here in terms of, at X million dollars in sales, yes, go ahead and outsource CEO-level leadership. There is no one size fits all. There is no playbook, and I don’t see beauty any different than say apparel or any other sub-category within consumer.
In the last decade, I’ve invested in numerous early-stage consumer brands, and I have three specific journeys of founders/CEOs that come to mind as I answer this question. All three I first invested in when they were each sub-$5 million in annual net sales.
One such founder remains in her CEO role today. Her business holds a valuation close to $1 billion and has been publicly traded for the last three years (hello, that’s you, Trina Spear, co-founder and CEO, FIGS).
I have also invested in a founder/CEO that remained in his CEO position throughout early growth and scale, surpassed $100 million in revenue, and then transitioned to a new incoming CEO (that’s you, Davis Smith, Cotopaxi, who passed the torch to incoming CEO Damien Huang last year).
Finally, and in beauty specifically, shortly after I led the seed for Iris&Romeo in 2021, I played a key role in recruiting Tara Desai (MBA, ex-Estée Lauder) into her current CEO role at Iris&Romeo, working alongside founder Michele Gough-Baril to scale the business beyond what was then a DTC-only business to what is today a truly omnichannel brand, with strong retail partnerships at Credo, Sephora and Goop.
All three businesses recruited (or didn’t recruit) new CEOs at very different levels of scale. However, all three businesses have this in common: They have incredibly strong brands where their founders (regardless of their position as CEO or no longer CEO) are deeply invested in their respective businesses and have done the hard work in building a solid base in brand and setting the tone for overall culture.
You can transition to senior-level leadership whenever you think it makes sense, and this may be driven by a variety of reasons—skill set and experience of the founder as their business transforms and scales, life/personal circumstances or requirement for founder to contribute in a core area of the business that may be outside of day-to-day leadership. But is my opinion that such a transition, if it is to happen, should only happen when the brand is strong enough to live on its own without its founder in the CEO position.
I will also say this: The best leaders I know surround themselves very early on with people who can fill the gaps and blind spots. They create a powerful inner circle of employees, advisors and investors that know what they don’t know, and they give their key employees and executives sufficient room to really lead. And I think that’s hard to do for a founder/CEO, but nailing that level of self-awareness can supercharge a business to levels beyond a founder’s own capabilities.
- Rebecca Levin VP, Retail and Digital Business Development, Martin Kartin and Company
I completely agree with Rich’s thinking, but not before I ask the founder, “What is it that you don’t know or can’t do?”
In the majority of cases, founders readily admit they can’t put in processes. They can’t or don’t want to manage and run teams of people in disparate functions. They are really not organized properly as a company so that they can keep up organizationally with the growth that they have been experiencing.
They don’t really have experience in beginning to select the C-Suite of executives that they are going to need to run their growing company. They are personally overflowing with great product ideas and strategies, but they are too busy doing that, and they need help in running the company.
Once the founder acknowledges that they need help with all or some of the above, they should define the role of a CEO or GM and agree that the role needs to be filled.
Most importantly, these needs don’t become needs when a company gets to $50 million or $100 million. They are usually necessities much earlier on, which really supports Rich’s point of view. It’s not about the size of the company, it’s about needs that the founder has as they are growing their company.
We find that the fear factors in making this decision are: Is the founder ready to “let go” of certain things and partner with a senior level executive? Is the right CEO or GM for a company under $50M million and the right person for when growth is accelerated beyond that? The answer is sometimes.
If we do this now, we might need a different kind of person when we experience exponential growth, and if we will, then maybe we should wait.
- Evelyn Wang Brand Advisor
The question of whether to bring in a CEO or GM at an earlier stage is complex and hinges on the founder's background and vision. A creative founder infuses the brand with a unique magic that can define its identity. Hiring too early might risk diluting that vision and saddling a young organization with unnecessary overhead. On the flip side, a seasoned leader can help avoid costly foundational mistakes and streamline operations, balancing the creative spark with strategic growth.
I don’t believe there’s an exact number on when to bring in a professional CEO/GM, but if I had to throw one out, it may be wise to think about this by around $20 million to 25 million in revenue, with the variability depending on the founder’s background. At this point in a brand’s trajectory, it has probably established its core identity, and a CEO/GM can bring in the expertise needed to scale effectively.
I’ve also seen the importance of bringing in someone who not only has the business acumen, but can empathize with a startup's lean, relationship-driven culture. In today’s landscape, strategic acquisitions seem to be happening at an earlier revenue stage so earlier professionalization makes sense in lockstep with this trend.
- Jeremy Triefenbach Founder, DFN Ventures
Rich is correct. Changes are here! There have been a lot of lessons learned over the past five years as we have seen an unprecedented amount of capital flowing into early-stage CPG, specifically beauty and wellness brands.
One big lesson learned was the need to eliminate execution risk. Startups experience existential risks all the time—product-market fit, financing, execution, macroeconomic, regulatory, environment, you name it! Just the fact that a VC-backed startup needs to scale product learning at small volumes to national or global distribution and awareness in five to seven years is an absolutely crazy concept.
And because there are so many risks, the key is to control what you can control, and execution is one risk that is more controllable. Unfortunately, there has been a large amount of capital lost in the past few years driven by poor execution, and that is the area investors are looking for change. Therefore, Rich’s point that brands should be prepared to recruit and retain senior executives early to take over large chunks of the operations is addressing this lesson learned.
For our investments, we are continually assessing our portfolio’s executive team to determine if all functions of the business have strong management. This typically comes as part of the quarterly or annual strategic planning process.
As part of that process, our teams review organization charts that only have roles only, and then start plugging in existing executive team members. This process then identifies needs in the organization.
The key difference in our process now versus before is that we (and many investors) have moved from being reactive (for example, have an inventory issue, let’s hire someone) to a more proactive approach filing these gaps even before we invest.
This is the other point Rich was alluding to. The new venture capital model going forward is that investors will be much more proactive with brands to plug team gaps in conjunction with closing investment rounds. I foresee investors negotiating more control related to team hiring to future address this point.
Overall, I think this is a very positive trend in the market and moves more toward industry practices in the more mature segment of the market, technology startups.
- Rachel Roberts Mattox Brand Developer and Strategist
I wholeheartedly agree with this perspective. The landscape for emerging founder-led brands has evolved significantly over the past decade, increasing the pressure to operationalize efficiency and demonstrate scalability sooner in its lifecycle.
The skills required to envision and create a brand are very different from those needed to run and grow the business. The real flex for a founder is self-awareness, understanding their own strengths and knowing when and who to hire to complement their skill set.
Founders should be thinking about their executive team before going to market and allocating a budget for C-level support from day one. I often recommend that my clients consider a fractional CEO within the first 12 to 24 months to establish a sound business strategy.
This person should be an experienced operator with a strong track record of leading and scaling early-stage brands. They should be focused on unit economics, gross margins, product and pricing strategy, and should have a deep understanding of the entire supply chain.
They should also understand the importance of brand marketing and performance marketing in driving growth. (This is one reason why the path from CMO to CEO makes so much sense.) Depending on the company’s goals, the CEO should spearhead distribution and global expansion strategies and help secure funding.
The ideal dynamic allows the founder to remain the face of the brand, driving awareness and vision, while the CEO drives business strategy and growth, turning the founder's vision into reality through effective execution and leadership.
- Kathryn Beaton Brand Architect
My consulting business was built on the belief that the earlier a founder brings in an industry-native support system, the greater the chances are of building a brand that is fiscally responsible, operationally set for scale, and one that not only retailers can rely on, but future investors as well. It behooves founders to pay the money now to save them the money, time and sleepless nights later.
Ideally, they can find support in the form of an early-stage strategist that can also execute. The ability to execute is arguably the most critical factor to ensure the brand receives the necessary support for its investment. With fractional assistance becoming the norm, obtaining exceptional C-Suite help is easier than ever.
There is no need for an early-stage brand (<$3.5 million) to hire full-time support when industry knowledge, guidance and insights can be accessed through a fractional system, encompassing any or all C-Suite functions.
- Allison Moss Industry Executive
I would advise early-stage brands to build a strong executive team as they grow. For founders whose strengths are in a particular function (marketing, product design, operations, etc.), bringing in a CEO or GM at an earlier stage can be a great partnership.
I've seen this happening more over the past five or so years. Having a high-performing leadership team can bring perspective to navigate the unique challenges early-stage brands face acquiring customers, building a healthy P&L, managing finances and operations, etc.
When to bring someone in will differ by business and be based on current team structure, number of co-founders and what executive roles they play, degree of scale and if the business has reached or is close to profitability.
A few questions to ask yourself would be: 1). Has the brand refined product-market fit? 2). Have they scaled successfully with strong retention KPIs (repeat rate, retail sales velocity, etc.)? 3). Is it profitable or does it have ample runway to allow the business to lean in after they bring in a new executive partner? I have seen these typically come together at $2 million to $5 million in revenue.
When looking for a CEO/GM for an earlier stage beauty brand, I would first focus on what functional gap can benefit the business most. If you're a founder whose background is in branding and design, perhaps you want a CEO whose career started in finance or operations and then grew into general management.
Or vice versa, if the executive team leans heavier into operations and R&D, seek someone who has successfully scaled design-forward or high-impact brands. Beyond this, I would look for prior experience in similar channels of distribution and a great track record of building high-performing (and happy!) teams.
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