Four Leading Beauty Entrepreneurs On Tweaking Business Models, Pinning Down Labs And Taking On Investment
Scrappiness can be a small beauty brand’s best asset.
At a panel last month hosted by Stacklist, a community-driven effort to document entrepreneurial learnings, in New York City, founders from Cocokind, Atolla, Prose and Scentbird delved into the strategies from direct-to-consumer expertise to personalization they pursued to give them an edge against the conglomerates their brands are up against. One of the liveliest discussions during the event called “Building a Beauty Startup” involved how to secure chemists, laboratories and manufacturers. In plucky fashion, the founders scoured LinkedIn and prowled trade shows to pin down behind-the-scenes partners.
“We looked for chemical lab partners who were as data-driven and nerdy as we are,” said Meghan Maupin, CEO and co-founder of Atolla, an artificial intelligence-fueled skincare brand that individualizes products based on lifestyle and environment. “Don’t go in cold. We found the best way to find companies was to ask other skincare companies we liked.” Priscilla Tsai, founder and CEO of the four-and-a-half-year-old Cocokind, was introduced to her brand’s chemist at a lecture centered on prebiotics and probiotics. She said, “I wanted someone aligned with my values and ingredients.”
At five-year-old Scentbird’s embryonic stage, co-founder and CEO Mariya Nurislamova pounded the pavement at trade shows for resources. She advises fellow beauty company founders to look at “baby” labs, but not be afraid to contact larger facilities because she notes they often covet new customers that have long-term potential. In the beginning, she was stunned by minimum order quantities ranging from 5,000 to 25,000 pieces. They forced her to rapidly sharpen her negotiating skills. “If you are launching multiple shades [of a makeup product] and someone offers a MOQ of 5,000, you can bring it down to within 100 per shade,” recommended Nurislamova. “If your pitch is good and they like you, you might be able to push some buttons.”
With production nailed down, the founders discussed building their brands with limited funds. Atolla wet its feet in pop-ups. The brand experimented with a temporary boutique in New York’s SoHo neighborhood where it customized facial oils on the spot. Maupin said, “It was a test to see of people liked the concept and what they wanted to know about skin. We used all that data to develop the serums.”
“Don’t go in cold. We found the best way to find companies was to ask other skincare companies we liked.”
The company was able to breakeven as well as gain valuable data at the pop-up that cost less than $5,000 to execute. Going forward, Atolla has a predictive model that can help it devise ingredient inventories required to fulfill orders as customers use up what they have. The continual addition of new ingredients is part of the model that improves with consumer demand to optimize product formulations.
The startup process frequently means an initial launch isn’t the final vision. “When we launched, we were not a perfect company and not a perfect product. We did a massive rebranding this past January. We took our consumers on the ride with us and thankfully they’ve supported us,” said Tsai, speaking of Cocokind’s evolution. “Consumers have followed us, and we are totally transparent about what we are doing.”
Consumer feedback shapes a brand’s trajectory, according to Nurislamova, mentioning Scentbird’s business plan was reworked after the realization that its initial fragrance recommender concept couldn’t be monetized. People didn’t want to pay $100 to receive fragrance suggestions. “The business model we have now works,” she said of Scentbird’s subscription offer. For $15 per month, customers receive a 30-day supply of scents from more than 600 top brands. Among them are Dolce & Gabbana, Tom Ford and Gucci.
Scentbird has proved to fragrance houses that first scoffed at the idea of putting their perfumes in Scentbird atomizers that there’s an audience for them. The company boasts 300,000-plus subscribers and, last year, it raised $18.6 million. That capital was earmarked to accelerate product innovation and market expansion. Scentbird has spread its wings into body care and cosmetics. Skincare is on tap for next year.
“When we launched, we were not a perfect company and not a perfect product.”
The panelists concurred that taking on investment and considering exits are decisions specific to brands and the people behind them. At Cocokind, healthy beauty product profit margins allow the brand to flourish without cash infusions. On social media, it’s gained 100,000 without having to spend the big bucks on traditional advertising. Tsai said, “Our goal is not to get funding. Our goal is to connect with customers.”
For Prose, money was critical to spur growth in the United States. In 2018, the haircare brand closed an $18 million series B funding round led by Insight Venture Partners with participation from previous investors Forerunner Ventures, ISAI, Lerer Hippeau Ventures and Correlation Ventures. In total, Prose has raised more than $25 million.
Atolla, Prose and Scentbird favor direct-to-consumer distribution. Cocokind, on the other hand, is carried at Target and Whole Foods. Even for brands that push into physical distribution, Tsai emphasized owning customer relationships is important. She said, “DTC is still our largest channel. We care a lot about who are partners are, and we are looking for one large mass retailer per channel. 95% of our customers find us on our website and shop there or in Target or Whole Foods, and Target found us because customers asked, but don’t expect retailers to sell for you.”
Direct conversations with customers help Cocokind better its business online and in stores. Any negative feedback that’s received, said Tsai, is studied. “Negatives reviews are where you learn the most,” she elaborated. “We pair up people on our team every other month to look at bad reviews, and create ideas and content to turn a bad experience into a positive one.”