Great Expectations For Beauty Investments, Great Expectations for BeautyX Capital Summit
The headlines say it all—the emerging beauty market is full of great expectations. In the space of a few months, news that five-year-old startup Glossier has surpassed the $1 billion mark (“Glossier Now Valued At More Than $1 Billion”) was followed by the revelation that five-year-old brand Drunk Elephant, too, had scaled similar financial heights (“Skin-Care Startup Drunk Elephant Explores Sale That Could Fetch $1 Billion”). The promise of a lucrative exit for founders and investors to a strategic partner (one of a handful of global conglomerates) keeps driving these valuations. L’Occitane kickstarted the year with the $900 million purchase of Elemis, while days ago Beechwood Capital’s Tatcha was snatched by Unilever for around $500 million. Across the beauty food chain valuations and investments seem, to the casual observer, to have only one direction: up.
The upcoming BeautyX Capital Summit 2019 (August 19-20) will explore the investments behind Glossier, Drunk Elephant and the Elemis and Tatcha deals in panel discussions and presentations as it delves into the prevailing mood among investors—the Summit’s theme is Great Expectations. Special guest speakers such as Carol Hamilton, Group President of Acquisitions at L’Oreal and Rich Gersten, Partner at Tengram Capital, among others, will address investors’ perceptions on future growth among beauty brands, and how indie brands of various stages are viewed against the larger backdrop. While optimism abounds, the investor process for identifying specific areas of potential growth has enormous implications for independent brands. What do current expectations mean for brands that are just starting? Is it a good time for brands to launch? A good time for fundraising?
Even in a surging consumer segment like beauty, success for one type of brand can come at the cost of another. Days ago global strategic giant Coty made headlines, too, only of the wrong sort, as it announced a $3 billion write-down—a third of its market cap!—that came hard on the heels of a $965 million writedown. In its reporting to investors, Coty acknowledged that its brands like Covergirl and Max Factor had lost their luster among consumers. No doubt, legacy brands are facing pressures from newer brands, changing consumer tastes and market forces that are challenging old business models. But the factors behind their high-profile stumbles don’t account for the recent collapse of Glansaol, a short-lived conglomerate of larger emerging brands that had designs to grow and compete among global strategic players.
Competition and challenges exist at every turn for independent brands. When it comes to attracting outside investment and support, brand founders need mentoring and advice. “We would not have started the BeautyX Summit series if our Indie Beauty Expo exhibitors had not asked us for the type of help and education the summits provide,” says Indie Beauty Media Group co-founder Nader Naeymi-Rad (IBMG owns Beauty Independent). “Now that we have the right forum, we’ll see how investor expectations are changing. There is investor interest in beauty, of course, but it’s becoming more refined. Maybe there are expectations for types of products, or geographic potential. It may be by category that you’re in or the level of IP protection that you have or technology that’s enabling your products.”
BeautyX Capital Summit’s 360-degree curriculum begins with courses that establish terminology and concepts, covering the Capital Landscape, Calculating Costs and Fundamentals of Valuation. Case studies and panels build upon the common knowledge base, allowing founders to apply criteria that determines what they need to best prepare a brand in today’s environment as they try to access capital either through individuals or institutions. Investor Time sessions with angel and venture capital investors in an intimate session further attune brands to investor shopping habits in terms of acquiring assets.
“BeautyX really homes in on how to fund your passion in the world of beauty,” says Camille Belle, Founder and CEO of Pound Cake, and BeautyX Capital Summit 2018 attendee. The investor lineup this year, in addition to Hamilton and Gersten, includes Julian Steinberg of Alliance Consumer Growth, Tina Bou-Saba of CXT Investments, Pat Robinson of CircleUp Growth Partners and Sutian Dong of Female Founders Fund. Collectively, they’ve nurtured—and reaped the rewards from—on a “who’s who” of beauty brands such as Lime Crime, Cos Bar, Tata Harper, Harry’s, Volition, Mented, Hum, Kosas, Supergoop!, and Winky Lux.
“BeautyX really homes in on how to fund your passion in the world of beauty.”
“It’s as if you were at the very nascent stages of the next generation of brands that could be dominating the industry 20 years from now” L’Oreal’s Hamilton says about the Summit. “So it’s important that we’re all here, and supporting each other.” Support and relationships are forged off-stage as well at BeautyX, as founders and investors exchange contacts and information during multiple networking opportunities. Outside of the structured curriculum, it’s the unstructured flow of ideas that attendees find most invaluable.
“Why is beauty defying gravity compared to fashion, it’s bigger sibling?” says Naeymi-Rad. “We see an edge in technology, innovation happening at the product level, with ingredients, with packaging. And the nature of beauty is personal, and intimate, which is reinforced by the ability of smaller, more unique approaches to arrive in the market without the burden of high production runs. At least, that’s what we see from brands and retailers at IBE. Now we’ll find out what the investment community thinks.”