In the beauty and wellness market today, investors are leaning into science-backed brands with proprietary technologies or ingredients, but there’s plenty of science-washing making it difficult to determine what’s truly scientific differentiation and confusing consumers.
Amid the confusion, for the latest in our ongoing series posing questions relevant to indie beauty, we asked 17 beauty and wellness investors, the following question: How do you evaluate the science that science-backed brands pitch to you?
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Rachel ten Brink Founder, CEO and General Partner, Red Bike Capital I assess science-backed beauty through two lenses. First, there is a technical assessment of the proprietary technology or ingredient. It helps that I spent many years at some of the largest tech forward beauty companies (L’Oréal and Estée Lauder), so I have relationships with PhDs, researchers, etc., that I can lean on to validate new technology as well as my own experience.
I want to read any clinical studies and any primary research, conduct extensive competitive research, etc. There needs to be a result from the technology. Efficacy is cost of entry.
The second part is, who cares? What I mean is not only is the technology breakthrough efficacious and unique, but also does it deliver a benefit that consumers truly value and that can be clearly articulated? For a company to win in the market, all of these elements need to be there.
- Christina Yu Principal, NextWorld Evergreen
At NextWorld, we view proprietary technologies and ingredients as just a couple of the many ways a brand can build its competitive moat. They aren’t a prerequisite for us to invest, but if communicated to the consumer in the right way, they can help a brand more easily differentiate themselves in a crowded landscape.
Formula ownership is important to us because it allows a brand to de-risk their supply chain. For example, if a brand’s contract manufacturer has quality/production issues, owning their formulations allows the brand to more quickly move production to another co-man.
But an even more important investment criteria for us is customer loyalty and repeat purchase rates. Simply having the most innovative and proprietary technology/ingredients isn’t enough if the customer doesn’t love the product and therefore doesn’t continue purchasing it.
- Maggie Abeles VP, NewBound Venture Capital
Depending on the category and innovation itself, we go quite deep to understand the current and potential value of product and/or ingredient novelty. This involves reviewing patents, reviewing clinical studies and getting down deep into the full ingredient profile.
The importance of novelty, formula ownership and patents depends heavily on the category. Hair and scalp care, for example, are highly innovative categories in this regard, and we believe our former portfolio company, K18, is a great example of the novelty required to truly disrupt the category.
There are other sub-categories where the utility and efficacy of products requires a broader scope. That’s where we look closely at the brand’s customer behavior to identify signs of potential break-out success.
- TINA BOU-SABA Investor
I agree that there is a lot of interest in science-backed beauty and wellness brands today. It seems to me that clean beauty has moved away from no-no ingredient lists, which, to be fair, are still important to many consumers, and toward a more nuanced view of safety in combination with efficacy.
This, in turn, has driven greater emphasis on unique ingredients or technologies that claim to provide measurable benefits and/or are protected by patents or other types of IP. These products often come with a high price point and may require significant education to communicate those benefits to consumers.
When evaluating this type of product, I always start with the fundamental question of, does it actually work? This is tricky because a product may take time to demonstrate results, so one has to stick with it for weeks or months to see benefits. Sure, clinical testing may help to convince me that the product has worked for other users. (Note that this is different from consumer testing!)
At the end of the day, I have to try it myself. My friends joke that I am like a guinea pig (not to make light of the barbaric historic practice of animal testing, ugh) for all sorts of products, and I can't deny it. That's part of the job.
It is important to recognize that just because a product has a proprietary ingredient or technology does not mean that it actually creates measurable results or benefits. This gets at "science-washing." The ingredient or technology is a feature, whereas the actual result is a benefit.
Ultimately, in beauty as in other categories, consumers will pay for benefits, not features. They may try the latter once, but they won't stick around if the actual benefits aren't there. This may be measured in the repeat purchase rate, for example, although I wouldn't rely on that metric alone.
Fundamentally, while I need to be sure that the IP is appropriately protected, what I really care about are results in both clinical testing as well as my own (or, if necessary, other consumers') experience with the product.
- ODILE ROUJOL Founding Partner, Fab Co-Creation Studio Ventures
Science means first and foremost IP, meaning it’s not just a product from a supplier with a formula that any brand could have.
I focus on iconic products. If founders have a scientific background, it's best or else they can surround themselves with scientists advising them, and I care about that in the due diligence.
Founders trying to fix a problem that they have experienced in their life build trust with people. They have a mission.
Science-backed also means checking the performance of the products, evaluating customer satisfaction and learning about test results and methodology. A high repurchase (40% for a core target) is always a healthy metric.
- MANICA BLAIN Founder, Top Knot Ventures
It’s such a timely question as consumer purchase decisions no longer seem to be as heavily swayed by a celebrity/influencer endorsement, ambassadorship or stamp of approval.
Furthermore, the market is cluttered with so many different beauty brands. I think it’s become overwhelming for consumers to evaluate one from another purely on brand appeal. To acquire that new customer, a beauty brand needs to demonstrate that its products are unique and can deliver clinically backed results.
There are many different ways to approach clinicals, but I am particularly interested in brands that are going above and beyond customer perception studies to dig deeper into the science using instrumentation and experts.
Everist is an example of a brand I've invested in that's recently discovered some very interesting scalp benefits of their concentrates through a partnership with TRI Princeton, where scalp hydration was measured using FTIR spectroscopy.
It's important as an investor to know the difference between 1). clinicals and patents attached to the non-proprietary raw materials a brand is using, 2). clinicals that are based on a customer self-assessment questionnaire, and 3). clinicals that are objectively measured through instrumentation and expert evaluations.
One of the most important things I scrutinize in my investments is loyalty, and this is evident in repeat numbers and cohorts. Brands delivering on real innovation with unique IP and measurable results are likely to have the most loyal customers, and I believe those brands are more likely to achieve strong returns for their investors.
- Scott Gurfein Founder, Skyefox Ventures
When we launched Freeze 24/7, we leaned heavily on science and performance-based data backed by clinicals to substantiate our marketing claims.
Looking back, the lines were blurred between what is really science versus a novel ingredient story, a functional product and the story it was wrapped in. The product worked well enough for its intended purpose and consumers voted with their wallets. It was a real business.
The market has evolved since then, so it’s critical we discern the difference between what is science and what is marketing. Truth in science is natural law, so a fact-based approach to validating what is proprietary, what the science really is and what the tangible user benefits is where the conversation starts and stops for me.
Everyone is under the microscope. When a brand leverages provable proprietary technology in its products, creates market differentiation as a result, and can demonstrate the value of its differentiation through repeat purchase, things get exciting. Is there IP that can be protectible or not? It’s difficult to protect this stuff, and production processes often make product duplication difficult.
- Rachel Hirsch Founder and Managing Partner, Wellness Growth Ventures
Here's how we approach the evaluation process at Wellness Growth Ventures:
- Scientific rigor and validation: We prioritize brands that have robust scientific evidence supporting their claims. This includes looking at clinical trials, research studies and peer-reviewed publications that validate the efficacy of the products or technologies. Brands that invest in rigorous scientific testing and have data to back up their claims are more attractive to us.
- Intellectual property (IP) ownership: We value brands that own their formulas, patents and trademarks. This not only protects the brand's innovations, but also provides a competitive advantage in the market. Brands with proprietary technologies or ingredients are more likely to have a unique selling proposition and command consumer loyalty.
- Regulatory compliance: Depending on the sector, science-backed brands may face varying degrees of regulatory scrutiny. We assess the regulatory landscape and the brand's ability to navigate it effectively. Brands that have obtained regulatory approvals or certifications demonstrate a commitment to compliance and consumer safety.
- Consumer demand and loyalty: Ultimately, the success of a science-backed brand hinges on consumer acceptance and loyalty. We analyze metrics such as repeat purchase rates, customer engagement and brand loyalty to gauge the brand's market traction. Brands that can effectively communicate the value of their scientific differentiation and resonate with consumers are more likely to succeed in the long term.
- Comparative analysis: We also consider how the brand's scientific differentiation compares to competitors in the market. Understanding the competitive landscape helps us assess the brand's positioning and potential for market share growth.
In summary, our evaluation of science-backed brands goes beyond assessing the scientific merits alone. We consider a combination of factors, including IP ownership, regulatory compliance, consumer demand and competitive positioning to identify investment opportunities with the potential for long-term success in the beauty and wellness market.
- Elizabeth Brown Senior Associate, Vanterra Ventures
When assessing science-backed beauty and wellness brands, I look for scientific innovation that offers an effective solution to a specific problem (e.g., hyperpigmentation, acne, anti-aging, eczema or hair regrowth) and tangible proof that the product is solving a need for consumers.
In order to evaluate the science that brands pitch, I often rely on clinical studies, patents and our network of industry experts to stress test the claims presented. To avoid cost-prohibitive studies at the early stage, brands can start with smaller samples (e.g., 30 participants) in a "clinical light" study to show intent and confidence in product performance.
I also look for brands that simply and effectively communicate their science with consumers, which affects customer acquisition costs. Given science-backed beauty brands typically command a premium price point, it is also imperative to benchmark the company's repeat purchase rates and customer reviews to gain insight into consumer-perceived efficacy.
These benchmarks will provide a strong indicator of consumer loyalty and if the consumer would be willing to repurchase and spread word to their friends.
- Eliza Becker VP, Consumer Investing, VMG Partners
Each diligence process is unique, but when we are evaluating science-backed brands, we tend to look at the science through two lenses—and typically we look for companies that have both.
- Consumer lens: Do consumers believe the product works? Conviction in this can be built through: 1). repeat purchase trends, 2). rate of organic customer acquisition/ referral and 3). consumer studies/surveys/reviews.
- Strategic acquirer lens: Will this stand up to strategic diligence process? As growth equity investors, we strive to partner with brands on their way to a strategic acquisition. Large beauty strategics conduct rigorous diligence to understand the proprietary nature of the formula they are buying. They will not buy a company unless it passes heavy scrutiny.
Overall, brands must:
- Own their key formulas or have a clear path to ownership during the course of the investment.
- Be able to back up any significant claims they make (clinical trials, etc.).
- Back up claims of proprietary technology with IP and patent protection.
In our diligence processes, to understand this, we partner with scientists to evaluate and assess the rigor of the science and with experienced industry lawyers to evaluate the depth of patent protection or claims substantiation as relevant.
- CRISTINA NUÑEZ Co-Founder and General Partner, True Beauty Ventures
It is undeniable that we have entered the era of science-backed beauty. More and more brands are trying to lead with science as if they are table stakes today. And like all beauty cycles, this inevitably results in a herd mentality when it comes to investor interest.
Our approach when we evaluate science-backed, clinical beauty and wellness brands is twofold. First, we look at how unique, ownable and differentiated the science is. There is value here to a potential future buyer, especially if the technology is proven, clinically tested and truly differentiated.
Second, we assess how well that science is communicated and marketed to the consumer. Does it convert to a purchase and subsequent repurchase, i.e., does it deliver results? If science is core to your brand’s DNA and positioning, i.e., you are defined by your technology, then the answer to the first question has to be yes for us.
We would have to validate through our network and resources that the science/technology/IP is in fact unique, and that there is a defensible moat around it.
However, answering yes to the first question does not a successful beauty brand make. We have seen plenty of examples where science-backed brands have fallen short of gaining strong consumer momentum and scale. Why? Because they fail to address the second question.
They do not recognize that in addition to having incredible science and technology, you still must build a brand, tell a story and communicate that science in a way that consumers can understand and appreciate. We call it “consumerizing” the science.
K18 is an excellent example of a brand anchored in dense biotechnology that was able to clearly and succinctly articulate how the science worked through storytelling and edutainment. The science was proven because the consumers loved the results, shared them on social media and with their friends and came back again for more.
All this talk about science boils down to two things: Does the product actually work and does the consumer know it? The proof is always in the pudding.
- Amanda Eilian Co-Founder and Partner, Able
In an increasingly crowded beauty and wellness space, where consumers are more discerning and less loyal, investors are prioritizing differentiation. Science-backed claims, both meaningful and superficial, are one way to do that.
There are four things we look for when evaluating science-backed brands: Are the claims and technology: 1) legitimate, 2) meaningful, 3) relevant and 4) clear?
Put another way: Are the claims and underlying technology supported by rigorous scientific evidence? Does the innovation offer a significant improvement over existing solutions? Does the improvement address a genuine consumer need or desire? And, finally, is the innovation easily understood and valued by the target consumer?
When we evaluate whether claims and technology are legitimate, we look at the quality of the studies supporting the innovation. I love science, but I'm not a scientist, so we usually rely on outside experts to advise here. Patents need to be broad and strong, formulas should be owned, and the overall IP strategy needs to be defensible.
The remaining requirements are more easily discerned from market feedback. Customer acquisition costs tell us a lot about how consumers perceive the innovation. Is it relevant, easily understood and genuinely valued? Repeat purchase rates and word-of-mouth purchases indicate the significance of the improvement being offered.
- Sonya Brown General Partner and Co-Head of Growth Equity, Norwest Venture Partners
First and foremost, we look at clinical data either from the brand or from third parties. This remains a focus after we invest.
For example, we have clinical data across Maelys’ different body care products, and we’re in the midst of clinical studies with Face Reality’s acne protocols.
Repeat rates are important in addition to underlying clinical data. Patents are helpful, but not always necessary. Existing formula ownership or a path towards it is critical.
- Madeline Kaplan Principal, Selva Ventures
At Selva Ventures, we’ve closely followed the rise of science-backed beauty and wellness brands over the past few years. We view this as part of a bigger trend of consumers wanting products that actually work and deeply solve their problems. Below is a framework of how we evaluate these brands:
- Who is behind the science and are they credible? We look for teams with uniquely suited backgrounds in science that make them standout.
- Does the product work? We look into what clinical studies have been run, any papers published in scientific journals, comparisons of the product to leading products on the market today.
- Does the company have unique ownership of their IP? We believe ownership of patents and formulations is essential, especially as science-led businesses scale and eventually think about exit opportunities.
- Does the product solve a problem for consumers in a meaningful way? At the end of the day, if you can’t convince the consumer why your product is special, it doesn’t matter how innovative it is, it won’t sell.
As an example, we found this framework helpful in guiding our decision to invest in science-led, skin longevity brand OneSkin in 2022.
- OneSkin is founded and run by PhDs who studied longevity and skin aging for many years before starting the company.
- The company ran clinical studies and had papers published in scientific journals which we reviewed and had a few dermatologists in our network validate.
- Their peptide is patented providing real defensibility of the product.
- Consumers love it. This was reflected in high repeat purchase, willingness to pay a premium, and organic virality of the product.
- Lori Wachs Managing Partner, Penultima Capital
Since the phrase science-backed isn’t a regulated term, it can be used pretty loosely. My first step in evaluating the science in these brands is usually looking at the data from their clinical trials done by independent parties.
I want to ensure that the studies are done via instruments or expert clinical graders that measure efficacy, not simply subjective consumer responses. These are studies that are rigorous enough to be published in respected, peer-reviewed science journals.
I’m looking for results that will significantly enhance a consumer’s experience. For instance:
- K18’s repair mist designed for in-salon use before a chemical service fortifies hair and improves its elasticity by up to 99%. Keeping hair strong during a color service when it’s prone to breakage and increasing the longevity of the color equals extremely satisfied customers.
- Whitney Bowe’s DWB Vitamin C serum demonstrates improvement in the appearance of fine lines in 100% of subjects by week 12 as well as a 10.7% improvement in the appearance of hyperpigmentation/uneven skin tone.
Once I’m fully convinced that the science is there and will resonate strongly with the consumer, the issue of patents and IP are important to ensure that the company will be able to protect this competitive advantage. When it comes time for a strategic to consider an acquisition, companies that own their formulas with IP in place tend to get a meaningful bump in their valuations.
- Chris Kelly Senior Partner, Bansk Group
Science-forward brands are exciting when done well, and the prevalence of these brands shows that today’s founders understand the importance of efficacy to a brand story. Positioning your brand with science-backed claims can be a compelling way to drive trial and, as an investor, I look for clinically proven results, ownership of key formulas and practical IP protection.
Nevertheless, it is important to recognize that a brand can’t succeed on clinical or science-backed claims alone. All innovation in this space can eventually be replicated. The most compelling moat you can establish for your brand is consumer trust and loyalty, which is earned by repeatedly exceeding customer expectations and communicating an authentic brand story.
The most coveted brands combine efficacious products with a genuine emotional connection to the consumer. That is the combination that matters and what we look for as investors. You cannot build an enduring brand without both.
- Kara LaForgia Founder, Kaz Ventures and Kaz Konsulting
We thoroughly examine every aspect that could contribute to the brand's defensibility such as intellectual property (IP), including patents, trademarks and trade secrets. Robust IP positions give the company a competitive edge, preventing replication by others.
The competitive landscape is another crucial focus, where we meticulously identify existing competitors and scrutinize whether the brand's proprietary technologies or ingredients furnish distinctive value propositions, affording it a significant advantage.
Additionally, we delve into the speed at which potential competitors could enter the market and the timeframe it would take for them to attain a comparable level of development as the company under consideration. This dual focus ensures a thorough understanding of the brand's competitive standing, potential challenges from rivals and the sustainability of its unique advantages.
We focus heavily on the sourcing of ingredients. We explore questions such as the novelty of ingredients in the market, the difficulty in sourcing them and whether exclusive partnerships with manufacturers are in place. Is this a new ingredient that has been recently discovered in Peru or is this an ingredient that is as old as time and widely used and available?
Our process also includes evaluating clinical studies and consumer perception studies, assessing the efficacy and safety of each SKU. Some other components that we assess with clinical studies are insights into the appropriate dosage, administration guidelines, long-term effects, etc.
Additionally, we take a deep look into customer retention, repurchase rates and feedback to gauge customer loyalty, indicating market demand and potential growth opportunities.
If you have a question you’d like Beauty Independent to ask beauty investors, please send it to editor@beautyindependent.com.
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