Money Issues: Indie Beauty Entrepreneurs Discuss The Pros And Cons Of External Funding
In this edition of Beauty Independent’s ongoing series posing questions to beauty entrepreneurs, we ask 27 brand founders and executives: Do you have outside investment or plans to secure it?
- Andrea Lisbona CEO, Touchland
We raised funds in January 2020 from Align Ventures Spring St. Group and two other venture-focused investor groups. The process started in Q3 2019 and lasted a few months so we could select the most strategic and aligned investor partners to grow our business mission and vision. We learned a great deal during our capital-raising efforts. It's a constantly evolving process, and nothing is guaranteed until that check clears. This process made us more educated for the future, specifically on the dos and don'ts of capital raising.
- BRITTA CHATTERJEE Co-Founder, Odele
Our initial fundraise was through friends and family and a lead angel investor. We do not have plans to secure additional investment at this time, but, as with everything in business, we are constantly evaluating our options, risks and rewards to ensure the business is properly supported and funded for growth. We’re loving the introductions and conversations that doing that entails along the way.
- MELISSA JOCHIM Founder, High Beauty
We do have outside investors. Our largest investor is Canopy Rivers, which is a cannabis venture capital firm based out of Canada. They have been a great partner and were definitely a great fit in closing out our seed round of investments. High Beauty Inc. also started with friends and family investing early on and expanded during our seed round to other large investors that have experience in consumer goods and cannabis.
- Jack Wolton Co-Founder, Object
We’re currently preparing to pitch to investors, which is very exciting. We’re working with a specialist, Maria Springer from Capital Department, which is based in the U.S. She is helping with our financial model and forecasts. And, at the same time, we’re working on a detailed marketing plan with a top performance marketing agency in London, Tomorrow TTH.
Other preparations include working with ex-Selfridges beauty buyer Wizz Selvey, and her team at Wizz & Co, who have guided us through a rigorous series of remote sessions to ensure our messaging fits our customer, and all elements of the brand are aligned. Wizz & Co. recommended a top beauty and wellness PR agency, The Brand Whisperer, who work all around the south of the U.K, to help us launch the brand to the consumer and beauty trade press, so we're in the process of planning that outreach and activity now.
We’re an ethical business, so we would only want to work with investors that believe in our vision, and that share our values and sustainability goals. We have a short list of potential investors, and we are already having conversations with our contacts in the VC and angel investment world to find the perfect partners.
- Aleena Khan Co-Founder, CTZN Cosmetics
We are actually in our pre-series A round and are currently pitching to investors globally. We also have a crowdfunding campaign live on Seedrs in the U.K.
- Banie Redelinghuys Co-Founder, Skinesiology
Yes, we do. It’s more in line with uncle funding than venture capital. I have previous experience in writing prospectuses and sourcing funds. So, despite the existing relationship with our investor and now partner, we approached everything in a professional manner with a proper business plan and financials.
I have to add that the support from our investor has been inspirational in itself. During our development phase, I attended events to meet with funding institutions. This was part of our learning curve on what is happening in the beauty space and also helped with positioning our brand, which is not so much a beauty brand as a wellness brand in the beauty/skincare space.
Through this process, we built relationships with individuals whom we could connect with if and when additional funding is required. We continue to update them on our progress and plans. I believe if one focuses on doing the right thing for your brand, you will be noticed and attract the right people on the investment side or in other ways to support the growth of your brand.
- Donnet Bruce Founder, Nubian Oasis
I've been in business for a few years, but I didn't start to take on outside contributions or investments until July 2020. Since the beginning, I have self-funded my business. After a few years of operating while I worked a 9-to-5 and bootstrapped, I'm now running my business full-time, which has proven I need to secure funding to scale.
Previously, with bootstrapping, I didn't always have funding for specific projects. I had to put things on the back burner or prioritize the best ways to use limited funds in my business. Also, the progression sometimes felt slow, and I wanted to change that this year. I'm at the point in my business where I need outside investments to catapult my business to the next level. I wasn't comfortable asking for outside funding or investment, but that has recently changed.
By reflecting and growing my company, I had to shift my mindset and also realize I have a trusted community that believes in what I am doing, which led to starting crowdfunding via my family and friends. I'm also open and looking for the right investment opportunity for the long term. There are many good things in store for my brand and securing outside funding is now one of my priorities.
- Kevin Sharp CEO, Trilipiderm
Trilipid Research Institute is a small privately funded company with a fantastic base of supportive local and national private investors. They share our vision for growth and scaling the business to meet the needs of our customers for soothing and hydrating the skin.
A challenge for most indie brands, startups and the like is who to pitch to, how much to “give up” and how to best manage the T&Cs [terms and conditions] of capital raises. In a prior life, I was involved in a significant number of capital raises. Every investor wants to see a different angle, a unique slice of your market analysis. It is easy to be caught up in the churn of accommodating an investor that has no intention of putting capital in. Founders need to guard their most precious asset, time, and qualify potential investors aggressively.
When we go out to the market again for expansion capital in 2021, our pitch deck will be very limited, our terms largely pre-defined and, most importantly, our target investors pre-qualified via our network of current investors, market relationships and due diligence. Raising money is not easy, rejection happens nine out of 10 times. Our goal is to find interested, proactive and supportive investors who want to work with us on a shared vision of the brand and its potential. I would encourage would-be founders to be resilient and start with family and friends, and be rock solid on your plan and realistic on what you can achieve with the capital you raise.
- Brittney Ogike Founder, BeautyBeez
One of the issues minority entrepreneurs face is funding and having the resources or network. I feel very fortunate to be in a position where outside investment was not necessary. My husband and I have invested 80% in the company from the money we saved up throughout our careers, and I am grateful to have my brother, Khris Middleton, who owns 20%, invest in the company as well. I am acutely aware and appreciative of the situation I am in, which I don't take for granted.
- Lindsay McCormick Founder, Bite
We are bootstrapped, also known as customer-funded. We exist because our customers choose to purchase from and support us every day, and I am so thankful for that. I started Bite in my living room in 2017 with $6,000 in savings. We took a small amount of money as a cushion in 2019 from some friends who are in complete alignment with our business and in it for the long haul, but I think raising funds from venture capitalists can create perverse incentives for mission-driven businesses.
VCs need to provide returns to their LPs (limited partners) and, to do that, they need their investments—companies they give money to—to show insane growth with the goal to blow up and sell over a few years or go public, as that's the only way the VCs get their money back. That can pressure brands to grow recklessly and gloss over issues with their product or impact in order to hit those sales numbers.
I already see our space, and I don't think it's [venture capital] conducive to growing a strong, long-term brand or is even ultimately beneficial to customers or the planet. The companies I look up to are brands like Patagonia and Dr. Bronner's, who built up what was once a niche product at the time to businesses with a solid foundation. As Bite continues to be a leader in that plastic-free personal care space, it's my goal to always be on the edge, pushing the big guys in a more sustainable direction.
- EMILY H. RUDMAN Founder, Emilie Heathe
We have some debt financing and are looking to take on more as well as fundraise in 2021. Debt financing was more a financial decision on favorable terms and interest rates, and just by reaching out to many institutions and individuals to get favorable terms against collateral. For fundraising, we have been off and on fundraising. It has been tricky because of COVID-19, but we look forward to 2021 and have a positive outlook with our new traction in growth into wholesale retail.
We made sure to make a list of 100-plus investors, and who works at them, who are the decision-makers, who we can have warm intros to, etc. We also, of course, need to have our pitch/teaser deck, all of our legal documents, and our 5-year financial forecasts. In order to get in front of investors, we have also attended conferences like the Beauty X Summit, BeautyVest and more, and are constantly looking for venues and places to pitch.
- Jacinta Kanakaratnam Founder, The Veddas
We have been approached by a few investors. Accepting investment has its advantages and disadvantages. We had a very specific mission starting this company, and we cannot afford to have that mission diluted. In that sense, investment is not just about money, but whomever wants to invest must understand and align themselves with our vision. There is a bit more freedom being independent. We enjoy being accountable to our clients and to ourselves versus stakeholders who aim for profit only.
- Ilinca Sipos Founder, Rara Club
We received a grant from our acceptance and participation in Georgia Tech's Create-X startup accelerator. We have not accepted any additional investments.
- Vladimir Vukicevic CEO and Co-founder, Better & Better
When Jerry, my longtime friend, business partner and co-founder, and I were planning to launch a new brand, we knew we wanted and needed investment partners. Fortunate to have a developed and trusted network from our prior company, we raised a modest sum from those existing supporters. This allowed us to develop our product and launch the brand. We may raise additional capital to boost growth, so I'm always having conversations and developing my network.
My network—really our networks—are the key to not only securing funding, but finding the right funding partners, and I take nurturing my network and building relationships very seriously. I keep my network broad, from other founders to investors who might have referrals, but also future entrepreneurs looking for advice.
I connect with experts in various fields that may not seem related to what I'm working on currently, but you never know where someone might have an insight or experience or make another introduction that can be valuable to you. I approach each conversation, email, text as an opportunity to get feedback, not necessarily as an ask for fundraising, and I always look for opportunities I can reciprocate their effort. And then I follow-up. And follow-up again.
- Shadi Ghanim Founder and CEO, Fashionsta
We recently got an investment from a Kuwaiti VC, Adan Al Musalam. We are immensely excited to continue to amplify our marketing, and have the expanded capability to enhance our subscription experience for both our women’s and men’s boxes.
- Irina Gottesman Co-Founder, House of Grō
At one point, we did have an investor deck, and we hoped to secure an outside investor. We usually operate on an instinctive vibe, and no one really felt right. So, as of today, we are a family-run business. Myself, my brother and our father are the sole investors. We hope, once we scale and prove ourselves in the industry as a superior product with a superior team behind it, we will find that right investor to help us Gro to our full potential. Timing is key and, when the time comes, we will know.
- Kerlyne Jean-Baptiste CEO and Founder, KerlyGirl
We are proud as an indie beauty brand to have thrived off revenue sales and bootstrapped funds since our company inception. We do believe now that scalable growth is contingent on securing outside investments. We’re currently focusing on raising our first angel round. As a first-generation entrepreneur and first-generation American, it’s personally important to include folks from diverse backgrounds and folks that believed in KerlyGirl early on. It’s been beneficial to tap into my collegiate network, and we have sourced a few angel investment groups.
- Kimberley Ho Founder, Evereden
We turned down over $2 million in venture capital funding early on in the brand’s lifecycle to maintain autonomy in the brand and also because we were focused on selecting long-term, strategic investors who believed in the vision and mission of Evereden: to build the next generation’s leading family skincare brand. Instead, all three founders funded the business with our personal funds in the earliest days as well as accepted funding from strategic investors, fellow consumer entrepreneurs and private equity professionals who understood what it took to build an enduring consumer brand.
While it would have been easier to take the money we were offered initially and certainly less painful, I believe that it has made a huge difference in the DNA of this company. We have eschewed paid marketing (spending zero dollars on Facebook and Google ads) and, because we do not have investors breathing down our necks every month about our monthly growth rates, we are able to make patient, long-term calls that I believe will serve the brand well in the future, this includes investing in product development, brand and community building over paid marketing. In our minds, the best brands that stand the test of time were not built in three or five years, they were built over decades, sometimes a century. I want Evereden to be here long after I am gone, and that is why we have secured funding as intentionally as we did.
- Shalom Lloyd Founder, Naturally Tribal Skincare
It all started with my husband and I remortgaging our home to raise funds, and we got to that point where one needs to make a decision if organic growth is the way to go or external funding. We went down the loan route, which has supported our organic growth model to date. However, I know that I have brought my company this far and, now, at the point where to help us scale, move faster and accelerate our growth rate, external investment is a great option. It is about the right person or organization and the right fit.
- Melissa Obeid Founder, La Fervance
Jamie [Arnold] and I have developed La Fervance in its entirety with our own personal funds whilst living in France over the past four years. This includes the R&D of our completely original formulations. Unlike the common practice of using ready to package standard formulations (much quicker and cheaper to market) as well as the various testing phases, EU regulations and compliances, COSMOS and other global certifications, our fragrances are custom-made, handcrafted packaging—the works! This is how much we believe in the brand and product values.
We see any potential investor contribution as adding value beyond a purely financial one such as opening new distribution networks [and] contributing expertise, knowledge and connections, which will enhance and grow the business whilst respecting and remaining true to the core values. As a family business and independent brand, this balance is vitally important.
- Avalon Lukacs Founder, AURA Inner Beauty
We have been in discussions with a VC firm, but haven’t yet entered into any agreements until we know the timing is right. While we are still a relatively small brand, we do have some exciting partnerships coming up, so if we can manage our equity and cash flow, and use debt effectively to grow, we’re OK doing that for now.
- JULISSA PRADO Founder and CEO, Rizos Curls
We are 100% self-funded. I started saving when I was 15 and, after grad school, worked a full-time corporate job to be able to launch Rizos Curls. I don’t have any immediate plans for outside funding. I think, as a new brand, it’s important to be clear about what you stand for and with outside funding sometimes it can feel like you are being pulled in a million directions. Sure, the money is great, but it comes at a cost. It’s important to be strong enough to stand for who you are as a brand and align with partners that share your vision.
- PAAYAL MAHAJAN Founder, Essential Body
For the time being, I’m sitting pretty on my business as a sole proprietor. 100% ownership of my business gives me agility. If something doesn’t work, I can change it. And, because I don’t do high volumes or rely on third party producers, I don’t lose money on paying my manufacturer or unsold stock. The ability to be agile and independent is very important to me. I have been approached by two major investors, but I didn’t see them adding value to my vision. My vision is not to suddenly go mass and scale up production. I will always place quality over everything, and it works in my favor because my clients come back to me repeatedly.
- Paloma Bradtke Founder and CEO, Wonderbar
I don't have any outside investment. It is completely self-funded. When I was 24 years old, I started my first e-commerce business with 1,000 euros of my savings [or about $1,215 at the current exchange rate]. Just last year, I founded my second business, Wonderbar, which was made possible by my business before. I strongly believe that businesses grow best organically and, therefore, founders can stay true to themselves and their brand.
- Phoenix Gonzalez Co-Founder, Silked
We have built our business organically on crowdfunding campaigns through Indiegogo, founder credit cards, product profits, and friends and family loans on POs [purchase orders], which we have paid off on time. We are not looking to take investment as a business. Instead, we are working on factor PO financing now that we have a well-documented track record of delivering on the large POs ourselves and paying off all loans that we secured through our vendors, friends and family over two years.
- SELMIN KARATAS Co-Founder and CEO, Kazani
As of the moment, I do not have any outside investment. I do have plans to secure it when we are ready. To get investors, depending on the situation, it's important to show gross sales on financial documents. Another factor is to attain trademarks and a patented formulation. If the investors see that the company has been growing and if they see that it is a good idea, then you might be able to secure a good investment. We have pitch decks that we worked on so we can show them to investors.
- LOUIS MARTY Co-Founder, Merci Handy
We raised 3 million euros [or $3.64 million at the current exchange rate] two and half years ago and are now profitable with significant growth. The U.S. is one of our big challenges, but we have a new, huge opportunity coming. Our rainbows are ready to spread and, if new partners want to keep in touch with me, feel free. But go fast!
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