Sundial Brands CEO Richelieu Dennis On What Beauty Entrepreneurs Should And Shouldn’t Do When Seeking Capital

Richelieu Dennis hasn’t slowed down since selling Sundial Brands, the company he launched with his mother Mary and college roommate Nyema Tubman in 1991, to Unilever last year. In addition to staying atop Sundial Brands as CEO and executive chairman, he’s chair and CEO of Essence Ventures, owner of Essence magazine, and spearheads New Voices Fund, a $100 million investment vehicle that’s directed $30 million so far at companies led by women of color, including The Honey Pot Company, Mented, Beauty Bakerie and The Lip Bar. Dennis’s growing empire is a far cry from his start selling soap on the street and being snubbed by investors when he sought to expand stores. However, his uphill history and experience as a minority entrepreneur in the consumer packaged goods sector underpin his dedication to what Dennis calls community commerce, which he defines as supporting business owners from underserved communities to strengthen their communities. At New Voices Fund, he says, “We’re looking to be intentional and purposeful with whom and where we deploy capital.” Beauty Independent interrupted Dennis’s busy schedule to ask him to provide advice to beauty brand founders seeking investment. Here are five of his top suggestions:

Maybe Money Isn’t The ANSWER

Before chasing funding, Dennis advises entrepreneurs to get a firm handle on the needs of their companies. He says, “Oftentimes, we identify capital as a problem, and we expend a ton of energy to get capital that in many cases is overpriced and undersized. Then, we bring it into the business, and we realize the capital alone is not going to drive the business, grow the business or preserve the business.” Once they have a firm handle on company needs, Dennis is adamant founders identify experts to help them figure out how to address those needs. He recognizes access to experts can be a challenge for some, but reasons entrepreneurs are incredibly determined to pin down what’s required to succeed. “You can borrow, rent, steal, beg to get expertise that doesn’t cost anybody money except it may cost time,” he says. “Then, leverage the understanding you get to properly bring in and deploy capital.”

Richelieu Dennis
Unilever acquired Sundial Brands, the company behind SheaMoisture, last year. Richelieu Dennis is CEO and executive chairman of Sundial Brands.

Hold On Tight To Equity

Sundial Brands was operating for about a quarter century before an outside entity took any part of the business. Although Dennis reexamines a lot of decisions he made over that period, he never thinks twice about the decision to retain equity. He and his mother had a 51% share of Sundial Brands upon its sale to Unilever. “When you have something of value, you want to hold onto that as long as possible,” says Dennis. “You don’t want to be giving that away, and you definitely don’t want to be giving that away just for capital.” He elaborates, “As hard as it is to obtain capital in our community, it’s very costly when you are exchanging it for equity. It’s much better to give away as little equity as possible early on, create value and, then, give additional equity for greater value.”

Richelieu Dennis
Dennis at a photoshoot with his mother Mary, co-founder of Sundial Brands.

Make Yourself Part Of The Pitch

The New Voices Fund isn’t a charity. Dennis believes the returns on the beauty companies it invests in will meet if not exceed the returns from similar investments in the beauty segment generally. However, the financials of a brand alone don’t motivate Dennis to back it. “I don’t invest in companies. I invest in people,” he asserts. “What I want to know is: Are you going to do what it takes to get this business up to where it needs to go?” In a pitch, a focus on gaps in the market above all else isn’t going to convince Dennis to open his wallet. “The thing that I don’t like to see in a pitch is inauthenticity. You don’t truly believe in the product you’re offering, you only believe in the opportunity,” he says. “I want to see realness. I want to see you solving a real problem, and I want to see you really caring about that problem.”

Richelieu Dennis
Sundial Brands generated roughly $240 million in sales last year. It’s said to be valued at approximately $1.6 billion.

Don’t Adjust Your Mission For Investors

If founders truly understand the problems they’re solving with their products, why should investors who probably don’t understand those problems persuade them to alter the fundamentals of their businesses? Particularly for brands aimed at women of color, it’s unlikely outside investors are going to comprehend the concerns of the target audiences as well as the entrepreneurs behind the brands. Changing the essence of a brand for an investor without that comprehension isn’t wise, according to Dennis. “The very reason brands are successful is their authenticity, especially as it pertains to their points of differentiation and the offerings they’re providing to consumers,” he says. “Compromising on the pillars and principles that make you unique tends to take away a lot of the valuable differentiation you bring to the market. I think that’s definitely one of the big mistakes that I see people making in order to attract capital.”

Richelieu Dennis
Richelieu Dennis talks to Black Enterprise. In addition to his role at Sundial Brands, Dennis spearheads New Voices Fund, and is chair and CEO of Essence Ventures.

Think Boldly About Your Market And Message

Dennis pinpoints two decisions made at Sundial Brands that he’d like to redo if he could. The company began in mass haircare with the brands Nubian Heritage and SheaMoisture, and later branched out to the prestige beauty sector with Madam C.J. Walker Beauty Culture. In retrospect, Dennis would rather have tried to build prestige and mass brands simultaneously. “We have women of color consumers in all those spaces and, no matter what space they’re in, they deserve to have products that speak to them within those environments and that can solve their issues in those environments,” he says. Given a do-over, Dennis also would have been vocal sooner about the issues SheaMoisture raised in a 2016 #BreakTheWalls campaign highlighting the struggles women of color face beauty shopping and product segregation at stores. He emphasizes, “We have to continuously be pushing the marketplace, the powers that be, to serve our community better.”

Feature image credit: Jamey Stillings