BeautyX Capital Summit hosted the Great Expectations of 150 beauty entrepreneurs, executives and influential investors during two days of the most engaged networking and learning sessions of any BeautyX yet. Couldn’t make it? Here’s a recap of what you missed. Stay tuned as more announcements are made about our upcoming events: BeautyX Entrepreneurship Summit in New York, and BeautyX Demand Generation in LA.
The Capital Landscape
The Capital Summit commenced with IBMG Co-Founder Nader Naeymi-Rad laying out the full beauty investment landscape: the different types of investors, what they look for in brands and their average check size.
Beauty Independent Editor In Chief Rachel Brown sat down with three very different brand founders who executed three very different funding strategies. Pai Skincare founder Sarah Brown, Dame Co-Founder Alexandra Fine and Mayvenn Founder Diishan Imira. “I didn’t have to do it all through equity,” shared Brown of Pai’s $3 million capital raise. “We had quite a balanced way to raise funds. People can be quite fearful of debt. The way I reconciled it was by seeing it as a cost of doing business. You pay for rent, utilities, interest on a loan. Once I squared that I was much more okay with raising debt.”
When everything seems urgent and essential, how does a founder figure out what to spend on which business needs? IBMG Education + Thought Leadership team member Christopher Napolitano offered advice on dividing up those pie slices. “Protecting intellectual property is a really big thing for investors,” he instructed. “They want to know that you have it. You also have to have someone look over contracts, NDAs, etc. You have to keep all of that in mind.”
The BeautyX Summit series has become known for the stellar networking opportunities provided to attendees. During lunch, founders mingled and conversed with investors, fellow founders, and industry luminaries in a casual setting.
Angel & Individual Investor Panel
Rachel Brown was back on stage with a panel of investors—Tina Bou-Saba, Founder of CXT Investments, individual investor David Chung, Anu Duggal, Founding Partner of Female Founders Fund, Elizabeth Edwards, Founder of H Venture Partners and Patrick Robinson, Managing Partner at CircleUp Growth Partners—specializing in seed and series A funding. On what makes an investment attractive to CircleUp, Robinson said, “We try to find brands and initial products that become inseparable from their target consumer. We are more attracted to brands that start out narrow with a specific product [and] a clearly defined value proposition to their consumer. We’d rather find a brand with 500 or 1,000 initial passionate consumers and then figure out how to scale that.”
Beauty Independent has covered the beauty and wellness crowdfunding space closely over the past two years, interviewing founders that have had successful and unsuccessful campaigns. Editor Claire McCormack shared tips for entrepreneurs considering the crowdfunding route. “Your overall marketing spend to make sure your campaign is successful can be significant, especially for larger equity campaigns,” McCormack said. “For a raise of up to $1 million, you can expect to spend $25,000 on marketing. For raises up to $50 million, marketing costs can total $75,000.”
Preparing A Pitch Deck
BeautyX Master of Ceremonies Paul Potorti was joined on stage by Elena DiGiovanni, Strategy + Corporate Development for IBMG for this investor pitch deck how-to “The most important thing about framing the opportunity is knowing your audience,” advised DiGiovanni. “Understand how it fits into the context of what they’re looking for. Two things they look at are motivation and expertise as a proxy for their ability to understand the product and business model.”
Fundamentals Of Valuation
Ashleigh Barker, Senior Advisor at investment bank Michel Dyens, led this course that covered what brands should know about how investors will value a brand. “If you’ve launched, you will have sales performance, this is something an investor will look at,” she said. “If you start a brand today and don’t really know what the next two years will look like, your projections may not mean a lot. If you’ve been in business for five years and demonstrate growth, there will be more value to those projections but they are still hypothetical.”
Return Of The Brand: The Sale & Repurchase Of Clark’s Botanicals
The finale of day one was an inspiring and insightful one-on-one conversation with IBMG’s Claire McCormack and Clark’s Botanicals Founder, Francesco Clark. Clark founded his clean skincare brand after a spinal cord injury left him paralyzed and left his skin unable to sweat out toxins. Within a few years of launching, Clark’s Botanicals was acquired by Glansaol, which shortly after filed for bankruptcy. Clark quickly decided to buy his brand back. Of the whole ordeal, Clark says, “Glansaol was an immensely positive experience because Warburg invested much more in Clark’s Botanicals than I would have ever been able to. So, since January 18th, we have grown our direct-to-consumer by 240%. Now it’s about making sure our EBIDTA growth and top-line growth is in line with where it was before. Proving people wrong isn’t bad, either.” Read more here.
Understanding Deal Structures
In this course, Elena DiGiovanni discussed how things like financing options and a company’s corporate structure can impact how an investment deal is put together. Using clear-cut examples, concepts like debt versus equity financing, value appreciation and ownership dilution were all explored.
Investor Time Sessions
Larry Kahn, Managing Director at venture firm Beechwood Capital, angel investor Tina Bou-Saba, Founder of CXT Investments, and Patrick Robinson, Managing Partner at CircleUp Growth Partners led intimate question and answer sessions with BeautyX attendees. Participants used this valuable face time with these investors to ask in-depth questions about their investment strategies, get advice on how to scale their businesses and, of course, exchange business cards.
Another amazing networking opportunity, presented by our sponsor On Air Direct. Attendees and speakers were able to reflect on all they learned during day one of BeautyX Capital.
State of Deals 2019
“If it looks like a bubble, if it feels like a bubble, if it smells like a bubble, guess what? It is a bubble.” Elena DiGiovanni did not mince words during this day two kick-off conversation. The case for a beauty bubble was buttressed by citing the marked increase in beauty unicorns, those brands valued at $1 billion or above, that have commanded multiples reminiscent of the multiples seen in the technology sector. Also covered was the hot-and-sure-to-get-hotter CBD space—perhaps a bubble of its own. Read Beauty Independent’s full article.
Venture Capital Panel
Christopher Napolitano moderated this panel of investors that included Sonya Brown, General Partner at Norwest Partners, Anu Duggal, Co-Founder of Female Founders Fund, Brandon Ford, Chief Accelerator Director at Lubrizol, and Rob Rosenberg, Partner at Prolog Ventures.
The panelists’ diverse backgrounds and perspectives led to a lively discussion. Duggal, who has funded Winky Lux, Billie and Live Tinted, explained the allure of the beauty segment. “What beauty has which is particularly compelling for VC investors is high growth, high margins and high repeat rates, which are similar to what you want to see in a good software business. The multiples in the industry I think are very healthy,” she shared.
Venture Capital Case Study: Creating Credo
In a few short years, Credo has become one of the most coveted retailers in beauty. Rachel Brown spoke with Founder Annie Jackson, Credo investor David Fife of Nextworld Evergreen and Credo’s recently-appointed CEO Dawn Dobras about Credo’s creation and its plans for the future. Read more here.
A Conversation With Janet Gurwitch
Nader Naeymi-Rad had one-one-one time with respected beauty investor Janet Gurwitch, Operating Partner of private equity firm Castanea Partners. The 45-minute session was full of valuable takeaways from this beauty veteran. “We hope to get unicorn valuations, but that’s not our goal,” Gurwitch said of the exit process for brands she’s invested in. “I hate for a founder to go in thinking they’re getting a billion [dollar valuation] because you rarely are. We feel [multiples of] 2.8-3.8 is a very good return. Time is money, too, so we do try to turn [a brand] very quickly. Top line growth has been something we’ve sold on, but the higher your EBITA, the much better your price. It impacts it a lot.”
The View From The Top: A Conversation With Carol Hamilton
For the second year in a row, industry legend Carol Hamilton sat down with Claire McCormack to give her singular insight on the beauty industry. Hamilton is a 34-year veteran of L’Oreal and currently serves as Group President of Acquisitions at the beauty juggernaut. The duo discussed the consumer profile of Gen Z, the impact of Amazon, whether Hamilton remains as bullish on wellness as she was at last year’s Capital Summit and current investor darlings, direct-to-consumer, or DTC, brands. Hamilton enthused, “I love DTC brands, because they talk directly to the consumer. There’s something so powerful about the DTC space. You have all your data and you’re so much closer to your consumer. I don’t see these brands going away. This channel will continue to grow and will be a more powerful part of the beauty mix.”
Deal Appeal Competition
Everyone was a winner at Deal Appeal, the live pitch competition that served as the finale of BeautyX Capital Summit. The brand founders had 10 minutes to pitch to and field questions from the judges on the three-person investment committee. To prepare for Deal Appeal, the founders were each paired with a seasoned beauty finance professional. Ashleigh Barker, vice president at investment bank Michel Dyens, advised women’s sexual wellness brand Quim founder Cyo Nystrom; Luc-Henry Rousselle, managing director at William Hood, counseled palette producer Ace Beaute’s Niye Aniekhan-Attang; and independent strategic growth advisor Nicole Massimi, a former Birchbox executive, coached sustainable oral care brand Terra & Co. co-founder Azra Hajdarevic. Read more here.
Investor Time Sessions
Sonya Brown, General Partner at Norwest Ventures, Elizabeth Edwards, Founder & General Partner at H Venture Partners and Edward Wong, Principal at TSG Consumer Partners. Participants used this valuable face time with these investors to ask in-depth questions about their investment strategies, get advice on how to scale their businesses and, of course, exchange business cards.
BeautyX Capital Summit exceeded expectations with best-in-class education and unparalleled networking. Join us in LA in January for BeautyX Demand Generation, our enhancement of BeautyX Media & Influencer Summit, that will take a two-day deep dive into how to boost awareness and drive sales in a beauty market that’s more crowded than ever.