The Future of Investments
“The competitive landscape requires a big budget to compete. Twenty five years ago you could self-fund and launch in Barneys. Today that’s not possible,” Kovack remarked earlier in the day—so naturally audience members were eager to learn the latest news in the investment landscape from Deborah Benton, Managing Partner and founder at Willow Growth Partners; Jorge Cosano, founder and Managing Partner at Synchronicity Ventures; and Kendra Bracken-Ferguson, founder and CEO of BrainTrust. Skincare was one of the most active categories but saw 24 brand failures in Q3, leading to mixed messaging growth stories.
“There is not one white space; there are many white spaces: innovations around materials and formulations, retail channels, content innovation. What’s most important for founders is find your white space. Gone are the days where you can white label a formulation and put a beautiful brand on it and bring it to market,” Benton proclaimed, also noting that she is seeing a “healthy culling” but that 2024 could bring a turnaround. “You will win if you find the niche or the desire and create the products to satisfy that,” Cosano advised entrepreneurs. “Look at some of the winning companies; those came from the last economic crisis. A lot of people were attracted to the business for the wrong reasons, and now it is a time of correction. The market is tough, but for the right founders and good ideas there is always opportunity.” BrainTrust invests in Black-owned beauty, which has been notoriously underfunded despite the substantial spending power of its consumers. “It wasn’t a case of this is the right thing to do, this is good business,” Ferguson notes. “We spend so much time educating investors about the communities we are serving. There is room for all of us to create brands.” All three panelists advised against putting too much emphasis on valuations, which were termed “a completely fabricated number” and instead to “buckle down and be super judicious with your capital.” Women’s hormonal health, functional color, scalp care, AI-led beauty, and ingestible wellness were highlighted as prime categories for investment.
Another area with potential for growth is the new iteration of the metaverse, or web 2.5 (a connection of the digital with the physical to facilitate community and drive sales) as it was termed in conversation with Maya Kosovalic, Vice President of Digital Innovation at NYX Professional Makeup; Agustina Sartori, Senior Director of Digital Innovation at Ulta Beauty; and Bridey-Rae Lipscombe, co-founder and CEO of CULT. “You need to be where the consumer is. There are already established platforms; now it’s a question of finding those spaces for engagement,” Kosovalic commented. “We’re always looking for new channels. Technology is part of the future of beauty, but adoption is still to come. Understanding what it is that you want to learn is key. Be thoughtful about what your choices are, or you can get lost in creating your own metaverse,” Sartori added. According to Lipscombe, “The metaverse represents an investable evolution of the online experience, but we are not there yet. There are big audiences in meta-gaming and Gen Zalpha coming through. See it as part of 360-degree environment, enabling self expression.”
Creating those “tribal audiences,” as Mahdara calls them, is a key to brand strategy. “Trends take three to five years to hit mass market, and having a mass brand is really hard right now. The number one thing I am looking at when working with a brand is how close they are to their tribal audience. Their consumers are actually their stakeholders,” she says. “You cannot buy consumers and audiences. We tried, and the market kicked us in the shins. In the end, when you look at acquisitions, it is ultimately brands who build a strong, intense relationship with their stakeholders, listen to what they want, and show up for when they have feedback.”
The final panel of the day—consisting of Sophie Bai, founder of B.A.I. Biosciences, Inc. and Pavise; Carolina Reis, founder of OneSkin; and Dr. Robb Akridge, founder of Opulus Beauty Labs—looked to the future of investment in science as the new driving force of skincare. Where clean beauty primed audiences for medical study curiosity and ingredient scrutiny, this new era is based in medical backing and years of dedicated research to create truly unique products. While all three admitted the challenges of funding an innovation-driven brand built entirely new from the ground up, the promising potential of shifting the skincare industry into a new era of efficacy and ingredient transparency is more than worth the effort. From inventing proprietary peptides that target anti-aging at the cellular level to superhero zinc oxide filters for superior sun protection and delivery components that offer an adjustable daily dose of efficacious actives, the sky is the limit.
“The industry needs a huge revamp in terms of what’s available in raw materials that are efficacious and therapeutic,” Bai comments, adding that “skincare is healthcare.” “When you invent something that’s totally different, it’s all about education; one of the challenges we’re encountering is how to educate consumers,” Akridge admits, although all three founders stand by the power of innovation. “If you want to build a company that’s going to last decades, 100 years, this is totally worth the investment, because if you continue to have innovation, pushing forward the development of products, you are going to make sure that you are ahead of the market. Given that it’s such a saturated market, if you don’t have something that’s really differentiated and based on solid science, it’s going to be hard staying in the business long term,” Reis adds.
The day concluded with the NEXT Awards ceremony, highlighting the entrepreneurs, branding and marketing agencies, creatives, brands, and PRs who pushed the boundaries of beauty in 2023, acknowledging the talents shaping the industry’s present state and future. Learn more about the winners here.
