Startup beauty and wellness brands continue to turn to venture-capital funds to scale their burgeoning businesses, but the other side of that coin is angel financing.

According to PitchBook, U.S.-based beauty companies have already raised a record amount of VC funding in 2018, coming in at a total of $812 million. While venture capital money uses a pool of funds from several individuals, angel investors dip into their own pocketbooks for checks as high as $750,000 — though the median investment size is $25,000 — for a percentage of a company, according to the Angel Capital Association.

One such angel investor is Tina Bou-Saba, a former Morgan Stanley investment banker turned strategist (she covered business development and strategy at L Brands’ Victoria’s Secret and Bath & Body Works) and equity analyst — at Sanford C. Bernstein, she led coverage of Walmart, Target and Costco. Bou-Saba started her portfolio CxT nearly three years ago and has been early on buzzy indie beauty brands like clean color cosmetics line Kosas; Mented Cosmetics, which is a brand aimed at women of color; and naturals fragrance and body-care line Ellis Brooklyn. For the latter, Bou-Saba helped the company raise $500,000 in capital this year prior to its expansion into Sephora physical retail.

As female angel investors reached a record high in 2017 — accounting for 30 percent of the pool versus 18 percent in 2002, per a Harvard Business School study — Bou-Saba explains her investment approach and the increasing competition to get there first in beauty.

Your CxT portfolio is heavy in young beauty, wellness and health companies — what attracts you to those businesses?
I have a Wall Street background and covered retail for many years, but it was at Limited Brands, where I was doing strategy and business development for Victoria’s Secret and Bath & Body Works, that I really got to know the beauty space. I have a very personal interest in these businesses as a consumer. What rapidly became clear in the last 18 months or so is how much incredible entrepreneurial activity is happening in independent beauty specifically. I look at very early stage companies and how they are looking at the newest trends and white spaces for commercial opportunities in the market.

Why do you think beauty upstarts should consider angel investment funds versus private equity or venture capital money?
There is definitely a gap in funding sources across beauty and wellness. Traditionally, beauty tended to be the type of business where there were growth equity players interested in companies that were much bigger, like making tens of millions of dollars in revenue. More recently, you’ve seen venture capital become very active in this beauty consumer space. It’s very hard for independent beauty companies to raise the earliest stage of capital — they might be wanting to raise $100,000 to $1.5 million, and they are struggling to get that across the finish line because of the lack of sources or opportunities. Often times, they are too early for a traditional growth equity partner, and in many cases, when you are building a brand from the beginning, a tech-focused VC player will expect hockey-stick growth, which isn’t really realistic. I come in when companies are beyond the friends-and-family fundraising, but they aren’t ready for a larger growth equity player.

How do you help budding companies like Ellis Brooklyn and Kosas at CxT?
It runs the gamut, but I work on go-to-market strategies, brand building and early team building decisions. I also zoom out and tell these young founders how to tell the story of their companies to customers, partners and potential investors, in a way that also fits into the broader consumer landscape.

Shaping the narrative is so important at the beginning, but if you are a beauty entrepreneur, you are laser focused on executing the day to day — you may not be looking at how your product or story fits into the bigger beauty space. Doing this helps with commercialization — how you take an idea and a great founder and make it a real opportunity. Also, many of these founders don’t have in-house capabilities like PR or growth marketing, so I connect them with the right network and players, who can help. That is incredibly important in the early stages.

Many of your companies like Mented Cosmetics are founder-led beauty brands. How important is that in the industry today?
Consumers, more than ever, want interesting, founder-led independent brands. There is a realness and authenticity that  connects customers from the beginning and allows them to grow with the brand. The biggest sign of success for the companies I have invested in are the founders or the founding teams.

Being a female founder yourself, what about female founders is so compelling in beauty and wellness today?
As challenging as the past has been and the lack of funds that have been available, from my perspective, this is the most exciting time to be a female entrepreneur. We are at beginning of a much bigger wave of that, especially in beauty and wellness. No one knows better the needs and wants of this customer than these women who are using and needing these products already.

Why do you think more and more private equity and venture capital funds, as well as larger players like L’Oréal and Revlon, are more willing to make bets on these smaller beauty upstarts?
All of these companies have a No. 1 priority of being customer-centric and following that consumer and what is interesting to her. It’s impossible to ignore what’s going on in the indie beauty space, given the consumer interest. These micro-targeted brands that have really strong personalities speak to more and more consumers. Everyone talks about community, but strong communities are forming around these indie brands, so if an early-stage company can get that kind of engagement on social or word of mouth, that is incredibly promising. Those fans become the early advocates of these beauty businesses, and that is such a strong and worthy foundation. Larger companies or funds want to connect with these customers and communities in that personal way.

Aside from beauty and health, what other growth sectors does CxT focus on?
I’m excited about specialty apparel and accessories, so I’m an investor in Modern Citizen and Birdies and Argent. And the third area is tech-enabled disruptors, so that includes Armarium — I’m very interested in rentals and sustainability. As far as platforms, I’m an investor in a company called The Relish, which is a platform for female sports fans. Overall, I’m an observer, so I’m constantly evaluating the landscape and thinking about what I can do next.

What kinds of beauty and wellness companies are you looking to invest in next?
I’m extremely interested in the beauty from the inside-out proposition, whether that’s ingestibles or CBD — they are both very promising sectors in the coming months. The landscape of beauty right now is hyper competitive, and acquiring customers is the biggest challenge, so if you look at broader definition of beauty and what that could encompass, there is a lot.