Investments in the beauty industry have already been making waves this year, from color bar brand Madison Reed‘s $51 million raise to women’s shaving company Billie’s $25 million Series A round to clean beauty brand Jane Iredale’s undisclosed majority stake.

Jane Iredale debuted in 1994 and currently sells in locations like C.O. Bigelow and Follain. The recent deal, led by San Francisco Equity Partners (SFEP), was for an undisclosed sum. The private equity firm has had a longstanding interest in the beauty sector: Its portfolio includes Yes To, which retails at Target and Ulta Beauty (SFEP invested in the company 2008), and Japonesque, which sells at Dermstore and Rite Aid — the firm invested in it in 2015. Managing partner Scott Potter called the firm’s approach “hands-on,” as it assists in all aspects of brand building, from marketing to financial infrastructure and distribution.

“We are very growth-oriented investors,” he said. “We like partnering with companies that have some scale and profitability and want to grow their businesses the right way.”

Potter discussed with Glossy what trends are emerging in clean beauty, what authenticity in that space means and how retailers are looking to create their own proprietary brands to get in on the beauty boom.

What interested you about Jane Iredale and your other portfolio brands?
Yes To and Jane Iredale have some similarities. There has clearly been a movement and growing awareness with the consumer around clean beauty. When you have natural beauty brands like Jane Iredale and Yes To that have the combination of both natural ingredients and efficacy, it is a powerful combination. Both businesses have that in spades, and they’re very authentic brands; they are very transparent and speak to the consumer in an authentic way. They are also very social and have direct relationships with the consumer — that is something appealing to modern beauty consumers.

What does authenticity mean here?
Some legacy brands that have been in the market for a long time start flapping natural or pseudo-natural claims, or come out with a natural extension of what they are doing. But then you have Jane Iredale with a 25-year history, where Jane started the company in the Berkshires with a real belief that foundations were causing women serious skin-care concerns. Over the years, they also sold through dermatologists, plastic surgeons and cosmetologists that gave the brand a stamp of approval around efficacy. That authenticity is something you can’t fake or replicate through a marketing channel.

What beauty industry trends are you seeing emerge within clean beauty? 
There is a big part of clean and natural beauty that is [focused on] ingredient stories. It is constantly evolving. Yes To is great because they have a platform in which we can launch lines tied to particular hero ingredients. Over the last year and a half, they have had great success with their charcoal line, which is a hot ingredient that has driven a lot of growth. We are also seeing trends in delivery mechanisms. For example, there was a lot of growth driven by Yes To in the mask category. And we are also seeing a lot with millennial consumers and how they are interacting with beauty: They are moving away from full-size tubes [of products] and more into single-use treatments, like paper masks.

What about retail? Are you seeing any changes happening there?
We are seeing big retailers, whether it is Walmart, Target or even Amazon, really wanting — across all consumer segments — to develop their own brands that are unique to them and also distinct from private label, which is [more like] generic packaging. [They want] brands that look and feel natural to the retailer. Beauty is an area where they are very focused on doing that. And while it makes strategic sense to do that in order to offer differentiation and, frankly, give the consumer a reason to walk into the store, they aren’t set up to do it well.

We will continue to look at brands, like Japonesque, that can offer that [service] to retailers. Japonesque has all the capabilities of being a national player within beauty, and they are actually partnering with retailers to give them exclusive brands. We think that is an interesting trend that will continue, and it’s one of our investment themes.