As the barrier to founding a beauty brand is lower than ever, there is also more opportunity to spot the next big thing earlier in brands’ life cycles.
Private equity firm True Beauty Ventures “was really born out of a frustration … and being restricted on the types of businesses [we] could invest in,” said TBV co-founder and general partner Cristina Nuñez on the latest episode of the Glossy Beauty Podcast.
Nuñez, the former gm and COO of Clark’s Botanicals, had been approached by her co-founder, Rich Gersten, about building a beauty- and wellness-specific firm that could invest at the earliest stage. “[Prior, Rich] couldn’t invest in any brand without a minimum check of $10 [million] or $20 million,” she said.
True Beauty Ventures’ sweet spot is between the $1 million and $3 million check size, and it has the goal of further supporting brands with more capital as they grow. Since founding True Beauty Ventures at the height of the pandemic, Nuñez and Gersten have invested in emerging brands like K18, Maude and Crown Affair, and best-in-class brands further along in their journey like Moon Juice.
Below are additional highlights from the conversation, which have been lightly edited for clarity.
A different playbook
“The opportunity for us to come in on that $1 [million] to $3 million check size, and then follow up meaningfully with the brands that are winning, that are working and [where] we have strong partnerships has been the strategy we’ve executed to date with fund one. We’ve kicked off fundraising for fund two, which will be much larger than fund one. It’ll allow us to invest even more as a follow-on [investor] and more meaningfully in the brands that are working, to the tune of up to $10 million. [This] is really exciting because we could potentially come in and have a smaller investment to start, see how the brand grows, develop a great partnership with the founder, and then come in and lead their next round with a $5 [million] to $7 million check.”
“There are so many things that we look at. … At the top of the list is, by far, the brand founder. … We’ve probably evaluated 1,000-1,100 brands since we launched True Beauty in the summer of 2020. There is an unbelievable amount of brands that launch in this space, as we know. When you see enough of them and you’ve seen enough reps, if one comes to you that looks different, sounds different and acts different, you can spot it pretty quickly. We’ve invested [in about] one out of every 100 — that’s been our hit rate to date. And so that one out of every 100 really stands out when you’ve seen so many of them that don’t meet the qualifications. … [We ask] ‘Is this brand differentiated? Is it unique? And does it have the opportunity to be an enduring brand, not just a brand of the moment because of the trend? Can it stand the test of time?’ Behind [those questions] is the founder, who at the beginning is so intertwined.”
“Most of our brands are either currently category leaders or are very much driving growth, innovation [and] disruption in their categories. A great example is Maude. When we were evaluating what categories in wellness to invest in, we evaluated maybe 10-12 different brands. What it came down to is, ‘Which brand is actually trying to create a true assortment and trying to create something more than just the product itself?’ Maude is embracing modern intimacy for all, and is broad and inclusive across sexual orientation and gender in a way that was incredibly elevated.”