As new corporate and VC investors seek out beauty startups as investment targets, the beauty & grooming sector has seen a rise in deals. In 2017, major corporations such as L’Oreal and L’Occitane stepped up investment activity, while smart money VC firm Sequoia Capital made its first-ever cosmetics investment (in UK brand Charlotte Tilbury).
Our beauty sector includes startups producing packaged cosmetics and grooming products, on-demand beauty services, beauty e-commerce platforms, and salons and salon tools.
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Quarterly deals and dollars
Deals to beauty and grooming startups spiked in Q1’17 compared to the prior quarter, with 38 deals versus 28 deals in Q4’16. However, funding slipped for the second consecutive quarter, from $139M in Q3’16 to $131M in Q4’16 to $99M in Q1’17.
UK-based salon chain Rush raised the quarter’s largest deal, with a $17.18M private equity investment from LDC, the company’s first disclosed funding round. In second, personalized hair care startup Function of Beauty raised a $9.5M Series A from GGV Capital and Y Combinator, bringing total company funding to $9.62M. Rounding out the top three, online beauty platform Beautycon Media raised a $9M Series A from A+E Networks and others, boosting company funding to $11M.
In comparison, Q4’16’s top deals were much larger — a $60M raise by beauty subscription Memebox (now with $157M in total funding), and $25M raise by content/cosmetics startup Glossier (now with $35.4M total).
Annual deals and dollars
From an annual perspective, the run-rate for 2017 so far would drive the beauty sector toward an all-time high in deal count of 149, representing 19% growth from 2016. If the pace of deals continues, 2017 may see the first major annual jump since 2014, as deal count from 2014-2016 was relatively stable. However, with smaller deals so far this year, the run-rate projects a small slip in the annual funding total.
Beauty investment peaked in 2014, due to a number of large $50M+ deals. In 2014, Beijing-based beauty site Jumei raised $150M in private equity from General Atlantic; razor startup Harry’s raised $150M across three equity rounds throughout the year (Harry’s also raised a $57.5M debt round in 2014, not included in the equity figures here); and subscription startup Birchbox raised a $60M Series B.
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