Smart Money VCs Bet On Direct-to-Consumer Beauty Startups

Deals to beauty and grooming startups got off to a strong start in 2017. Over the past few years, top-tier VCs have made a number of investments in the space, though with mixed results.

This year, Sequoia Capital made its first ever beauty investment, investing an undisclosed amount into British cosmetics brand Charlotte Tilbury. Sequoia’s investment is somewhat of an outlier, in that Charlotte Tilbury is a multi-product cosmetics brand that sells through traditional online and in-store channels, including Nordstrom and Bloomingdale’s. Nearly all other beauty & grooming startups backed by smart money VCs focus on direct-to-consumer, subscription, or on-demand distribution methods.

To get a better idea of smart money activity in the space, which can provide a window into momentum in a sector, we used our Business Social Graph tool on the CB Insights platform to map out smart money VCs’ beauty & grooming plays since 2012. Our beauty sector includes startups producing packaged cosmetics and grooming products, on-demand beauty services, beauty e-commerce platforms, and salons and salon tools.

For more on how we selected our 24 “smart money VCs,” please see the explanation and full smart money list at the bottom of this post.

In the graphic above, we can see that Andreessen Horowitz has been the most active smart money VC in beauty & grooming, backing four startups since 2012. One of its portfolio companies, Dollar Shave Club, attracted investment from two other smart money VCs (Kleiner Perkins and Battery Ventures), and their bet paid off – Dollar Shave Club was acquired at a $1B valuation in 2016 by Unilever in one of the largest e-commerce acquisitions of all time.

In contrast to Dollar Shave Club, Bessemer Venture Partners’ beauty play – Indian on-demand beauty startup StayGlad – ended up being acquired in fall 2016 by Indian listings platform Quikr after reportedly running out of cash. Beauty booking app Beautified, backed by smart money VC NEA in 2014, also appears to no longer be operating.

Beauty brand Julep, backed by Andreessen Horowitz and others, exited for an undisclosed amount in December 2016. Julep was acquired by Glanasol, a new beauty company formed by the acquisition of Julep along with two other brands, Laura Geller and Clark’s Botanicals.

From a business model perspective, Dollar Shave Club focuses on direct-to-consumer and subscriptions for razor blades, disrupting a category traditionally reliant on convenience stores. Similarly, many startups in the graphic below avoid the brick-and-mortar sales channel. Madison Reed offers direct-to-consumer hair coloring; Mayvenn sells direct-to-consumer hair extensions; and Walker & Company sells the direct-to-consumer Bevel razor system geared toward men of color.

Subscription beauty startup Birchbox also earned funding from two smart money VCs, Accel Partners and First Round Capital. Birchbox began as an e-commerce based subscription box service, offering curated samples of other brands’ products, but went on to launch their own in-house product lines and opened their first brick-and-mortar store in 2014. (While Birchbox struggled through rounds of layoffs, they recently achieved profitability).

Eyeing another means of bypassing the store channel, we see several smart money VCs looking to on-demand beauty delivery startups. Besides Bessemer Venture Partners backing StayGlad, NEA invested in New York-based on-demand beauty startup GlamSquad in 2015 and again in 2017. StyleSeat, which attracted investment from both Lightspeed Venture Partners and Founders Fund, offers instant booking for beauty appointments.

See the full graphic below. Please click to enlarge. Each green line symbolizes one investment round.

Note: To analyze smart money trends, we looked at the activity of 24 top VC firms, selected according to portfolio valuations and investment outcomes. Some of the investors are linked to relevant research briefs. Here’s our full list of 24 smart money investors:

1. Sequoia Capital
2. Benchmark Capital
3. Accel Partners
4. Greylock Partners
5. Andreessen Horowitz
6. Union Square Ventures
7. First Round Capital
8. Bessemer Venture Partners
9. Kleiner Perkins Caufield & Byers
10. New Enterprise Associates
11. Founders Fund
12. Lightspeed Venture Partners
13. Foundry Group
14. Index Ventures
15. Khosla Ventures
16. Social Capital
17. Emergence Capital Partners
18. True Ventures
19. Floodgate Fund
20. General Catalyst Partners
21. CRV
22. Spark Capital
23. Battery Ventures
24. Redpoint Ventures

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