Beauty startups have begun to diversify the sector and investors are taking notice, with more deals to the space in every year since 2012. Unilever’s $1B acquisition of Dollar Shave Club in 2016 helped drive new momentum in the sector, and since then corporate leaders such as L’Oreal and L’Occitane have increased their private market activity.
In the charts below, we used the CB Insights platform to break down deals to beauty & grooming startups to get a better idea of where investment activity is going. Our analysis of the beauty & grooming sector includes startups producing consumer packaged goods for beauty and grooming (makeup products, razors, moisturizer, perfume, etc.) as well as beauty websites and apps, on-demand beauty services, and new salon chains and salon-focused websites and software.
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Annual deals by segment
The majority of startups in the space are developing new cosmetic brands. Grouped under our packaged products category, these startups attracted 56 deals in 2016, 55% growth since 2012. In combination with the salon segment (which we’ll discuss below) startups offering packaged products have powered growth in the overall beauty & grooming category. Some of the most well-funded startups in the packaged products segment include Harry’s ($287M), Tria Beauty ($207M), and Madison Reed ($45M). The largest exits have been in this segment as well – Dollar Shave Club, which sells affordable razor blades direct-to-consumer, was acquired by Unilever for $1B in July 2016 after raising over $163M.
Other startups have launched e-commerce platforms focused entirely on beauty. This segment saw 29 deals in 2016, holding essentially steady in deal count over the past three years. Since new makeup styles can be complicated for shoppers to learn to apply, many e-commerce platform startups provide how-to articles along with online marketplaces. We include subscription boxes, such as Ipsy ($103.4M in disclosed funding) and Birchbox ($86.9M), which group together products from different brands into one box, in the e-commerce platforms segment.
Some startups have offerings that span across packaged goods and e-commerce platforms, such as Glossier, which combines a content-rich online platform with its own branded goods; with these two prongs, Glossier has raised $35.4M from Index Ventures, Forerunner Ventures, Lerer Hippeau and others. (For our purposes, we categorize Glossier in packaged products.)
The salon segment, including startups providing salon management platforms or even launching new salon chains, has also grown from 8 deals in 2012 to 29 deals in 2016. The most well-funded startup in salons is Drybar, which currently operates over 70 salons focused solely on hair blowouts. Drybar has raised $97.7M from Castanea Partners and others, and has earned a valuation of upwards of $200M. In second is StyleSeat, a platform for reviewing, browsing and booking salons and stylists, with $40.7M from Lightspeed Venture Partners, Slow Ventures and others.
Breaking down deal share by category
We dug deeper into these segments to see which specific areas have been most attractive to investors and found that since 2012, within the packaged products segment, startups producing skincare goods have been most successful, with many leveraging a growing trend of using organic/all-natural ingredients. Notable skincare startups include TULA, One Love Organics, The Ritualist, and Goddess Garden.
Within e-commerce platforms, the largest sub-segment is multi-brand marketplaces, platforms focused solely on beauty but selling a range of brands and products. Other e-commerce platform startups focus on subscription boxes, product reviews, or beauty how-to guides.
Among salon-focused startups, we see startups offering online booking and reviews for salons, such as Brazil-based Vaniday, which has raised over $16M. Investors have also backed a number of new salon chains, including MiniLuxe ($42M in disclosed funding) and Drybar ($98M). Other startups provide tools for stylists, such as apps for stylist education, while the smallest sub-segment offers store management platforms for salon businesses.
The graphic below illustrates the full breakdown of deals to beauty & grooming startups since 2012. Shares are based on number of equity investment rounds, not the amount of money invested; we view number of deals as a more meaningful metric of investor attention, since dollar amounts can be skewed by single large deals.
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