The Business of Wellness: Why One Venture Capitalist Invested $6 Million in Fast Beauty Brand Winky Lux
As new wellness and beauty brands emerge on the scene with increasing regularity, carving out a niche for a brand can be challenging—or even frustrating—for its founders. From brand recognition and loyalty to organic social media engagement and global growth, launching in today’s popular wellness and beauty markets takes passion, drive and a plan to break out from the noise. For investor Robin Li, vice president at GGV Capital—a 20-year-old VC firm with offices in the United States and China and a $4 billion portfolio—deciding to invest in a brand doesn’t fit a particular formula. Instead, the 280 companies GGV Capital has invested in over the past two decades are able to set themselves apart through both their products and their founders. GGV Capital’s recent investment in cult-favorite, “fast beauty” brand Winky Lux is proof positive that creativity, ingenuity and high quality can make all the difference in securing investment—and taking a beauty or wellness brand to the next level.
What do you look for in brands or founders before deciding to invest? Is there a “formula” you look for, or is it more of a gut feeling?
We don’t have a formula. We evaluate not just product/market fit. We also care about founder/market fit: Why are they the right one to build this company? When we can identify this, it helps the brand and founder to break out from the noise. We can spend anywhere from a week to a year with founders before we invest. It’s kind of like a marriage!
Our return cycles are a 10-year return. We have a lot of core theses we invest in; consumption changes so much. Look at smartphones: 10 years ago, they didn’t exist. There’s a long way to go with this technology, and so much opportunity for companies to be more global. It’s easier than ever for them to reach people and to grow as a result.
What most excites you about the beauty and wellness space right now?
I’m really excited about “masstige.” It’s a newer category that merges mass market and prestige. We’ve seen a lot of shift in consumer behavior around the demand for color cosmetics online. Masstige is marketed as luxury, but still affordable—think brands like Zara, Coach, Godiva—and in beauty, is relatively new. We think it’s exciting because they rate higher than middle market brands, but they sell taste and design to the masses through their look, feel and the way they advertise.
I’m also very exited about wellness as affordable luxury. More than ever, people are spending on self-care, on things like Class Pass, Peloton, Soul Cycle. In the age of social media, people more than ever care about how they look. It’s about how fit you are, how you skin glows—and that’s a big driver in this wellness-as-luxury movement.
GGV Capital has invested in Winky Lux, the color cosmetics brand that’s been dubbed the “Zara of cosmetics.” What about their “fast beauty” model attracted you as an investor?
Actually, what attracted us to Winky Lux was not about fast beauty exclusively. We invested slowly and worked closely with founder Natalie Mackey for almost a year. We could see how on top of trends she is; her team includes both millennials and experienced people who can tell you what’s trending, what’s working. Winky Lux interacts with their customers directly, asking what they’re looking for, inviting them to help name products. They work with co-creators who have their own followers, so they end up empowering an army of influencers online and offline.
We’ve never been able to interact with conventional beauty brands like L’Oreal. We’re in this era when cosmetics penetration online is less than 10 percent of the market. Millennials are turning to the internet to research the brands and products they’re interested in; Winky Lux has a masstige price point ($14-29) with this beautiful packaging that is all designed by Natalie, so unboxing the product is also an appeal for consumers. In addition, the formulas are high end, which has earned them a customer loyal following.
Winky Lux took to social media to track what was trending, built their product development to meet these trends, and turned around their first product in 45 days—a timeline unheard of in traditional, and clean, beauty manufacturing. They’ve done incredibly well, raising $6 million in funding for their Series A round. Do you think this “fast beauty” is a sustainable model for founders in wellness or beauty who are looking to launch, or is Winky Lux a bit of a unicorn?
Fast beauty is only sustainable if your supply chain is really solid. Natalie has had a lot of experience with supply chain and licensing. She worked with manufacturers in China with some top brands; she also understands the private equity side and had a design background in undergrad. Unless you have access to this know-how, it’s really hard for someone to do it all themselves. The experiential retail channel is actually what drew us to them for this most recent round of funding; people are seeking things to do and ways to engage with a brands online and in-person, we know people are three times more likely to purchase when they engage with a brand offline. This summer, Winky Lux will be doing events in New York, and we can’t wait to see how people respond!
With beauty and wellness continuing to grow in leaps and bounds, what makes a brand stand out enough to catch your eye?
In this day and age, it’s so easy for anyone to create a brand, but how do you prevent being a one-trick pony? How do you have something that’s proprietary? We look at retention and repeat usage—six to 12 months from now, will your customers still be with you? With Peloton (part of the GGV Capital portfolio), after several years, 96 percent of all their bikes still have a subscriptions tied to them. To stand out, you have to be a cult—you have to be integrated into your customer’s routines.
How has social media changed the way you decide to invest in brands? Are followers as important as brand founders are conditioned to believe they are?
Yes, definitely! Social media matters. There are more than 1 billion users on Instagram and more than 2 billion on Facebook. Teenagers today spend more than five hours a day on YouTube. But it’s not about just followers; it’s about engagement and interaction—that’s only going to continue to grow. We care about community posts and tags: Are people sharing your products and your brand? Is your engagement authentic? Paid advertising is not sustainable, so organic growth and word of mouth are the most important.
What do you see as the future of beauty and wellness? Anything in particular trend you’re keeping an eye on?
The future of beauty and wellness lies in global accessibility and engagement. We see the global nature of millennials, who are very similar in the United States as they are in China. There are about 63 million millennials in the U.S., and 350 million on China. How are brands becoming more global, especially in digital? While we don’t require brands we work with to be global, it’s on our minds when we work with them, and vise versa.
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