For any brand founder, securing financial backing can seem like both a dream scenario and one of the most daunting tasks they’ve ever encountered. In the beauty and wellness space, brands are often launched with an idea, a passion—and the tenacity that comes with having to bootstrap it for several years as the brand gains traction. Founders are often pulled in so many directions, the thought of trying to lure a wellness investor falls by the wayside. This can mean missed opportunities to grow and scale a business.
But the formula for attracting a beauty or wellness investor doesn’t have to remain a secret. As it turns out, passion, vision and a clear understanding of their target customer base go a long way in founders getting the attention of potential investors.
Know the Why, What and How Behind Your Brand
“Because I’m a very early stage investor, there is limited data on a brand, so I’m looking for passionate founders who wake up and want to crush it daily,” says Tina Bou-Saba, an early stage (“angel”) investor. “I want to see passion and vision. After that, I evaluate the business plan and the specific skill set as it relates to their ability to execute that plan. What’s the white space they’re looking to fill? What does their customer profile look like? If the business has already launched, I would look at the data: What are the sales numbers, the repeat purchase rates and other traditional metrics like CAC and LTV? As a company grows, it gets more challenging and expensive to continue to acquire more customers. I’d want to know how loyal their customers are, how much they’re spending and [if they’re] recommending the brand to others.”
Focus Your Brand Story—Then Focus Some More
Sometimes, a founder will be so enthusiastic about launching that they want to hit the ground running without truly understanding what their brand story is, or who their customer will be. But having clarity around these can mean the difference between working with an investor—or not. “Founders I get super excited about know everything about their target customer,” says Tina. “Who she is, where she lives, what she watches, where she shops, what other brands she buys. This allows them to hone their messaging and speak to their customers in an authentic way.”
Another thing that resonates with this beauty and wellness investor especially is a solid brand story. Tina says, “Think of a traditional brand like Clinique. We don’t know what the founder’s story is. Today, consumers love an authentic founder story. It’s not the only go-to-market strategy, of course, but it can be very compelling, and it plays well on social media.”
If a founder doesn’t have a solid grasp on their brand story, it doesn’t mean all hope for investment is lost, but it suggests that the company could benefit from some refinements in positioning. “If I think there’s white space and I get where they’re going with their brand, it could be a fit. It depends on the specifications of the business opportunities and what the other dynamics are. But the reality is, there are already brands who know who they are and are doing brand identity really well, so it’s a tough competitive environment.”
Know Your Brand’s Customers and Its Competition
As the green beauty and wellness industries continue to grow in leaps and bounds, brands may struggle to differentiate themselves from the fray. While this can make it a challenge to stand out to potential investors, having a solid foundation—including brand identity—makes all the difference. Says Tina, “What’s happening now in beauty and wellness is that the barriers to entry are low. It’s not that expensive to start a beauty or wellness brand, so there’s a lot of competition. That being said, there is no substitute for the vision of the founder. A great founder understands the customer deeply, and is creative and open to learning. Beyond that, the branding is critical. I want to know if the brand has found a core group of customers who are super passionate. Who is your customer? How are you reaching them? How much are they spending? Are they coming back to buy, and are they recommending your brand to their network? A founder needs to know these answers. Getting the branding, the look and feel right, and understanding how the customer is going to experience it, is critical.”
Know How You’ll Allocate Investor Funds
In addition to knowing their brand inside and out, founders need to have a clear idea of what they will do with the money once a wellness investor comes on board. “The last thing I’d say is for a founder to really consider why they want to raise money,” Tina advises. “How are they going to use the funds they raise? Will they invest in growing their team? In implementing technology? In marketing initiatives? Building out inventory or on product development? I think it’s important for founders to be able to communicate to a potential investor what the uses of the funds are as they relate to supporting the business plan.”
Practice Your Pitch
Founders looking for fundraising will have to present a pitch to potential investors. What investors want to see is a pitch that’s clear and concise. “I personally want founders who are fundraising to have a crisp, sharp, polished pitch deck. It doesn’t have to be overly long or fancy, but for me, I want to see the branding, the founder story, the product line and the target customer information,” Tina says.
Though putting together a deck and presenting it can be arduous for founders who may not be naturally business-minded, the process can be invaluable. “For a founder, the process of putting together a pitch deck is really important,” Tina shares. “Part of the deck presentation is me evaluating how good the founder is at selling her company. With financial projections, when a founder is in early stages, they’re illustrative at best, and I will look at them with a healthy dose of skepticism. But information on margin structure or cost of goods—that, I want to see. Talking through the financial model with the founder helps me understand if they know the levers of their business: Are they realistic on their marketing budget? What if they go wholesale instead of direct to consumer? I want to see those margins. Does the business model still work under these different scenarios? And for a business further along, I want their pitch to include stores and wholesale account information, sales data, CAC [customer acquisition cost] and LTV [customer’s lifetime value].”
The Benefits of Early Stage Bootstrapping
“I think early stage bootstrapping is great!” Tina says. “You learn so much when you have to be lean and efficient. This instills a level of operating discipline that’s extremely important. I don’t think you need to raise money to figure out if there’s a business opportunity around your idea. For first-time founders, it’s more realistic to do a soft launch and figure out who their customer is and what’s working. Then, if there’s an opportunity to fundraise, great. You’ll be in a much better position.”
If your brand is a bit further along, Tina advises cautious optimism when seeking funding. “For businesses further along, don’t overly dilute yourself because you think you have to fundraise. Think carefully about what you’re giving away when you’re giving away equity.”
Tina continues, saying that if what you’re doing is working, then start talking to potential investors. “Think about what your vision is and who will be the right partner to invest in your business. Consider if you can work with angel investors, or if you need one or more larger institutional investors. If a founder doesn’t have experience with financial modeling and budgeting, they can hire someone to help build out the forecast. That’s often not the skill set of founders, and that’s okay! There are people who can walk you through it. Think about what your cash needs are, and then consider fundraising against that. Founders need to be aligned in what their goals are.”
Remember: Investors Are Paying Attention
The power of networking can’t be underestimated in the increasingly crowded space of beauty and wellness. “A lot my investment in wellness and beauty brands comes through my extended network, or other, larger investors I know may send me something that they believe is a good fit,” Tina says.
“The network may include other founders, or an article that people read prompts them to reach out to me. I try to spend a lot of my time thinking, researching, going to stores and seeing what’s online. Because I’m quite focused on the beauty and wellness space in particular, I have a sense in my own mind what excites me, where the white space is, and I usually know early on if a business aligns with that. A different beauty and wellness investor may have different ways of seeking opportunities out, but that’s what works for me.”
5 Things That Most Excite This Wellness Investor
1. Female Entrepreneurship. More and more, the beauty and wellness space is becoming a vehicle for talented women of diverse backgrounds—and that’s exciting.
2. Inclusivity. New businesses now are really all about celebrating women and men in their true selves. People are waking up to the fact that there is no one standard of beauty. This authenticity is resonating with millennials on up. Businesses who get it right will have the opportunity to build strong, lasting relationships with their customers. These are not niche markets, they’re just underserved—plus-sized fashion, women of color—and finally, they’re being included.
3. Owning One’s Own Health. People in general are increasingly distrustful of institutions like Big Pharma. Now, these modern wellness businesses are allowing people to take charge of their own health in myriad ways, from supplements and meditation practices to businesses in the healthy food and even cannabis spaces. Products and services that enable and encourage people to take charge of their own health are very promising right now.
4. Increased Access. One of the biggest challenges in wellness is it has historically tended to market toward a narrow group—affluent, white women. As an industry, they’re figuring out wellness is a huge market, and there needs to be greater access to healthy living to people of all backgrounds and socio-economic groups.
5. Micro-Targeted or Specialized Beauty Brands. The old concept of brand loyalty, where a woman would buy only from her favorite beauty counter brand, is no longer relevant. Now, customers like to mix and match their brands, seeking specialized formulas that target their concerns and unique products and brands.
Are you interested in launching a wellness business? Check out these tips for setting up your venture.