The Barefaced Podcast: Episode Summary
Title: The Beauty Funding Boom: Why Are VCs So Obsessed with Beauty?
Host: Lily Twelve Tree
Release Date: April 6, 2025
Podcast Description: A beauty business podcast hosted by Barefaced, available at barefaced.substack.com
1. Introduction
In this episode of The Barefaced Podcast, host Lily Twelve Tree delves into the burgeoning relationship between venture capitalists (VCs) and beauty brands. Observing a surge in VC funding announcements within the beauty sector, Lily seeks to understand the underlying factors driving this trend. To provide comprehensive insights, she interviews Ava Chandler Matthews and Beck Jeffrid, founders of the Australian skincare brand Ultraviolet, as well as Tara Petter, CEO and co-founder of NuFace, a leading microcurrent device company that has thrived without external funding.
2. The Surge in VC Funding in Beauty
Lily begins by highlighting the noticeable increase in VC investments within the beauty industry. She notes, “I swear I see a post by the beauty independent or business of fashion announcing that a beauty brand has closed a funding round” (00:27). This observation prompts an exploration into why VCs are increasingly interested in the beauty sector, which traditionally required substantial capital for product development, manufacturing, and distribution.
3. Understanding Venture Capital in the Beauty Industry
Before diving deeper, Lily provides a primer on venture capital (VC) funding. She explains that VC is a form of private equity financing aimed at early-stage and high-growth companies in exchange for equity stakes. Originating in Silicon Valley with firms like Sequoia Capital, VC thrives on identifying businesses with significant growth potential despite high risks (00:27).
Lily contrasts tech startups with consumer packaged goods (CPG) businesses, noting that while tech companies benefit from low overheads and scalable digital products, CPG brands like those in beauty face higher costs due to physical product manufacturing, inventory management, and logistics.
4. Interviews and Insights
a. Ultraviolet Founders: Ava Chandler Matthews and Beck Jeffrid
Ava and Beck share their journey with Ultraviolet, an Australian skincare brand focused on innovative sunscreen solutions. They successfully closed a $15 million funding round last year. Ava remarks, “We found that having the money allowed us to think so much bigger than we ever had before” (15:45).
Key insights from their interview include:
- Strategic Use of Funds: The capital injection enabled Ultraviolet to expand into the U.S. market, including a significant launch in 592 Sephora stores nationwide.
- Selective Funding: Despite their profitability, they chose to raise funds to leverage expert knowledge and market expansion rather than out of necessity.
- Growth Acceleration: Access to VC funds allowed for rapid scaling and entering markets that would have been challenging to penetrate independently.
b. NuFace's Tara Petter
Tara Petter provides a contrasting perspective as NuFace has never raised external funding. She emphasizes the importance of clear differentiation, strong brand storytelling, and financial discipline for sustainable growth without VC backing. Tara states, “Someone starting today could replicate New Face's success, but it requires a clear differentiation and financial discipline” (22:30).
She highlights that while VC funding can accelerate growth, it is not the only path to success. NuFace’s approach relies on reinvesting profits strategically and fostering a loyal customer base to sustain long-term growth.
5. Pros and Cons of Raising Capital
Pros:
- Accelerated Growth: VC funding can significantly speed up a brand’s expansion, enabling entry into new markets and large-scale marketing campaigns. For instance, Ultraviolet leveraged their $15 million to penetrate the U.S. market effectively.
- Expertise and Networks: Partnerships with VCs like Aria Growth Partners provide valuable insights and connections that extend beyond financial support.
- Increased R&D: More capital allows for enhanced research and development, driving product innovation and diversification.
Cons:
- Loss of Control: Raising significant capital often means ceding equity and decision-making power to investors.
- High Expectations: VCs typically seek rapid growth, which can pressure brands to prioritize scale over sustainable practices.
- Financial Obligations: Funded companies may face increased scrutiny and the necessity to meet aggressive performance metrics.
Beck from Ultraviolet shares, “Having the money allowed us to find the right partner that could help beyond just injecting cash” (22:15), illustrating the strategic advantages of selective funding.
6. The Future of Beauty Funding
Lily explores the sustainability of the current VC boom in beauty. She raises concerns about a potential funding bubble, drawing parallels to the tech sector’s downturn when overinvestment led to unsustainable growth expectations. With beauty already saturated, the influx of VC funds may lead to overcompetition and inflated valuations.
Key points include:
- Incubators vs. VCs: Major beauty conglomerates are establishing their own incubators to nurture brands internally, reducing reliance on external VC funding.
- Market Saturation: There’s a finite number of beauty products consumers will purchase, leading to intense competition and the need for continuous innovation.
- Interest Rates: Rising interest rates make traditional investments more attractive, potentially diverting funds away from high-risk VC ventures.
Lily posits that we might witness a shift back to bootstrapping, where brands prioritize sustainable growth and profitability over rapid expansion fueled by external capital.
7. Conclusion
Lily concludes the episode by reflecting on the dual nature of VC funding in the beauty industry. While it offers unparalleled opportunities for growth and innovation, it also brings challenges related to control, sustainability, and market saturation. The stories of Ultraviolet and NuFace underscore the diverse paths brands can take—leveraging VC funds for aggressive expansion or maintaining independence for steady, sustained growth.
She hints at future episodes that will further dissect the dynamics of beauty brand funding and the evolving landscape of venture capital in the beauty sector.
Notable Quotes:
- Lily Twelve Tree (00:27): “VC stands for venture capital and VC funding is a form of private equity financing…”
- Kelly Dill (16:18): “We have to have some competitive advantage of getting in front of millions of people in a way that other people can't.”
- Beck Jeffrid (28:10): “Having the money allowed us as a business and as founders to think so much bigger than we ever had before.”
For a more detailed analysis, graphs, and visual aids discussed in the episode, visit barefaced.substack.com.
Acknowledgments:
Special thanks to Ava Chandler Matthews, Beck Jeffrid of Ultraviolet, and Tara Petter of NuFace for their invaluable insights. If you enjoyed this episode, follow The Barefaced Podcast on your preferred platform and share it with friends or colleagues interested in the intersection of beauty and business.
Recorded On: Ghana Country
Respect: I acknowledge the traditional custodians of this land and pay my respects to elders past and present.
Timestamps
- 00:27: Introduction to VC funding in beauty
- 15:45: Ultraviolet founders discuss strategic use of funds
- 16:18: Kelly Dill on beauty brands and venture capital
- 22:15: Beck Jeffrid on the benefits of selective funding
- 22:30: Tara Petter on building NuFace without external funding
- 28:10: Beck Jeffrid on the transformative power of funding