Thursday, February 21, 2008

Angel Investors: the Beauty Industry

A quick break from high tech today:

Finding angel investors with beauty industry domain knowledge is tricky if you're a beauty start up trying to build a line of products. Building up your launch line, including creating "comps" for pitching to major retailers, can be done relatively cheaply. If you want to work with a brand strategist, or "beauty futurologist" to increase your chances of a quick major channel partner, add another $150 - 250K to your budget. Jeanne Recckio is the one who gets the most press, and who inspires me. I am following her example and trying to become a law futurologist. So far, no takers at that price, though.)

I also tell my clients to take a look at those in their supply chain for cash. Some designers, contract manufacturers and others might be willing to invest if they believe you are likely to get early pick up by Sephora, Ulta or QVC. There also are a number of small-business loans aimed at women-owned businesses (even better if you can locate your business in a historically-underutilized business zone, or HUB).

Bottom line: you can bootstrap to get to a launch line, and there are a few other options available to increase your cushion. But beauty is a network business in many ways - who you know really can lead you to great formulators, designers and even send you "product flow" (ideas for new products) if you're lucky. If you have an idea that's big, or that needs smart money, it never hurts to look far. (Also, the more clinical your product line, the more cash you're going to need. You need to spend a bit more to be cosmeceutical.)

In Toronto, I always start by point to Inter-Act Management, an investment group started by Vic Casale, the original chemist for MAC Cosmetics. The group is very low profile, but early bets include CoverFx, a company originally focussed on makeup solutions for burn victims and others with significant scarring. Businesses like this have found a wider niche with the proliferation of HDTV, which makes everyone look hideous, even with standard tv makeup. Another great beauty story here in town, based not just on great marketing and design.

Back to our regularly scheduled programming.

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