5 Steps Beauty Brands Must Take Before Launching a Capital Fundraise
August 14, 2023
August 10, 2023
min read

5 Steps Beauty Brands Must Take Before Launching a Capital Fundraise

You’re at the helm of a rapidly growing consumer beauty or wellness brand. Your products have captured the market’s attention, thanks to your differentiated approach to skincare, makeup, haircare, tools, accessories—whatever it may be.

As a founder or finance leader, your focus now turns to scaling. Before you know it, you’re faced with the exhilarating (and sometimes daunting) task of launching a funding round to raise capital.

A lot goes into a successful fundraise: the right investors and partners, the right brand story, and the right business plan. But your finances are at the center of it all.

A financial framework for beauty brand fundraising

Beauty industry veteran Marla Beck, co-founder and CEO of Bluemercury, thinks about beauty venture funding based on four company stages: start-up, scale-up, reset, and drive.

Marla Beck's Phases of Beauty Ventures and Likelihood of Securing Funding
Source: Bluemercury Co-Founder Marla Beck On What Every Brand Should Know About Raising Capital

Based on her experience at Bluemercury and advising beauty founders at every stage, one of the most important factors in securing funding is your revenue growth rate.

“In beauty, revenue growth and the rate of growth are everything,” according to Beck. “For instance, a $6 million beauty company growing 75% a year is much more likely to nab funding than an $8 million beauty company with flat growth.”

At the start of your fundraising planning process, Beck’s framework is a useful one to ground your thinking on the most promising funding avenues based on the reality of your business.

And it should get you asking questions like:

  • How can I accurately forecast revenue and expenses across all channels to present a compelling case to investors?
  • What financial models will best represent our growth strategy and resilience to market fluctuations?
  • What are my company’s key levers of profitable growth—and how can new investment help turbocharge them?
  • How do I articulate our funding needs and outline how we plan to allocate capital to generate the highest returns?
  • Where can new money do the most work? Customer acquisition? Inventory? Omnichannel expansion? Team growth? New product extensions? And how can we model out the impact of each scenario?

Raising a Series A, Series B, or any funding round can be a long and challenging process. But there are some critical steps beauty founders and finance teams can take to answer some of the questions above and get moving in the right direction.

How to set your beauty brand up for a successful funding round

To make the strongest case to investors that your beauty brand will deliver a high return on their capital, these finance focus areas are a smart place to start.

1. Align on one source of truth for all the data that makes your business run

It’s exponentially harder to make a clear, data-driven investment pitch when the data you need to inform a bulletproof financial strategy is stuck in ten different silos.

Every beauty business is different, but piping data from your sales channels (DTC, wholesale, online and offline retail, etc.), operations and inventory systems, and marketing channels into one source of truth will save you more time and frustration than you’ll ever know.

Shopify, Amazon, QuickBooks, NetSuite, Meta, TikTok—it’s all data that will serve your beauty brand better when it’s together. Platforms like Drivepoint can streamline the complex process of data integration, cleaning, and mapping so you don’t have to waste time wrangling data sources.

2. Build a financial model that you (and investors) can be confident in

Your financial model informs your fundraising pitch, growth projections, capital allocation strategy, path to profitability, and much more.

Find ways to automate financial model updates, so you’re always operating with the most accurate data and projections when you walk into an investor meeting. You can get partially there by stitching together multiple manual processes in Excel, but that can still be time consuming and prone to error.

For something as business-critical as fundraising, a connected solution like the Drivepoint SmartModel can give you confidence in your forecasts.

3. Run scenario analysis to game out growth and investment outcomes

What happens to your customer LTV if you pour fuel on your subscription offers? How would your margins be impacted by negotiating more favorable terms with your supplier? Or what about the EBITDA impact of using new capital to fund expansion into Ulta or Sephora?

Exactly how small (or big) changes can play out across a brand’s fundamental financials is vital information for investors to consider. Running scenario analyses on key strategic decision points can give beauty businesses and their investors a clear picture of the road to profitable growth.

4. Craft a data-backed story for your brand and business

Oddity’s recent IPO success is an example of a compelling story for investors: using the power and scalability of AI to bring a new level of personalization and profitability to the beauty industry. Oddity’s existing brands, Il Makiage and SpoiledChild, are each a poster child for this data-driven approach.

The story of your beauty brand (and the resulting product experiences that have come from it) is what has attracted customers and driven your business so far. For new investors, that story has to be infused with sound financial data at every turn.

Blend your unique brand value with a rock solid financial case, built on a strong model and strategic forecasting. A data-first strategy will go a long way in securing funding for future growth.

5. Invest in expertise to minimize risk and accelerate positive outcomes

As an entrepreneur in the beauty industry, your strength may be in formulating products that help customers look and feel their best. Or it may lie in finding ways to build a community—and a business—around clearing certain health and wellbeing stumbling blocks of everyday life.

When preparing to fundraise, it’s important to recognize when an experienced perspective can help guide your strategy. Scaling brands often turn to a fractional CFO for an assist, but the cost and effectiveness of people in these roles can vary greatly, and it can be a big gamble at an important time.

Drivepoint knows consumer brand fundraising dynamics.

We offer a strategic finance platform to help you profitably scale, but we also bring deep experience supporting fundraise planning at beauty brands like Geologie. Our goal is to leverage automation and our expert analyst team to deliver world-class FP&A capabilities at a dramatically lower cost than hiring internally.

Get ready for your financial close-up

Launching a capital fundraise at a beauty brand is a journey of data, strategy, and storytelling with finance fundamentals at the core. It’s about painting a picture of innovation and profitability that resonates with investors and unlocks your next stage of growth.

From aligning on a single source of truth for your financial data to modeling out multiple investment scenarios, a strong foundation to build your strategy on is critical.

A fundraising pitch is like a financial close-up, a snapshot of the success you’ve achieved as a beauty brand to date. But more importantly, it’s also a data-backed vision of the road ahead—one that leads to a profitable, sustainable business that keeps customers coming back for more.

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