With a firm belief in the recession-proof nature of beauty, True Beauty Ventures was founded to invest in emerging growth beauty, wellness, and personal care brands. Led by Rich Gersten and Cristina Nuñez, who collectively have 30 years of institutional beauty investing and operating experience, True Beauty partners with early stage brands with minimum sales of $2 million, and that require $1 million to $5 million of capital. The fund’s investing encompasses the traditional categories of skin care, hair care, personal care, and color cosmetics, as well as expanded definitions of wellness and self-care, for inner health and outer beauty.
True Beauty has made six investments to date: AQUIS and K18 Hair (science-based hair care); Kinship (clean Gen Z skin care); Feals (premium D2C CBD); Crown Affair (luxury ritual-based hair care); maude (modern intimacy brand), and a soon-to-be announced clean makeup brand.
Here, CEW Beauty News talks to Rich and Cristina about how they joined forces to create True Beauty, why they are focusing solely in the beauty domain, where they see the greatest opportunities, and what makes a brand stand out.
BN: Was it always your plan to run your own fund?
RG: It really wasn’t. I had rather unique subject matter expertise, and spent the last eight or nine years almost exclusively focused on investing in the beauty space.
BN: What do you like about the beauty industry?
RG: It is a large and growing industry, but despite its size and being global in nature, it is also a fragmented industry. The brands taking share from the large brands over the past 20 years generally have attractive business characteristics, origin profiles, and a strong exit.
When I met with various brand founders over the years, they were doing $5 million or less in sales, and were looking for $2 million to $3 million when they were in their infancy. They have gone on to have large and successful exits. I’m not saying that I could have invested in them, but I met them at that stage. There was a lot of personal frustration seeing them evolving as founders, and not being able to provide an investment solution. The white space is incredible.
BN: How are you differentiating your fund from others?
CN: There is an opportunity to really make a difference as an investor in this space. We also believe that we have an unfair advantage in this industry because we have experience investing and operating. We have the connections from a beauty ecosystem perspective to all of these really interesting brands. We also have a differentiated holistic lens through which we review every opportunity. Of course there’s an art and a science to it, but when you see hundreds of brands in this industry, you know it when you see it: you can identify the strong connection with the consumer, and the founders who have that special sauce. There’s also a science to the characteristics that we look for, the metrics, and business fundamentals.
BN: You recently announced that you had raised $42 million. Why were you successful, and who is invested in you?
RG: We originally set out to raise $30 million and surpassed that goal. So we called it a day when we reached $42 million. The easiest calls we had when we were fundraising were with beauty people, founders who sold brands, and retired and current executives (about a third of our investor base) or what we call ‘beauty stakeholders.’ We’re incredibly thrilled with where the fund ended up, and really proud of our investor base.
The interesting part about fundraising is that you’re casting a wide net, especially for a first-time fund because you don’t know who’s going to be attracted to the strategy, and who is willing to take a bet on two people. The good news about the way that we raised the fund was we had multiple closings along the way, and we could start to deploy the capital. We not only had the hypothesis that there’s a white space in the market, but we went after it with this strategy, and started to prove it out with investments. That really helped build the momentum and energize the fundraise. By the last couple of months, I was talking about the five investments we had made because it’s the best articulation of our strategy.
BN: What is the common denominator of the brands that you have invested in? What attracted you to them?
RG: We evolve a brand throughout what we call an inflection point for breakout growth that happens really soon in their life cycle. True Beauty has the flexibility to invest across multiple growth stages. For some brands, it might happen a little bit later, the series B that we have. One of the questions we got asked in fundraising, largely from institutional investors, is at what stage we invest in them: seed, series A, or series B. Our point to them was always, ‘You don’t understand our strategy if you’re trying to put us in a box.’
CN: We have our ear to the ground. And we can triangulate across the entire ecosystem when a brand has buzz and momentum. We get a sense for which brands are creating a lot of noise in the marketplace. And we use that to further dig into the brand, connect with the founder, and understand more about what they’re doing that sets them apart. It’s that brand differentiation that really matters in quite a saturated industry. We’re constantly learning, exploring, and figuring out trends and movements, and what ingredients and categories are at the forefront of the industry. For me personally, it’s so exciting to immerse myself in this one area that is always moving and changing.
RG: Our strategy uses the term beauty and wellness. We know wellness is converging with beauty in all sorts of ways. It expands our horizon and mandate beyond the core traditional categories of beauty. In the six investments that we made so far, one is a CBD brand, another is a sexual wellness brand.
CN: The majority of our brands are currently female or minority-led. We’re focused on women, and provide an opportunity for diverse founders who are launching brands and products to address unmet needs and underserved communities. We try to have meaningful conversations with as many founders as we can, and pass on knowledge and help them in as many ways as possible. Rich took me to my first CEW event when I was a senior associate at Tengram. I’ll never forget it. I had never seen so many women in powerful, executive positions. I had grown up in finance where there were very few female managing directors. I remember thinking to myself, ‘I want to be here.’
BN: Have you announced the sixth brand that you have invested in?
CN: Not yet.
RG: In October, safe to assume.
BN: How is the brand different from the others that you have invested in?
CN: This one is pre-revenue. For us, we usually like to see a little bit more commercial traction, a brand that is doing a couple million dollars in revenue, but this one was a very unique situation. The dynamics with the founder, and the very compelling launch strategy in the category, got us comfortable with coming in at this early stage.
BN: How many investments do you anticipate this fund round will help you support?
CN: If you look at traditional VC funds, they tend to sprinkle smaller checks in a lot more brands, 20 to 30 brands out of one fund. We didn’t want to do it that way because of the sector specialization. We wanted to have a more concentrated portfolio, and invest more meaningful check sizes into these brands and be a strong strategic partner for them. We want to take a more kind of hybrid private equity venture capital approach. I think at the most it will be 12.
BN: As a result of the past 18 months, what is the biggest change that you have made in how you look at brands and whether you’ll invest in them?
CN: Some of the fundamental beliefs we have from a distribution perspective haven’t changed with COVID. We’ve always been believers in omnichannel for beauty and wellness. If anything, that has been further reinforced by the pandemic, and emphasized the need to limit that channel risk. Omni-channel is the best way to play. The other thing that COVID emphasized is the importance of profitability. It’s not a growth-at-all-costs mentality, which is not the most disciplined approach, especially getting through the past 18 months, and overcoming the challenges that small brands have faced.
CN: The other thing coming out of COVID is the focus on health and clean products. Consumers are focusing on what they’re putting inside their bodies, how products are affecting the planet, and being a more ethical consumer. This happened pre-COVID, but post-COVID, it has really come to the fore. Brands that we’re looking at need to have the ethical consumer in mind, in terms of transparency as it relates to ingredients, sourcing practices, packaging, and being good for the planet. The way that brands treat their consumers from an inclusivity perspective, as well as their own cultural approach to business and hiring practices, is key as well. The consumer is looking under the hood in all of these different areas. The focus on science and technology is another a big trend. It’s not just about being natural, it’s about how you utilize science and safe, synthetic ingredients to augment product efficacy and the experience.
BN: What qualities do you look for in clean, sustainable brands?
CN: There is a lot of confusion and misinformation. Many brands and retailers have taken the ‘free-from’ approach as a way to identify themselves as being clean, as in being free from this or that ingredient. Let’s pivot the conversation more to what is actually in the product, and how ingredients are created for the desired effect. At one point, everything that was not natural was considered bad for you. That’s simply not the case with brands today that have a very strong point of view on safe, synthetic ingredients that they’re using.
RG: What always upsets me is when founders confuse the notion of brand attributes and product attributes. Your brand isn’t that you’re clean or made with natural stuff, that’s your product attribute. What is it about your brand that is unique and differentiated? Please don’t just tell us it’s clean and safe.
BN: Can you talk about how you know each other.
RG: Cristina and I first overlapped at Catterton. I was a senior partner. She was an associate, right out of our investment banking program. I left Catterton to go to Tengram Capital Partners, and Christina graduated from the Catterton program and took a job at Equinox.
BN: What are some of the qualities that Cristina possesses that makes you love working with her?
RG: What I was looking for, first and foremost, was someone who I trusted in life. You’re going to create a partnership with someone, and that mutual respect for what each other brings to the table is critical. Cristina’s combination of investing operating experience, especially with smaller brands, is a really important part of our story.
BN: And Cristina, what do you like about working with Rich?
CN: True Beauty is the culmination of a strong working relationship and friendship that we’ve had for over 10 years now. Rich has always been a mentor to me in so many ways, not only as a very seasoned, traditional private equity investor who has seen so many different types of investments, and has had such a strong track record, but also as someone who is a pioneer in beauty investing. As a career mentor over the years, Rich was a reference for me. He has always been a guiding light in how to be driven by ambition and career but, more importantly, guided by your values and always being a good person, no matter what. There is no one else that I would rather partner with.
RG: Our team started as a mighty two. We had an intern, Caroline Weintraub, who worked with us for almost a year out of business school. She is now full-time. We’ll be hiring a fourth person, hopefully in the relatively near term as we continue to build out our team.