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BFD Expert Voices - Retail Deals

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Early-stage investor True Beauty Ventures is making small strategic bets in hopes of winning big, co-founder Rich Gersten tells Axios.

Why it matters: True Beauty saw success with one of its first investments, exiting TikTok-famous hair care brand K18 to Unilever last December.

Catch up quick: The firm invested $4 million in over three rounds before K18, which exceeded $100 million in sales, was acquired.

By the numbers: To make the True Beauty cut, brands should ideally have about $2 million in net revenue with gross margins of around 70% or more.

"What I love about early-stage investing is you have incredible optionality on exit," which begins to occur around the $25 million revenue mark, Gersten says.

Zoom in: Ideal brand investments have an anchor retail partner, like Sephora or Ulta Beauty, which Gersten says is a crucial inflection point for breakout growth and a way to de-risk its investment.

What's next: True Beauty is seeking a clinical skin care investment, seeing it as a gap in its portfolio, Gersten says.

The firm also wants to make selective bets in the broader world of wellness, such as in supplements and sexual wellness.

It will continue to invest in its core categories: fragrance, hair care, skin care, makeup, and personal care.

What they're saying: "When a brand is smaller, it has many more levers to pull from a growth perspective," Gersten says.

The early-stage, beauty-focused investment firm also enjoys less competition for target assets because "the investor community has gotten more discerning," he says.

Context: True Beauty raised $75 million for its second fund this year, and has already made six investments.

On Thursday, True Beauty led hair care brand Crown Affair's $9 million Series B round.

The firm also invested in the fragrance brand, The Maker, in July.

The big picture: Beauty continues to attract investors because of consumers' willingness to spend compared with the broader consumer discretionary category.

Beauty sales rose 5.5% year over year in the first half versus 4% for the broader consumer goods category, per Nielsen IQ and the Bureau of Economic Analysis.

True Beauty Ventures on early birds getting the worm

The firm raised $75 million for its second fund this year.

Photo illustration of Rich Gersten collaged with abstract shapes and beauty items.

Photo illustration: Allie Carl/Axios. Photo courtesy of Rich Gersten

Retail deals

Early-stage investor True Beauty Ventures is making small strategic bets in hopes of winning big, co-founder Rich Gersten tells Axios.Why it matters: True Beauty saw success with one of its first investments, exiting TikTok-famous hair care brand K18 to <a class="gtmContentClick" data-vars-link-text="Unilever" data-vars-click-url="https://www.retaildive.com/news/unilever-acquires-hair-care-brand-k18/703348/" data-vars-content-id="d0b6ef45-0dae-4cc1-9170-036bc030647c" data-vars-headline="True Beauty Ventures on early birds getting the worm" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.retaildive.com/news/unilever-acquires-hair-care-brand-k18/703348/" target="_blank">Unilever</a> last December.

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True Beauty Ventures on early birds getting the worm

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