Latest / Skin Anarchy / E.382: Venture Capital’s Leading Lady, Tina Bou-Saba, Explains Beauty Brand Funding

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E.382: Venture Capital’s Leading Lady, Tina Bou-Saba, Explains Beauty Brand Funding · Skin Anarchy

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• 1:00
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• 2:21
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• 2:31
  SPEAKER_00: Hey guys, welcome back.
• 2:32
  SPEAKER_00: It's MmJ.
• 2:34
  SPEAKER_00: This is Ekta, and I have such a wonderful guest today.
• 2:37
  SPEAKER_00: Um, I've been really enjoying learning about um venture capital and just you know funding and the whole world um really around it when it comes to beauty products and the industry.
• 2:48
  SPEAKER_00: So without further ado, I want to introduce you guys to one of the leading ladies in this area, uh Tina Busaba, who is the co-founder and managing partner at Verity Venture Partners.
• 3:00
  SPEAKER_00: Welcome to the show, Tina.
• 3:01
  SPEAKER_00: I'm so excited to be hosting you.
• 3:04
  SPEAKER_02: Thank you for having me.
• 3:06
  SPEAKER_00: Oh, it's such an honor to host you.
• 3:07
  SPEAKER_00: I like I said, I'm very interested in this area and I feel like there's never um enough information about it, you know, especially for brands and even consumers.
• 3:18
  SPEAKER_00: Yeah.
• 3:18
  SPEAKER_00: Totally.
• 3:19
  SPEAKER_00: I would love I'm sorry, go ahead.
• 3:22
  SPEAKER_02: No, you go ahead.
• 3:24
  SPEAKER_00: I was just gonna say I'd love to get started with you telling us about, you know, just yourself and the company and and what you do and how you really got into this career track.
• 3:34
  SPEAKER_02: Yes.
• 3:34
  SPEAKER_02: Great question.
• 3:36
  SPEAKER_02: And I could talk about this for for a while.
• 3:39
  SPEAKER_02: So um, in the interest of you know, being concise, let me briefly talk about um what I was doing before this and how it led me to where we're here now, and then I'll pause and then we can talk some more about what we're building in Verity.
• 3:52
  SPEAKER_02: Um, so I have always had a strong personal interest in consumer, you uh, even as a kid.
• 4:01
  SPEAKER_02: I was one of those children who was uh doing fashion shows and doing makeup and you know, all of those types of things, even when I was very young.
• 4:14
  SPEAKER_02: Um and it was you just always an interest of mine.
• 4:18
  SPEAKER_02: After college, um I was fortunate in that uh um my the two sort of jobs that I had, um, my first and second jobs outside of college, I got to see the the business side of consumer.
• 4:34
  SPEAKER_02: Um so I worked in investment banking and and I got to do some deals in like the hospitality space.
• 4:39
  SPEAKER_02: And so I saw that.
• 4:41
  SPEAKER_02: And then I went to work for a hedge fund that um focused on retail and consumer stocks.
• 4:48
  SPEAKER_02: So I had the opportunity to work from expert or work with and learn from experts in the retail and consumer space.
• 4:56
  SPEAKER_02: And as part of that job, I traveled around malls every weekend doing channel checks.
• 5:02
  SPEAKER_02: Um, this was a long time ago.
• 5:04
  SPEAKER_02: So if you wanted to, you know, to see what was going on at a specialty retailer, you had to go look.
• 5:11
  SPEAKER_02: And so that's what I did, and that was part of my job.
• 5:13
  SPEAKER_02: But I I it absolutely um piqued my interest in working in um in the in more directly in the consumer world.
• 5:23
  SPEAKER_02: And um, so um later I worked for L brands, where I did strategy and business development for Victoria's Secret and Bath and Body Works.
• 5:30
  SPEAKER_02: That was a fantastic experience, and I learned so much, particularly around um brand building and customer loyalty, and and also around which categories within consumer are the most attractive.
• 5:44
  SPEAKER_02: Um we'll talk a bit more about that in a little bit.
• 5:46
  SPEAKER_02: Um then I spent some additional time in public equities.
• 5:51
  SPEAKER_02: After that, I wanted to do something more entrepreneurial, but I wanted to leverage the experience that I'd had, you know, the knowledge that I had built over more than a decade, um, but in a more entrepreneurial setting.
• 6:07
  SPEAKER_02: And so I went through the exercise of evaluating whether I wanted to start a company, you know, for example, a beauty business or something else.
• 6:19
  SPEAKER_02: And in the course of that exploration, I started to do some informal advising for other consumer founders.
• 6:29
  SPEAKER_02: And over time that became more formal.
• 6:32
  SPEAKER_02: And over time, I started to angel invest.
• 6:36
  SPEAKER_02: Um, and then I oh, you know, very gradually, very organically over a period of a couple of years, I built that into effectively like a small, very small micro venture fund, you know, doing small investing, um, you know, just personal capital and working really closely with founders to help them build their businesses.
• 7:01
  SPEAKER_02: I quickly discovered that there were even within consumer, and you know, this this definitely harkens back to learnings that I'd had when I was at Victoria's Secret and uh Bath and Body Works.
• 7:13
  SPEAKER_02: I quickly discovered that there were areas within consumer.
• 7:19
  SPEAKER_02: So, you know, for instance, you know, most most importantly, I think the beauty, health, wellness space, I found that there were extraordinary entrepreneurs, many of whom were uh um uh women and people of color who were starting fantastic businesses that were not being well served by traditional capital providers.
• 7:45
  SPEAKER_02: So I would include there both generalist VC and larger growth investors, you know, for whom these businesses were too small.
• 7:53
  SPEAKER_02: Um, but at the same time, I saw what was going on at the consumer end.
• 7:59
  SPEAKER_02: And of course, the appetite for new innovative, founder-driven, community-driven brands was incredibly strong.
• 8:09
  SPEAKER_02: And so I saw that opportunity to be not only an investor, but you know, as importantly, more importantly, a partner to founders at that emerging brand, you know, so to speak, um, stage.
• 8:25
  SPEAKER_02: So I spent a few years uh working on that.
• 8:29
  SPEAKER_02: And see, I'm the type of person, and we'll we'll get to the punchline in a second, but I'm the type of person who like once I get my teeth into something right, like I just don't let go and I just keep digging and digging and digging.
• 8:41
  SPEAKER_02: And so I was really focused on understanding like what's going on here, how can I be a fantastic partner to these extraordinary founders?
• 8:51
  SPEAKER_02: Um, and then uh which led me to the sort of last part of the story, how can I then leverage what I've built as an individual into a bigger business with a team and you know, writing bigger checks, leading deals, raising outside capital.
• 9:08
  SPEAKER_02: And um, I'll I'll I'll pause and in a moment, but that ultimately is what led me to form Verity Venture Partners um last year, so in 2021, um with my now business partner, Matt Levin.
• 9:22
  SPEAKER_00: I love that.
• 9:23
  SPEAKER_00: And I love that you walked us through that because honestly, I think that when people think of venture capital, you know, I know there's a lot of listeners out there that it's a very gray area for them, you know, and in the sense of uh really understanding who are the people behind the funding, you know, who are the people that make the decision um if a brand is good enough to get that kind of funding or, you know, um viable enough in terms of, you know, just uh whatever the criteria are that you look at, you know, when you're evaluating a brand.
• 9:54
  SPEAKER_00: I mean, I think it definitely helps lift the haze to hear someone like you say that, you know, you were um looking for this more involved approach with brands, you know, themselves.
• 10:05
  SPEAKER_00: So I find that to be very interesting.
• 10:07
  SPEAKER_00: And it really leads me to ask you, you know, um, I guess a question I just posed, which is when you were considering brands, especially as you started Verity, um, what were some of the pillars that you had kind of identified as, you know, truly um hallmarks for a brand that's going to do well eventually in the market and something that's worth investing in, um, something that's going to catch the eye of venture capitalists.
• 10:33
  SPEAKER_00: Okay.
• 10:34
  SPEAKER_02: So let me break this down into um sort of broader buckets of how we look at investment opportunities in the emerging brand space.
• 10:48
  SPEAKER_02: Um, and then we can talk about them, some of them a little bit more specifically.
• 10:52
  SPEAKER_02: But so we at a very simplistic and high level, but I think frameworks are useful for like organizing one's thoughts always.
• 11:00
  SPEAKER_02: Um, we would look at things in three broad buckets.
• 11:03
  SPEAKER_02: So one is uh like product market fit, right?
• 11:06
  SPEAKER_02: So the business, the brand, the traction, all of that, right?
• 11:10
  SPEAKER_02: Then the second bucket would be founders.
• 11:13
  SPEAKER_02: Um and we could talk a little bit more about that and what we're looking for and the types of founders that we partner with.
• 11:18
  SPEAKER_02: And then the third bucket is more around the investment because uh uh for us, um, we are very mindful of what um what does success look like with a particular opportunity and how can we work with founders to importantly manage dilution along the way and ensure that you know a successful exit, what appears to be successful exit is indeed going to be successful for founder, team, investors, and so on.
• 11:45
  SPEAKER_02: And we we can talk more about that, but I because I we could, you know, that's that gets into pretty nuance, but but broadly that's how we think about things.
• 11:52
  SPEAKER_02: So let me talk about the the first bucket, um, which is this business product market fit.
• 11:58
  SPEAKER_02: So overall, you know, when we think about emerging brands that, you know, we're excited to invest in, um, I I think that, and I know you'll you'll appreciate what I mean when I say this, but we are always looking for that brand DNA, right?
• 12:14
  SPEAKER_02: And I think that's something where you know it when you see it, right?
• 12:18
  SPEAKER_02: But you've got to have the brand DNA.
• 12:19
  SPEAKER_02: That's subjective, but you've got to have it.
• 12:22
  SPEAKER_02: Um, we also look for highly engaged brand or, you know, depending on what the business model is, user communities, like if it's a service or something like that.
• 12:31
  SPEAKER_02: But and how do we assess that?
• 12:33
  SPEAKER_02: I think that what's what's incredible now about the data that's available is that that's something where you know we would certainly be looking at um, you know, social media or like other groups, right?
• 12:41
  SPEAKER_02: Just getting a sense of the is there a group of people out there who are really excited about this brand, who love it, who are recommending it to their friends, who are repeat purchasing, um, you know, for instance.
• 12:52
  SPEAKER_02: So that's really important to us too.
• 12:54
  SPEAKER_02: We look at, we care a lot about gross margin, and that's certainly, you know, something that has led us to be focused on, you know, beauty as one of our core categories, because we, you know, we definitely feel like having you know strong, healthy growth margins is is really important in terms of being able to ultimately build a sustainable and profitable business as a starting point.
• 13:12
  SPEAKER_02: We look in unity economics.
• 13:14
  SPEAKER_02: So, for example, you know, with with the D2CPs of these businesses, um, getting into the unity economics, ensuring that they're, you know, that they're they're healthy and appropriate for where the business is on its path.
• 13:26
  SPEAKER_02: Um, and then we'll look at like just high-level sort of sales traction.
• 13:30
  SPEAKER_02: So generally we're focused on investing in um brands that are doing between one and$10 million in sales, because that's where we think that number one, there's white space because it is um generally too early for you know the larger established consumer growth firms who who are excellent but are focused on larger businesses than we are.
• 13:49
  SPEAKER_02: Um, but at the same time, we feel like we can get a sense of early traction.
• 13:53
  SPEAKER_02: And it's early enough that also we can we can really partner closely with founders and have have real impact, you know, and help them, I would say, position the business for ultimately a successful exit.
• 14:06
  SPEAKER_02: Um and, you know, so we feel at that stage there's tremendous opportunity for us to really get involved.
• 14:12
  SPEAKER_00: So I have a question then, um, you know, honestly, Tina, because I I understand that, you know, to be in the realm of seeking venture capital funding, you have to be like everything you said, you know, I completely understand that.
• 14:26
  SPEAKER_00: But what about the brands that don't have a million in sales yet?
• 14:32
  SPEAKER_00: What about those?
• 14:33
  SPEAKER_00: Like where what are their options?
• 14:34
  SPEAKER_00: Do they go for individual investments?
• 14:37
  SPEAKER_00: Do they can they still seek out a venture capital firm and get you know get some guidance?
• 14:42
  SPEAKER_00: I mean, how does that that you know how do you navigate those waters to the point where you reach venture capital level of funding and asking for that and getting analyzed by a firm such as yours?
• 14:55
  SPEAKER_00: I mean, that those are really, I think, some of the big questions consumers have now because I mean, let's be honest, you know, we brought up beauty.
• 15:02
  SPEAKER_00: How many times in a day do you see a new beauty brand pop up, you know, on your LinkedIn?
• 15:06
  SPEAKER_00: Oh, for sure.
• 15:07
  SPEAKER_00: Right.
• 15:08
  SPEAKER_00: So it's like it's these brand new, absolutely new brands.
• 15:12
  SPEAKER_00: I mean, uh, don't get me wrong, there some of them have very extravagant, you know, uh, what do you call it, media kits, like or aesthetic, you know?
• 15:20
  SPEAKER_00: So I know money has been poured into them, you know.
• 15:23
  SPEAKER_00: So it's like, where is that money coming from?
• 15:25
  SPEAKER_00: Is it is it private or is it something that they've been able to raise in a different way?
• 15:30
  SPEAKER_00: Like, what are your opinions on that?
• 15:33
  SPEAKER_00: Okay.
• 15:34
  SPEAKER_02: So let me break down this question into because there's a lot there that we should unpack.
• 15:40
  SPEAKER_02: So let me break this down into at least two buckets.
• 15:46
  SPEAKER_02: One is how to think about brands and advice to brands that are, you know, doing less than one million in sales, and two is new brands that appear to have a lot of capital behind them.
• 15:56
  SPEAKER_02: So let's separate that.
• 15:57
  SPEAKER_02: So on the on the brands that are, let's say, you know, a newer brand, doing less than a million dollars in sales, it's maybe it's a bootstrap business.
• 16:06
  SPEAKER_02: Um, what should what should they do?
• 16:09
  SPEAKER_02: Well, okay, so the first thing I would say is like it's always really important for a founder of any type of business to like decide, you know, like what do I what do I want to build here?
• 16:18
  SPEAKER_02: Like, what am I signing up for?
• 16:19
  SPEAKER_02: You know, because raising outside capital, especially if you're raising like institutional money, you know, as opposed to like some quote, friends and family money.
• 16:27
  SPEAKER_02: And we can talk about that.
• 16:28
  SPEAKER_02: I feel like that's so problematic, but we can talk about that.
• 16:30
  SPEAKER_02: But like you're signing up for something, right?
• 16:33
  SPEAKER_02: You're gonna give someone, you may have have to form a board, right?
• 16:36
  SPEAKER_02: You've got governance, you've got quarterly updates, you've got expectations, and like that's that's just one way to build a business, but that's not the right thing for every business, you know.
• 16:44
  SPEAKER_02: And so I do think it's it's really important for founders to just first like get clarity personally on what they want to build, what their goals and aspirations are.
• 16:55
  SPEAKER_02: Um, because not every business should raise outside capital, whether that's venture capital or something else.
• 17:01
  SPEAKER_02: And you you really want to have like alignment first on what you're trying to build and what you want to sign up for.
• 17:05
  SPEAKER_02: So the next thing is on companies that are, you know, early and might be too early for a firm like ours, like we we love to talk to them.
• 17:13
  SPEAKER_02: You know, all day long we're talking to um, you know, both in beauty and in and you know, in in other areas, um uh companies that are um early, you know, from in terms of like the traction that we would look for.
• 17:26
  SPEAKER_02: But that's that's our job, you know, we feel that building relationships early with promising businesses and talented founders is an important part of you know what we would consider to be our quote, like deal sourcing, you know what I mean?
• 17:39
  SPEAKER_02: And and it's that's that's what we have to do.
• 17:41
  SPEAKER_02: That that is it.
• 17:42
  SPEAKER_02: And so I think it's really important for founders to start, you know, having introductory conversations with investors early and building those relationships and you know, getting to know people.
• 17:52
  SPEAKER_02: So like that is if once one decides that the path that's the path one you know one wants to go down.
• 17:57
  SPEAKER_02: I think it's like totally appropriate.
• 17:58
  SPEAKER_02: And that's something that investors and their you know teams should be doing, um, that we think that's really important.
• 18:04
  SPEAKER_02: And we always try to be as helpful as possible in the conversations that you know we have with um with smaller emerging brands.
• 18:13
  SPEAKER_02: Um, I also would then layer on that like, you know, I realize this isn't like it's this isn't like a perfect solve, but I do feel like there are more sources of like non-dilutive capital now that, you know, and that what I mean by that is some, you know, like the Clearco and like SETL and like that's not going to be like your growth capital, but there are like um non-dilutive funding sources that I think like you know are geared towards like smaller businesses that I do think, you know, a number of like brands that we've um we've we've talked to have tapped into.
• 18:45
  SPEAKER_02: By the way, I'm not like I'm not um um uh recommending any of those in particular, but they're definitely out there.
• 18:52
  SPEAKER_02: And I'm sure you know they come up in the conversations all the time.
• 18:54
  SPEAKER_02: Uh I don't have any relationship with any of those companies.
• 18:58
  SPEAKER_02: Um but I thought they all do great work.
• 19:00
  SPEAKER_02: Um, okay.
• 19:01
  SPEAKER_02: So um, but I think it's you know, it's just important for for founders, you know, my point being to to kind of think think broadly about like other, you know, various, various um funding sources, because I think non-dilutive funding and like the these working capital type of providers can um be helpful in like bridging, especially around like you know, inventory or maybe maybe some a little bit of marketing spend, things like that.
• 19:21
  SPEAKER_02: Um, okay.
• 19:22
  SPEAKER_02: So that's you know, that's let me let me kind of put put that on one side, which is for all these, you know, small, small brands, maybe they're doing you know, a hundred couple hundred thousand sales, something like that.
• 19:33
  SPEAKER_02: Like um, you know, where I my my thoughts on um on you know how how they want to think about positioning their business.
• 19:42
  SPEAKER_02: And you know, I would just again reiterate that I think it's really important for founders to to do the the self um, what would you say, have clarity on what they want to build, right?
• 19:54
  SPEAKER_02: And you know, what their goals are because there's no, I can't say I can't say this enough, like there's no like right way to build a business.
• 20:01
  SPEAKER_02: There's no like, you know, they're raising money, okay.
• 20:04
  SPEAKER_02: I think that over the it feels to me, you know, we're based in San Francisco, so for better or worse, I feel like we um often are part of a kind of this bubbly sort of, you know, Silicon Valley stuff.
• 20:16
  SPEAKER_02: But um there there's this narrative that uh raising a lot of money uh equals success.
• 20:25
  SPEAKER_02: And that, you know, saying I raise this much is is in and of itself uh an accomplishment or a winning.
• 20:33
  SPEAKER_02: And in the consumer space, we don't think that that is true.
• 20:38
  SPEAKER_02: And it may be in other, you know, in other sectors that are, you know, like in some spaces within tech where it's much more of a winner-take-all and you really do need to grow as fast as possible and grab share as fast as you can.
• 20:48
  SPEAKER_02: But as we all know, that is not at all how the emerging brand world works.
• 20:52
  SPEAKER_02: And so we um we we love scrappiness and um prioritization of of uh of you know, thoughtful resource allocation, prioritization of activities, you know, all these all the types of things that you have to do when you have a more resource-constrained environment, because that then you really have to ensure that you are delighting your customers so that they come back on their own and you can acquire them organically.
• 21:17
  SPEAKER_02: Right, right.
• 21:18
  SPEAKER_02: So, okay, now the other, the the thick question you were asking me about like what to think about brands that seem to pop up out of nowhere that appear to have a lot of um funding behind them.
• 21:34
  SPEAKER_02: So, I mean, that's it, it's a really interesting question.
• 21:37
  SPEAKER_02: I um my you know, off the cuff, without like seeing the particular, we're not talking about any particular examples.
• 21:44
  SPEAKER_02: I would say that um it is certainly possible that um the comp the um brand, it it could be sometimes I think part of um um what do you call it, like one of Sort of incubator type.
• 22:02
  SPEAKER_02: But right.
• 22:03
  SPEAKER_02: I think sometimes that's the case, which is great.
• 22:05
  SPEAKER_02: I actually think that's a really cool, fascinating model that addresses a lot of the challenges that emerging brands have and they can move really fast and attack white space really, really fast and allocate capital really efficiently across different opportunities.
• 22:23
  SPEAKER_02: So I think that model is extremely intriguing.
• 22:27
  SPEAKER_02: So it's probably the case that sometimes when we see a new brand launched and it appears to have much larger scale and attention than we would typically expect of a new brand, it may be that it is coming from some sort of incubator like that.
• 22:41
  SPEAKER_02: It's I also think, of course, sometimes, you know, the most obvious being like the celebrity or like larger influencer brands, sometimes, you know, they're coming out of the gate with a lot of um capital behind them.
• 22:52
  SPEAKER_02: So they're, you know, immediately able to invest in a lot of um marketing.
• 22:56
  SPEAKER_02: So I think that's the case sometimes as well.
• 23:00
  SPEAKER_02: And then of course, there are random idiosyncratic things, you know, where who knows, somebody has a somebody has a really rich uncle somewhere who decides to back their business earlier, right?
• 23:12
  SPEAKER_02: But obviously, you know, that's that's not the model.
• 23:13
  SPEAKER_02: But um, but you know, there are sorts of all sorts of idiosyncratic um, you know, things.
• 23:19
  SPEAKER_02: I've also seen, for example, I've seen brands launch in the US that are actually um, you know, that are part of a um the um that are in are are based uh internationally and it'll they launch in the US and it seems like it's a really big brand, but no one's heard of it, but it's because um it's just new to this market, but it's not new to a global market.
• 23:40
  SPEAKER_02: Um so I I think there's actually some really interesting examples of in the peril space of of that type of thing.
• 23:46
  SPEAKER_02: But anyway, um so so I'll I we could I could go on about this could be an entire episode, honestly.
• 23:55
  SPEAKER_00: I and I really, really love your answer, by the way.
• 23:58
  SPEAKER_00: Thank you so much because that's very helpful how you really broke that down.
• 24:02
  SPEAKER_00: And you know, I going back to this, you know, this latest topic about you know some of these new emerging brands that we see as emerging, I guess.
• 24:10
  SPEAKER_00: Um, you know, and they and they are backed by something, you know, it just for me, I think I try to always uh put myself in the shoes of the average entrepreneur.
• 24:20
  SPEAKER_00: And you know, having had interviewed so many brands at this point, I know that, you know, a lot of them are very much, you know, bootstrapping their business, but it's not affecting, you know, they've a lot of them have done such an extraordinary job where it's affecting quality, you know what I'm saying?
• 24:36
  SPEAKER_00: Like they're really doing it the right way.
• 24:38
  SPEAKER_00: And um, you know, I sometimes get very frustrated when I see a brand, for example, coming straight out of the gates, tons of funding, tons of you know, resources available to them.
• 24:50
  SPEAKER_00: And I look at them and I'm like, you know, a lot of times, and and this is just me saying this, you know, um, Tina has nothing to do with this, this statement, but I really see a lot of them coming out that are very similar, if not almost the same formulas as some of the smaller brands.
• 25:04
  SPEAKER_00: And so recently, Tina, I actually started referring to indie brands that are like that, indie luxury, because they're truly luxurious.
• 25:13
  SPEAKER_00: You know what I mean?
• 25:14
  SPEAKER_00: And then you see these huge, you know, uh conglomerate kind of companies come in that are maybe launching a new brand and they've stolen that same kind of you know, feel and protection.
• 25:25
  SPEAKER_00: You see what I'm saying?
• 25:26
  SPEAKER_00: So I'm I'm starting to put this, I feel like as a business, like from a business standpoint in the beauty industry, we really need to have the distinction of that, and brands need to be more like I guess recognized for the quality they're producing because it's becoming a problem.
• 25:43
  SPEAKER_00: You know what I mean?
• 25:43
  SPEAKER_00: Like it's it's not the it's not on the shoulders of the people providing the funding, it's on the shoulders of the people who are formulating and thinking that they can just steal a concept and put it in prettier packaging because they have the funds, and then you know, there we go.
• 25:56
  SPEAKER_00: Like all of a sudden you've created a brand that you have millions of followers thinking this was your innovation when it wasn't, you know, that that's where I get confused.
• 26:04
  SPEAKER_00: Yeah.
• 26:04
  SPEAKER_02: But that's frustrating.
• 26:07
  SPEAKER_02: Yeah.
• 26:08
  SPEAKER_02: I I think um, you know, I I hear what you're saying.
• 26:13
  SPEAKER_02: That's it's unfortunate.
• 26:14
  SPEAKER_02: Um, I think that like when it's more about the brand and the authenticity of the brand and like that DNA, I generally feel like consumers are so smart and they know, right?
• 26:29
  SPEAKER_02: They can tell when something has come from like a really a founder-driven like place, right?
• 26:36
  SPEAKER_02: There's that, there's that strong like founder business fit, you know, and it's really has so much heart.
• 26:42
  SPEAKER_02: Um, and and I think they can tell when something seems to be just like a corporate creation.
• 26:47
  SPEAKER_02: However, you're you're raising uh another really interesting point, uh, which is around the formulation side and and like to the extent that there are independent brands that have like developed proprietary type of formulations, but that they can't necessarily protect it.
• 27:00
  SPEAKER_02: And then like what happens if a larger company uses it.
• 27:03
  SPEAKER_02: And that is certainly very frustrating.
• 27:07
  SPEAKER_02: Um, I I would, you know, I would be, I would be really annoyed, more than annoyed, um, if I were if I were a founder in that um in that type of situation for sure.
• 27:16
  SPEAKER_00: Exactly.
• 27:16
  SPEAKER_00: And also I think it it poses a you know a hurdle for a lot of uh venture capitalists because you know you can't monitor everybody, right?
• 27:24
  SPEAKER_00: I mean, you can't, no matter how much of a team you have, you know, no matter how great the team is, you can't monitor every brand and who that's emerging.
• 27:32
  SPEAKER_00: So yeah, I mean, I I think it's definitely an area that um I think we all need to pay attention to.
• 27:38
  SPEAKER_00: And especially, you know, lately, I I won't lie to you, I've been getting together, you know, my top picks list and whatnot, and I've found so many of these indie brands, you know, and I'm and that's really what where I asked you that original question about raising enough um, you know, sales where you are in that million-dollar bracket, you know, you're in that seven figures, you can you can reach out, get the help you need.
• 28:00
  SPEAKER_00: So it's just you know, trying to piece together the story is really the goal for me, you know?
• 28:06
  SPEAKER_02: Yeah, no, it's super interesting.
• 28:08
  SPEAKER_02: Well, I mean, I definitely think that look, I I love the beauty health wellness space.
• 28:13
  SPEAKER_02: I, you know, for for so many reasons, personal and business.
• 28:16
  SPEAKER_02: And I think that the fact, you know, as I've said, the founders in this space are so talented and so driven, um, and are so frequently so great at community building, um, and you know, a lot of the things that we care about.
• 28:30
  SPEAKER_02: Uh, all that said, no question, um, you know, particularly some categories are you know fiercely competitive and and you know, just so crowded as there have been.
• 28:41
  SPEAKER_02: I mean, the the landscape has changed so much even over the past like you know, five or six years.
• 28:46
  SPEAKER_02: Um, and so that does make it very challenging to scale.
• 28:51
  SPEAKER_02: Um, and so you really have to have very, very crisp differentiation, which may be around product, it may be around founder, it may be around distribution strategy, but there certainly has to be something that is very differentiated, I think, to be able to feel really confident in the ability of a of a new brand um in the space to scale.
• 29:11
  SPEAKER_00: That makes sense.
• 29:11
  SPEAKER_00: Yeah.
• 29:12
  SPEAKER_00: No, I I think that um one of my biggest questions for you, you know, especially since you deal with beauty brands, um, Tina, is I want to know, and if if you you're not too sure on this, it's okay.
• 29:22
  SPEAKER_00: It's a random question, but um, a lot of brands, what I'm noticing is that um, you know, they, for example, we talked about the cookie cutter formula, right?
• 29:31
  SPEAKER_00: So a lot of manufacturers I've noticed, um, for example, I had interviewed David Chung and he's the founder of iLabs.
• 29:38
  SPEAKER_00: And me and you know, David and I, we kind of dove into this topic a little bit, but um, the idea of cookie cutter formulations, you know, that manufacturers offer versus a brand saying, no, I have a proprietary blend or a, you know, a signature that I would like to use, how does that work in terms of like allocating funding for the manufacturing side of things?
• 30:00
  SPEAKER_00: You know, do you assess that like when you're talking to a brand, like, oh, this is gonna be a brand that's gonna need some extra help, you know, in that category where you have to find a custom manufacturer or whatever the process is?
• 30:11
  SPEAKER_00: I mean, how does that really work if you can comment on that?
• 30:16
  SPEAKER_02: Yeah, so okay.
• 30:18
  SPEAKER_02: I think that I mean, it's a it's a great question.
• 30:23
  SPEAKER_02: Um, and uh you're right that most, you know, it it certainly seems to me that most brands, um, when they are, you know, a new brand, when they are um developing a formula, will generally go to a a contract manufacturer.
• 30:43
  SPEAKER_02: And, you know, many of them have RD and innovation and you know, manufacturing all in-house.
• 30:48
  SPEAKER_02: So you would work with the teams there um to develop it.
• 30:51
  SPEAKER_02: There are different processes through which like you you may have talked about this.
• 30:55
  SPEAKER_02: I'll I'll have to listen to your your got your the conversation that you referenced because I probably would learn a lot of it.
• 30:59
  SPEAKER_02: But of course, there are different processes for which the company may own the formula, right?
• 31:03
  SPEAKER_02: Whether that's to buy it outright or you know, at a certain quantity.
• 31:06
  SPEAKER_02: So they of course those are all like the nuances of it.
• 31:08
  SPEAKER_02: It's less common, I think, especially for smaller brands, um, to like, you know, go to a lab just to develop a formula and then like you know pay a fee and then go find a manufacturer.
• 31:19
  SPEAKER_02: I think my sense is, you know, but again, you you know, you tell me what you because you you know you talk to so many people on this side of things.
• 31:24
  SPEAKER_02: Um, but I think my sense is that the former is you know more common.
• 31:28
  SPEAKER_02: Um we have in a handful of cases worked with a brand to in like more actively in that process, most of the time, the brands that you know we are considering for for investment have already gone through that process, at least for an initial set of products.
• 31:54
  SPEAKER_02: So they already have um existing relationship, you know, with one or more contract manufacturers.
• 32:00
  SPEAKER_02: Um, but where we have gotten involved and you know, both as an individual investor and you know, now for Verities, we're we're certainly very comfortable helping our portfolio companies um work on things like you know, uh contract negotiation or and I'm not again like this is like it really depends.
• 32:20
  SPEAKER_02: Some some some some teams have are you they're off to the races on something like this, right?
• 32:24
  SPEAKER_02: Like they don't need help and others do want help, and that's fine.
• 32:27
  SPEAKER_02: You know, we're not we we are we are of a light touch on this, but um it's certainly something that we're you know we're happy to help be a thought partner in, but we would, you know, of course be, you know, um the it would be the company and the founder, you know, the leadership that would be determining, you know, of course, what formula they want to develop and you know how that fits in with what their overall vision is and and what their customer wants, you know, like we wouldn't be that would wouldn't be our um our decision.
• 32:55
  SPEAKER_02: Um, but we're certainly happy to be supportive on like the the business side of it.
• 32:59
  SPEAKER_02: You're we're very comfortable with that.
• 33:01
  SPEAKER_02: And that's something I would say is like extremely unique about our business and our business model, which is between Matt and me, we have more than 50 years of experience in the consumer space.
• 33:12
  SPEAKER_02: And so we've seen so many of these things, you know, over the years.
• 33:18
  SPEAKER_02: So we're really comfortable just rolling up our sleeves and problem solving um and you know, and and what with whatever is necessary.
• 33:25
  SPEAKER_02: For sure, the given the types of companies we invest in and the skill sets of founders, uh, we would generally be more involved on certain like business-related things than we would be, for example, on you know, like branding.
• 33:44
  SPEAKER_02: Or logistics, right?
• 33:45
  SPEAKER_02: Or logistics, right?
• 33:46
  SPEAKER_02: But like things like, like I say, like most of the founders that we partner with are off the charts, talented on things like brand and vision and product and community building.
• 33:57
  SPEAKER_02: And so we would get out of the way on that kind of stuff, you know, like when they're the experts.
• 34:02
  SPEAKER_02: Um but there tends to be some blocking and tackling on the business side that you know we can be helpful on.
• 34:07
  SPEAKER_02: We also help our companies a lot on recruiting, um, because that's you know something that of course is hugely time consuming when you're when you're a growing business.
• 34:14
  SPEAKER_02: And I think as you know, investors um who've ourselves done, you know, a lot of recruiting and hiring and stuff, um, we we're you know, we're really happy to be helpful with team building, um, you know, and and and recruiting with our portfolio companies.
• 34:28
  SPEAKER_00: I love that.
• 34:29
  SPEAKER_00: No, I love that.
• 34:30
  SPEAKER_00: And that that was uh very well answered.
• 34:32
  SPEAKER_00: So thank you um for addressing.
• 34:34
  SPEAKER_00: And no, and it's a hazy area, you know.
• 34:35
  SPEAKER_00: Again, I'm coming at you like a completely complete novice, you know.
• 34:39
  SPEAKER_00: So excuse me.
• 34:41
  SPEAKER_00: No, no, no.
• 34:42
  SPEAKER_02: This is fun.
• 34:42
  SPEAKER_02: This is fun.
• 34:43
  SPEAKER_02: No, I know it's different.
• 34:44
  SPEAKER_02: I was looking at like I know I'm different from your typical um guest, but hopefully it, you know, adds something into some something new into the mix.
• 34:52
  SPEAKER_00: Absolutely.
• 34:53
  SPEAKER_00: No, you're definitely giving so much education out there for everyone listening.
• 34:57
  SPEAKER_00: And I know there's a lot of people who are, you know, either, like I said, currently they're entrepreneurs or they're really considering it.
• 35:04
  SPEAKER_00: So um, you know, I with that said, I really want to focus on um really the changes that you've seen, you know, in the VC uh industry as it pertains to beauty brands or anything, you know, in terms of wellness.
• 35:15
  SPEAKER_00: Uh, what are some things you've seen that you've noticed in terms of trends or whatever you want to call them?
• 35:21
  SPEAKER_00: Sure.
• 35:21
  SPEAKER_02: So if I look back five or six years ago, when I was much earlier in my career, my journey as an investor in this space, I would certainly say, like, of course, the big thing that you can't miss is the explosion of independent brands.
• 35:40
  SPEAKER_02: And of course, that is great for the consumer and it's great for the industry overall.
• 35:45
  SPEAKER_02: It does make it a lot more crowded and competitive for any individual brand.
• 35:50
  SPEAKER_02: And so I think that, as I mentioned earlier, really uh driving like crisp differentiation and and and leveraging that to like truly break out is of course extremely challenging.
• 36:02
  SPEAKER_02: And um, you know, no question that is it just is such an important overarching um uh theme with respect to where are we now?
• 36:12
  SPEAKER_02: I think that, however, that said, um you know, we're deep in the beauty, health, wellness space.
• 36:20
  SPEAKER_02: And I certainly believe that there are pockets, you know, or subcategories that are much less crowded than others.
• 36:31
  SPEAKER_02: Um and you know, so and I'm sure that you know the some of this will be, you know, very apparent to you.
• 36:37
  SPEAKER_02: So actually, let me let me break this up into two things.
• 36:39
  SPEAKER_02: I'd say uh subcategories and also uh target communities.
• 36:46
  SPEAKER_02: So let me let me separate that actually.
• 36:48
  SPEAKER_02: So subcategories, that's what I mean by like more technically, right?
• 36:52
  SPEAKER_02: So I think, for example, that skincare now is a much more crowded space than it was five years ago.
• 37:00
  SPEAKER_02: And so when we think about what's interesting in skincare, you know, for us, it's no longer about just like clean, right?
• 37:08
  SPEAKER_02: We really think like that next generation of extraordinary skincare brands are going to be um clean, yes, but they're also going to be highly effective, right?
• 37:19
  SPEAKER_02: And they're gonna have clinical backing and they're gonna have, you know, be able to really drive results.
• 37:22
  SPEAKER_02: And, you know, again, I'll we can come back to that if we have time, but I think that's certainly like an important piece in skincare.
• 37:27
  SPEAKER_02: I would also say that like makeup and you know, even clean makeup is is certainly more crowded than it was a few years ago.
• 37:35
  SPEAKER_02: I'm so fortunate to have been an early investor in a couple of extremely successful um clean makeup brands that were early.
• 37:44
  SPEAKER_02: I think launching one now, um it's it's a lot more crowded.
• 37:47
  SPEAKER_02: And so, you know, as investors, we would certainly be looking for some real, real sharp differentiation if, you know, if we were to um invest in a makeup brand.
• 37:57
  SPEAKER_02: I there, I we definitely think there are opportunities, um, but but it they're pretty, I think, specific.
• 38:02
  SPEAKER_02: Um now, I however, you know, we're really excited about the hair care space.
• 38:06
  SPEAKER_02: Um, you know, we're investors in Day, um, which has you know been an extremely, extremely um fast-growing, you know, very popular, strong brand, and um, you know, it's a terrific team and founder.
• 38:18
  SPEAKER_02: Um, and we we feel like hair care now is where you know skincare was maybe five years ago with respect to this quote, I'm gonna, you know, premiumization, right, or prestigioz.
• 38:32
  SPEAKER_02: I can't say it, but you know what I mean, right?
• 38:34
  SPEAKER_02: With people trading up and and also um then of course with the performance of clean hair care, which you know, I think for a long time just wasn't there.
• 38:43
  SPEAKER_02: So that you know, that's a really interesting opportunity, um, area of opportunity that we're excited about.
• 38:48
  SPEAKER_02: Um, and then uh on that like customer group piece, so that's what I think is really interesting because uh we um, you know, even I just said that I think generally speaking, like skincare makeup, clean skincare, clean makeup are you know quite crowded.
• 39:05
  SPEAKER_02: However, I still think that there are really compelling opportunities to build brands that speak to communities that have not been um spoken to, that have not been um included.
• 39:18
  SPEAKER_02: You know, so for example, in our portfolio, we're investors in a company called Noto Botanics, which is truly gender-inclusive um skincare and makeup brand.
• 39:30
  SPEAKER_02: It is a beautiful brand, an incredibly talented founder, Gloria Noto, who's um uh a makeup artist and activist.
• 39:40
  SPEAKER_02: And what what we like about that is um it is very differentiated with respect to the community piece of it.
• 39:50
  SPEAKER_02: And it is inclusive in a way that very, very few brands in this space are.
• 39:55
  SPEAKER_02: So um that's what I mean when I say um, you know, in inclusion um in in in as a kind of a big brand like um pillar.
• 40:06
  SPEAKER_02: So um I would also say, I think one thing I forgot to mention in the first sort of part, part one of this was um in terms of like subcategories, we do think like um the the the health and wellness side, because you know, beauty now like means so much, right?
• 40:21
  SPEAKER_02: But so for example, like in our portfolio, we're um investors in a company called Array, which has um had you know really also just incredibly strong growth um you know over the past year and two supplements, exactly.
• 40:34
  SPEAKER_02: Oh my god.
• 40:35
  SPEAKER_02: They've got a hero in Bloat, they've got this amazing digestive health positioning, terrific founding team, you know, just so so talented, you know, similar.
• 40:42
  SPEAKER_02: We just feel so fortunate to be, you know, investors in these great companies like Array and Day and Noto, and um, and again, more um, but which we can discuss.
• 40:50
  SPEAKER_02: But um what I um I think in that case, the way that they're approaching, I'd say almost like almost like beauty supplements.
• 40:58
  SPEAKER_02: I mean, in a you know, in a holistic way, it's really unique.
• 41:00
  SPEAKER_02: And so we definitely feel like that's a really great area.
• 41:04
  SPEAKER_00: Array, I was gonna say, you know, Array, I interviewed them and I am one of their biggest fans.
• 41:10
  SPEAKER_00: Yes, I love they have they're legit.
• 41:14
  SPEAKER_00: Seriously, Tina.
• 41:15
  SPEAKER_00: I mean, you have a totally legit.
• 41:16
  SPEAKER_00: Yeah, yeah.
• 41:17
  SPEAKER_00: Thanks.
• 41:18
  SPEAKER_00: They're very, very cool.
• 41:19
  SPEAKER_00: And I I remember, you know, for everyone listening, I'm just gonna have a little moment of, you know, I love this brand.
• 41:24
  SPEAKER_00: I really do.
• 41:25
  SPEAKER_00: Array is a great brand.
• 41:26
  SPEAKER_00: It's it's one of those.
• 41:27
  SPEAKER_00: I actually had reached out to them, Tina, and I was like, Do you guys understand that you've created something that is not it's like based in Ayurveda, but it's just as good as like a pharmaceutical, you know, in terms of I love it.
• 41:40
  SPEAKER_02: I love it.
• 41:41
  SPEAKER_02: Yeah, well, that was great to hear.
• 41:43
  SPEAKER_02: I'm glad it got your stamp of approval.
• 41:45
  SPEAKER_02: We we're excited too.
• 41:47
  SPEAKER_02: Yeah, it's a it's really special.
• 41:49
  SPEAKER_02: Um, because they've got the the performance side but the and the brand community side, right?
• 41:55
  SPEAKER_02: So I feel like they've really nailed both.
• 41:57
  SPEAKER_02: Um, so that's a yeah, that's a nice business.
• 41:58
  SPEAKER_02: So yeah, we feel, you know, we feel um really fortunate to be able to, you know, partner with these fantastic founders and their businesses.
• 42:08
  SPEAKER_00: Well, I know what you mean about inclusivity.
• 42:10
  SPEAKER_00: You've got that nailed because you know, hey, South Asian here represent, you know what I mean?
• 42:14
  SPEAKER_00: Yeah, like it's exactly.
• 42:16
  SPEAKER_02: I love it.
• 42:16
  SPEAKER_02: Exactly.
• 42:17
  SPEAKER_02: So we think that's really important.
• 42:18
  SPEAKER_02: And so I think that like some people will look at things like that and say, oh, that's too nichey, which of course, from my perspective, this really means like just a lack of creativity on the part of whoever's looking at it, because like how many things were like niche that ended up being like big businesses?
• 42:35
  SPEAKER_02: So I think that we have to keep an open mind um on that in that area.
• 42:39
  SPEAKER_00: You know, I love this.
• 42:40
  SPEAKER_00: I love this conversation, Tina, because honestly, you give me such a fresh perspective.
• 42:44
  SPEAKER_00: I mean, you, you know, when I look at um, you know, executives such as yourself, I I see people who have a very refined eye for success.
• 42:54
  SPEAKER_00: And I just have such admiration for what you do and how you approach your work.
• 42:59
  SPEAKER_00: I mean, clearly you are working with amazing brands, your company, your team, you guys are just doing it in a way that you're right, you know, it's inclusive, it's real, it's genuine, organic, good brands.
• 43:11
  SPEAKER_00: I mean, that is huge.
• 43:12
  SPEAKER_00: And for me as a consumer, it really helps me to know that there are firms like yours that are funding the right people, the right brands, you know, that the ones that are making a difference in this space.
• 43:23
  SPEAKER_00: Because as you know, as everyone knows, the beauty industry is very crowded and it's becoming more and more so, you know.
• 43:30
  SPEAKER_00: So it's it's really, really comforting for me.
• 43:32
  SPEAKER_00: And I and I love it, you know, and every everything you've shared with us today has been so, so helpful and and educational.
• 43:39
  SPEAKER_00: I would love to have you back anytime to dive more into any topic.
• 43:43
  SPEAKER_02: Anytime.
• 43:43
  SPEAKER_02: I'm super happy to.
• 43:45
  SPEAKER_02: This is so much fun.
• 43:46
  SPEAKER_02: You're right.
• 43:46
  SPEAKER_02: We really, I mean, to sum it, we talked about so much, but we also just scratched the surface because there's so much that we can still discuss.
• 43:55
  SPEAKER_02: So I will look forward to part two.
• 43:57
  SPEAKER_00: Absolutely.
• 43:58
  SPEAKER_00: No, it would be such an honor.
• 44:00
  SPEAKER_00: And for everyone um, you know, that's listening, whether you are an entrepreneur or you're just curious, check out Verity Ventures.
• 44:07
  SPEAKER_00: I will tag them in our concept art for this episode.
• 44:10
  SPEAKER_00: And yeah, you know, just shoot us some questions you guys have about, you know, just funding in general.
• 44:15
  SPEAKER_00: It doesn't have to be VC related, just funding or branding or whatever it is you're interested in or whatever this sparked for you.
• 44:22
  SPEAKER_00: We love hearing from you.
• 44:23
  SPEAKER_00: And also, before I go, please take a second to go on to Apple Podcasts and leave us a written review.
• 44:29
  SPEAKER_00: That helps us so much.
• 44:31
  SPEAKER_00: Thank you so much, Tina.
• 44:32
  SPEAKER_00: And for everyone listening, I'll be back next time.
• 44:34
  SPEAKER_00: Thank you so much.
• 44:37
  SPEAKER_00: Hey guys, so I hope you love that episode.
• 44:40
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• 44:45
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• 44:47
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• 45:02
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• 45:19
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• 45:23
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• 45:28
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• 45:33
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• 45:39
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• 45:44
  SPEAKER_00: Thank you.