by One step forward, two steps back.
That’s the sentiment shared by Black beauty entrepreneurs and executives, who report that the beauty industry has fallen short on its promises to better support Black founders in 2020 following the murder of George Floyd by a police officer in Minneapolis.
More from WWD
Biggest pain point: Access to capital has dried up dramatically. Earlier this year, Crunchbase reported that Black-owned brands’ funding fell 71 percent to $705 million in 2023 — the first time since 2016 that the figure did not exceed $1 billion. Funding in the U.S. overall, Crunchbase reported, declined at about half that rate.
“After the murder of George Floyd, there was a lot of momentum, and a lot of eyes and focus on supporting founders of color and Black in general,” said Alisa Carmichael, a partner at VMG Partners. “The holistic level of support has changed. There is more debate on diversity in general than there was four years ago, and that is having an impact.”
The dichotomy is that Black consumer beauty spending is surpassing other cohorts – and the industry as a whole – in the US Black consumer spending on beauty will reach $9.4 billion in 2023, according to NIQ. Dollar and unit sales were higher than beauty spending in the United States overall, as well as household sizes. They are also growing faster in categories such as cosmetics, nail, facial skin care and hair care, and much more is spent in store than online.
Carmichael also oversees VMG’s Parity Collective in partnership with Aurora James the Fifteen Percent Pledge, an investment initiative for “businesses founded by BIPOC and on a journey to become iconic consumer brands,” according to its website. Its current beauty portfolio includes Melanin Haircare, BeautyStat and Danessa Myricks Beauty.
Referring to that partnership, Carmichael said, “It’s a reminder that people are still doing the work and trying to make sure we understand how to help Black-owned businesses succeed. There used to be as much battle as there is now.”
That partnership is one of a dwindling number of investors dedicated to Black-owned brands. Last year, the American Association for Equal Rights, led by Edward Blum, sued the Fearless Fund, an investment firm that targets women of color-based businesses, alleging that the fund was violating the Civil Rights Act of 1866.
“We see what happened with Fearless Fund, we see what has happened with affirmative action, and the programs and brands that have made these commitments are now growing,” said Kendra Bracken-Ferguson, founder and chief executive . an officer of BrainTrust Founders Studio and its accompanying venture capital arm, BrainTrust Fund. “Less than 1 percent of venture funding goes to diverse audiences, and even less to Black women.”
Black founders echo the stats put out by investors, and say the financial community’s interest in their brands is waning despite the viability of their business.
“When I started Forvr Mood, I heard rumors about what it really means to be a Black founder getting outside investment,” said Jackie Aina, beauty content creator and co-founder of the brand, who is seeking funding for her brand about present. “It was really challenging.”
Forvr Mood, which makes both fine fragrances and candles and is sold in Sephora, is expected to break eight figures in sales this year, selling more than 30,000 units of product in its first week. “We are completely self-financed, we have not accepted any external investment whatsoever. We have the growth, the numbers that predict the trajectory of things that are far beyond exceptional,” said Aina.
Despite the success of the brand and the overall success of the fragrance category, fundraising was an uphill battle. “Jackie has a track record of selling products and doing brand collaborations,” said Denis Asamoah, co-founder of the brand. “Our funding journey started in 2023, we needed more funding to scale. A lot of investors I spoke to were excited about the business, and then they got ghosted.”
Aina’s experience seems to be the rule rather than the exception. Across the board, founders report that the financial community doesn’t quite recognize the magnitude of these opportunities.
Danessa Myricks Beauty closed a funding round in 2022 led by the Parity Collective, and its named founder noted the challenges of finding the right partners. “The funding we received at the end of 2022 came largely from a firm being intentional about its efforts with the Fifteen Percent Pledge,” Myricks said, noting that despite the success of brands like Fenty Beauty, investors were generally hesitant. “If you see that success and you still don’t want to invest, you have other reasons than income, which is more scary.”
In other cases, the financial community does not always recognize the broad appeal or viability of a brand. “Investors are looking at a very one-dimensional profit-and-loss perspective, that 15 percent of the population does not equal 10 times revenue growth, which is not true at all,” said Diarrha N’Diaye-Mbaye, founder and CEO Ami Colé. The makeup line is sold at Sephora and is known for its lip products, skin tint and mascara.
“If you’re able to focus and provide the right resources and look to understand what marketing means to this cohort, you’ll see where this consumer is spending their dollars,” N’Diaye-Mbaye said. . “And I’m a Black founder, but a good mascara is a good mascara — not just for 15 percent of the country.”
In fact, the misconception that Black-based brands are only marketed to Black people and those who have been there for years, further exacerbates access to money.
“Great businesses in our ecosystems have seen challenges in getting capital, even though they have proven product-market fit and the ability to scale. As a beauty founder for nearly 23 years, access to capital has always been my biggest challenge,” said Nyakio Grieco, co-founder of Thirteen Lune.
Grieco previously founded Nyakio Beauty, which was sold to Unilever in 2017. Her current business, Thirteen Lune, is a retail concept that dedicates 90 percent of its shelf space to BIPOC brands, and currently has a national partnership with JCPenney, where seeing her appetite. for those brands to grow. “We’re grateful for the many key learnings,” Grieco said, noting “the potential to expand domestically and globally as we’ve seen the enthusiasm for what we’re building.”
As a serial entrepreneur, Grieco attributed the rise in consumer interest to the fact that many shoppers were largely ignored by mainstream beauty companies. “Black women are the fastest growing segment of entrepreneurs in the United States right now, and the slowdown is taking a toll on the consumers who build our economy,” Grieco said. “Adopting and serving a multicultural consumer is good business. By 2040, the majority of the US population will identify as multicultural.”
One founder attributed that disparity to a lack of representation in the financial sector. “When we bring in investors, 98 percent of the time, they’re not like us,” said Devin McGhee Kirkland, co-founder and CEO of wellness brand Deon Libra, which has been seeking funding for more than a year. “Retailers and investors alike have asked us why there are no white people in our pitch deck. Do they ask that of white founders who have no Black people in their decks?”
Furthermore, even when a brand is successful, there are still challenges. “We have on paper that we could double our business, and an investor told me if we couldn’t raise more. [money], we should stop,” said N’Diaye-Mbaye. “When you think back to the mood in 2020, that’s disappointing.”
For its part, Pound Cake, which won Pharrell Williams’ $1 million Black Ambition Grant in 2023 and secured a retail partnership with Ulta Beauty, continued to face challenges despite the brand’s attention.
“Even after we won the $1 million, which we tried to use as a starting point to raise, it didn’t matter if we beat out other tech companies or CPG companies. It didn’t change anything,” said Camille Bell, CEO and co-founder of the makeup brand. “We won the grant, we were about to launch in Ulta Beauty, and it still wasn’t good enough. The goalposts are always moving, and we’ve been playing since February.”
In 2020, grants for Black-owned beauty businesses increased, as did nutrition programs for retailers. These include the Glossier Grant program, Ulta’s Muse Accelerator program, and Sephora’s Accelerate program and the recently launched Dream Makers Founder’s Grant, founded by Briogeo founder and CEO Nancy Twine. Even those, founders said, seem to be getting harder to come by.
“Four years after the murder of George Floyd, many of the grant programs have died,” Kirkland said. “And those grants are never enough. A $25,000 grant might cover overhead for a month or two, but that doesn’t fulfill purchase orders and doesn’t pay your contractors.”
One founder, who spoke to WWD on condition of anonymity, had cautionary advice for other Black founders. “You can’t count on being a Black founder with a good idea. You have to have a great idea, you have to have a lot, as well as retail support,” said the founder.
That founder took a pessimistic view of the future. “In 2020, [financiers and retailers] thinking that a little support would be needed, and the ongoing support these brands need is not paying off as quickly as they would like,” said the founder. “That support has dwindled. They are not excluding anyone who has not been historically excluded, it is the status quo. And a lot of brands have suffered because of that.”
The best of WWD
