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Beauty Inc issue 05/10/2013

Ryan Caldbeck, CircleUp, Founder and Chief Executive Officer

This story first appeared in the May 10, 2013 issue of WWD.  Subscribe Today.

After working for years in private equity at TSG Consumer Partners and Encore Consumer Capital, Ryan Caldbeck detected a hole in the financing ecosystem supporting upstart brands. He thought crowdfunding could be the solution. “Each week, we were seeing terrific small consumer brands that were doing incredibly well, but they were too small for private equity firms. These were under $10 million in revenue,” he recalls. “I wanted to start something to help these high-growth, smaller brands.” Enter CircleUp. Launched in April 2012, the crowdfunding platform connects brands looking for money with individual investors interested in backing emerging consumer concepts. “We want to put investors and companies in the position to succeed. In our view, that means creating a marketplace that has curated deal flow,” says Caldbeck.

One year later, 12 companies, including Episencial, Willa Skincare and RAEN Optics, have raised a total of more than $10 million on CircleUp. The average company that’s raised funds through CircleUp is generating $1 million in annual revenues, has been growing at a 50 percent yearly clip and secures $1 million in funding via CircleUp. It generally takes 60 or so days to complete a round of fund-raising, as compared to a year if companies tap angel sources, estimates Caldbeck. Companies on CircleUp pick how many investors they’d like to participate in their rounds and the minimum amount investors can ante up. CircleUp also provides value-added services such as sessions with executives from Procter & Gamble, with whom it has struck a partnership. “We have had more than 800 companies apply. The demand has been pretty unbelievable,” says Caldbeck. “We’ve doubled in size in the last couple of months.”


NEXT: Amy Cole, Instagram, Head of Business Operations >>


Amy Cole, Instagram, Head of Business Operations


Amy Cole admits her professional background is a bit unusual. After earning an undergraduate degree in mechanical engineering, Cole took a job at Chrysler, where she ended up in the NHRA—that’s National Hot Rod Association—program before moving on to production vehicles. Chrysler was interesting, but Cole wanted to delve into business, so she earned her MBA at Stanford University and did a stint at Sephora before becoming Instagram’s sixth employee. “I learned early on that I wanted to do things I got excited about,” says Cole.

In fact, it’s Cole passion for Instagram that led to her full-time gig at the company. After snapping a photo of two friends who showed up for a tour of wine country wearing pink pants, Cole posted it on Instagram and raved about the new app. Another wine-tour buddy heard Cole gushing about Instagram and connected her with the company, which took a chance on her. “At that time [in 2011,] I had a fairly undefined role. It was anything to keep the business running,” says Cole.

Today, Instagram, which was acquired by Facebook last year for $1 billion, has more than 100 million active users, half of whom are outside the U.S. Cole’s role is to enlist brands on to the platform and then help them maximize their presence once they are there.

Cole cites Sephora as a standout case, noting its success in expanding its digital campaigns across multiple platforms by asking for submissions on Instagram and then pinning them on Pinterest, for example. She also cites Nars, which operates an Instagram account from the perspective of an employee, and Smashbox Cosmetics, which posts behind-the-scenes images from its studio on Instagram. “With brands, you will typically see a lot of engagement on the photos they are posting. The ratio of the quantity of engagement on the photos compared to their follower count is much higher on Instagram than a lot of other platforms,” says Cole. “That speaks to the connections that people are building.”


NEXT: Michael Dearing, Harrison Metal, Founder >>


Michael Dearing, Harrison Metal, Founder


Michael Dearing, who spent seven years at eBay, serving last as its senior vice president and general merchandise manager, and who established Harrison Metal in 2008, might keep a low profile in Silicon Valley, but his investments speak volumes. Singling out a few of his seed-stage investment successes—AdMob (acquired by Google for $750 million), Heroku (acquired by Salesforce for $212 million) and Aardvark (acquired by Google for $50 million)—Forbes in 2011 named him to an “Elite 8” group of venture capitalists. The magazine declared that Dearing had “proven adept at identifying great teams and helping them commercialize technology.”

Harrison Metal’s recent investments—in Rivet & Sway, Euclid, Birchbox, Wantful and Bloomspot, among many others—demonstrate Dearing’s interest in how technology is shaping the modern shopping experience. Dearing, a member of the faculty at Stanford University’s Institute of Design, told the Wall Street Journal that mobile and video are thrilling prospects for e-commerce that he wishes to back. “I’ve tried to pick companies in both that I think are special. Browsing and [filling] shopping carts is a deeply ingrained behavior now. [Brands] find they need more of an editorial story in place to differentiate the product. Video storytelling for commerce has the potential to significantly improve conversion and monetization. I’m very optimistic about it,” he said.


NEXT: Nicolas Franchet, Facebook, Head of Retail and E-Commerce, Global Vertical Marketing >>


Nicolas Franchet, Facebook, Head of Retail and E-Commerce, Global Vertical Marketing

Nicolas Franchet has only been guiding Facebook’s retail and e-commerce for about a year. That isn’t long, but he has been engaged with the consumer side of the tech world for much longer. Franchet is on the board of Shop.org, the National Retail Federation’s digital division, and during eight years at eBay his titles ranged from senior director of marketplaces strategy to senior director of fashion for the U.S. At Facebook, he says, “I spend a lot of time with our clients, with the companies that are building business on Facebook, big and small…I also spend a lot of time with the team compiling best practices. We’re still an emerging platform for a lot of the companies, so the rules are still being written.”

Franchet points out that more than 1 billion people are on Facebook on both mobile and desktop. “How do you really find engaging ways to get in front of them and remain top of mind?” says Franchet. “A lot of experimentation is around engaging content that brands can put in front of their fans, but also their nonfans, the people at large who are most likely to become your customers. More and more, we can connect the right people with the right messages.”


NEXT: Tod Francis, Shasta Ventures, Managing Director >>


Tod Francis, Shasta Ventures, Managing Director

In a venture community filled with technophiles, Tod Francis is unique for his packaged-goods marketing background. He founded Shasta Ventures in 2004 and was at Trinity Ventures before that, but the foundation of his career was laid over a decade in marketing positions at Johnson & Johnson’s Tylenol brand and as a partner at Ram Group Marketing Management. “I don’t look at things from a typical venture perspective. I look at it from a consumer perspective and how you can provide great consumer experiences,” says Francis. At Trinity, he was involved in companies like BabyCenter, Wedding Channel and Jamba Juice. At Shasta, the list includes Caring.com, Threadflip, Plastic Jungle and Mamapedia. “I don’t think you can out-Amazon Amazon, so we don’t look to do another mass merchandiser online,” says Francis. “We are intrigued with the idea of new brand creation in the world of online and mobile marketing. We also look at marketing platforms and things that can help people build businesses online.”

Although Silicon Valley investors are no longer giddy about the consumer sector—the public-market fates of Facebook, Groupon and Zynga has soured them on the space, says Francis—he isn’t backing away from it entirely. “We remain committed. We believe technology can continue to improve customer experiences,” says Francis, adding a caveat. “We have to be super selective. We have to realize that the marketplace for raising additional rounds [of funding] will be challenging.” Mobile, of course, will play an enormous role in Francis’ investment moves. “That is an absolute megatrend. We will see more than half of the volume of usage will be on mobile in the not-too-distant future,” he says.


NEXT: Kirsten Green, Forerunner Ventures, Managing Partner >>


Kirsten Green, Forerunner Ventures, Managing Partner


When Amazon and eBay hit the Internet scene, Kirsten Green realized that the way consumers shop was going to change forever. She wanted to support the kind of companies that would be leading that change. But she had to put her time in first, working as a specialty retail analyst in the equity research department at Banc of America Securities until she headed out on her own to found Forerunner Ventures in 2003. She began by consulting for startups and learning the tricks of the trade before setting up a $5 million fund in 2010 to invest in mobile, social and e-commerce companies. Last year, Forerunner announced a $40 million institutional fund. “I feel like I worked really hard to have this opportunity and I am so excited about it,” she told Business Insider. “I can’t think of a better way to spend your career.”

Forerunner has invested in more than 20 companies, typically pouring $250,000 to $500,000 into early-stage companies. Its portfolio consists of some of hottest names online today, including Birchbox, Dollar Shave Club, Warby Parker, Wantful, Bonobos and Snapette, and it often invests alongside other active investors to build businesses. “We view every deal through the lens that product is king and the consumer is savvy,” Green told Internet Retailer. “Consumers are comparison shopping. Having a differentiated product that someone can’t Google and find in five other spots is really an advantage.”


NEXT: John Hansen, JH Partners, Managing Partner >>


John Hansen, JH Partners, Managing Partner

John Hansen’s participation in the beauty industry had an auspicious start when, in 1990, he acquired the assets of Bare Escentuals. “I figured out pretty quickly that I liked the beauty business: It’s a business that allows for constant streams of new products from technologies, trends, better ideas and creativity. It is just an enormous industry. You can have lots of smaller segments within it that, despite the fact that the economy might be growing at a slow rate, have a potential for higher growth,” says Hansen. JH Partners’ current beauty portfolio contains Kate Somerville, Go Smile and Ouidad.

Today, the firm is taking a close look at color cosmetics brands. “Since we sold Bare, we haven’t had an investment in the color segment, so that’s an area that’s pretty exciting for us,” says Hansen. He’s also keen on advanced skin care. “The pace of development has just been staggering,” he says. Whatever its concentration, a brand’s global prospects are critical today. “Bare Escentuals got to $500 million, $600 million in sales without even having 5 percent of its business overseas. That’s the old way. Now, I see these brands at $30 million, $40 million in sales, and they have 25 percent of sales in overseas markets,” says Hansen.

Above all, however, Hansen says a brand’s leadership—and the capacity to think big—is its most important quality. Talking about Leslie Blodgett, creator of Bare Minerals, he relays, “I remember asking her, ‘How big can this company be? How many people should wear this product?’ She said, ‘Well, all of them,’ without batting an eye. People laughed because the market share of mineral makeup then was less than 1 percent…We like to meet those kind of people.”  


NEXT: Jeff Jordan, Andreessen Horowitz, Partner >>


Jeff Jordan, Andreessen Horowitz, Partner

Jeff Jordan has been a professional investor as a partner in Andreessen Horowitz for about two years, but invested well before then as a hobby. Even during the years he was chief executive officer of OpenTable, president of PayPal and senior vice president and general manager at eBay, Jordan was involved in a dozen or so companies, including Tiny Prints (bought by Shutterfly), Pure Digital (bought by Cisco) and Hotwire (bought by Expedia.) “Entrepreneurs would reach out to me, and to have new challenges I was doing more and more of that,” says Jordan. At Andreessen Horowitz, which has invested in Julep, Fab, Pinterest, Airbnb, Twitter, Shoedazzle and Zulily, there’s certainly no shortage of those sorts of challenges.


Andreessen Horowitz’s partners are known for being outspoken about the future of retail and e-commerce, and Jordan is no exception. “E-commerce is entering a brand-new phase of significant innovation. E-commerce 1.0 was e-commerce for nerds. The businesses that worked—Amazon and eBay—are largely about putting key words into a search box, and they will tell you if they have that item. The second generation is companies with alternative distribution models. They are taking advantage of social channels and are curating like crazy,” says Jordan. Using Julep as an example, he notes its innovation is adding a subscription facet to the traditional nail polish business model, while still selling desirable à la carte stockkeeping units. “This is a case where online can collapse the supply chain. As a result, Julep can give consumers great value and still realize significant margins,” says Jordan.

Silicon Valley investors’ souring on digital consumer businesses does not dissuade Jordan. “Our approach is a long-term one. We are not concerned with what is hot today. We are concerned with what it looks like in 10 years,” he says. “We’re betting hard on the thesis that the fashion and beauty brands of tomorrow will be built online.”


NEXT: Aileen Lee, Kleiner Perkins Caufield & Byers, Partner, Cowboy Ventures, Founder >>


Aileen Lee, Kleiner Perkins Caufield & Byers, Partner, Cowboy Ventures, Founder


Prior to joining Kleiner Perkins in 1999, Aileen Lee spent years learning about consumers while at The North Face, Odwalla and Gap. “I loved the process of identifying a big opportunity in the market and figuring out what the product and consumer experience should be like and how to build a business out of it,” says Lee. That background and enthusiasm was a perfect fit for venture capital, Lee believes and, in particular, her focus on seed-stage investments at Cowboy Ventures, which has a $40 million fund for companies in their earliest phases of development. “Venture capital is about identifying supertalented people who have big ideas and giving them capital, but also giving them the advice, support and network outside of themselves to grow,” she says. “That’s a dream job. I love doing that.”

In what she calls the “era of life 2.0,” Lee contends that everything done in people’s work or personal lives is being reimagined, and she’s jumping headfirst into companies that are doing the reimagining, such as One Kings Lane, Rent the Runway, Dollar Shave Club and StyleSeat. For consumer-driven companies that might want to be added to that list, Lee warns it’s going to be a tough year for venture financing. “A lot of investors have a consumer hangover. They are raising the bar on which companies they are going to be willing to fund in 2013,” she says. “Given that, the expectation is higher than ever that people are going to do more with less. Companies have to figure out how to be super-duper scrappy.”


NEXT: Alfred Lin, Sequoia Capital, Partner >>


Alfred Lin, Sequoia Capital, Partner


Alfred Lin met Tony Hsieh, the chief executive officer of Zappos, at Harvard University, where Hsieh ran a pizza business out of his dorm. As Lin tells it, Hsieh was making $2 to $3 an hour selling pizza pies and Lin made $2 to $3 a minute selling those pies to his fellow students by the slice. That profitable relationship served Lin well after college, too. In 1996, Hsieh started Link Exchange and Lin joined to handle finances. Seventeen months later, the company was sold to Microsoft for $265 million. In 2000, Hsieh and Lin cofounded the investment firm Venture Frogs, which invested in Zappos, the company that Hsieh now leads and where Lin was the chief operating officer and chairman from 2005 to 2010. Amazon bought Zappos in 2009 for $1.2 billion. In his exit letter, Lin wrote he was venturing out to put his knowledge “to work to help finance and help build companies in the special ways we have built Zappos.”

Lin’s success—he has been part of $2 billion worth of acquisitions—has led TechCrunch to dub him the man with the “Midas touch.” At the moment, Lin, who joined Sequoia Capital in 2010, sits on the boards of Airbnb, Stella & Dot, Humble Bundle and Achievers. Rumors constantly swirl that he will once again step into a management role, but Lin has stuck with venture capital in recent years. Certainly, the companies he gets behind are expected to lead the pack. Lin told Chief Marketer that those companies shouldn’t be all style and no substance. “We believe consumers will stay cautious and be more conservative. But they will shop with companies they trust and feel a connection with. That has always been important, but it’s even more so today,” said Lin. “You must ensure that you have a personal, emotional connection with your customers. Don’t just market to them.”


NEXT: John McAteer, Google, Managing Director, U.S. Sales >>


John McAteer, Google, Managing Director, U.S. Sales

John McAteer’s career path has gone through several notable technology and information companies, including PC World, Evite and PriceGrabber, before he landed at Google in 2004. “I was dealing with the social aspects as well as the retail aspects of the Web,” says McAteer. “Retail is still my passion as an area that has a lot of room to grow in terms of understanding digital.” At the world’s largest search engine, the central questions McAteer says he contemplates daily are: “How do we interact with merchants and marketers to better understand what shoppers are searching for and how do they use that information to advertise better?”


McAteer is pushing for retailers to better align their organizations with the realities of digital. He stresses that keeping merchandising and marketing functions completely separate doesn’t maximize the value of information netted from digital tools, citing Home Depot as an example. Home Depot was traditionally stocking its stores with lawn and garden furniture in May, but information collected on Google showed that customers were actually interested in those items in March. “Consumers don’t think in your silos. They think in terms of finding the product and shopping and buying it,” says McAteer. “The consumer is not a digital consumer or brick-and-mortar consumer. They are just a consumer. There is huge room for growth there.” The surge in mobile only makes it more important that companies have the infrastructure and expertise to put information to work to drive sales. By the end of next year, McAteer estimates 50 percent of product-related queries will be made on mobile devices. With mobile comes “the ability to hyper-local target and that is a game that we have never played before,” he says.


NEXT: Jeff Menashe, Demeter Group, Chief Executive Officer >>


Jeff Menashe, Demeter Group, Chief Executive Officer

Jeff Menashe may not have been born into investment banking, but his family provided the impetus for his career in the sector. His father ran a brokerage company that served grocery, mass, warehouse and convenience stores, where the young Menashe worked every summer. “I was exposed to what it meant to be a midmarket, family-owned business at an early age. It’s what dominated the talk around the kitchen table,” Menashe recounts. “That developed my interest in working with owners and stewards of these high-growth consumer brands in the midmarket.”

It was no surprise, then, when Menashe ended up at The Food Partners, an investment bank specializing in the food industry, or when, following in the footsteps of his entrepreneurial father, he started Demeter Group about a decade ago. With Demeter Group, Menashe set out to diverge from the traditional investment-bank model. “We spent the first five years focusing on the buy side—Nestlé, Clorox, Guthy-Renker—and helping them from a strategy perspective figure out how to deploy capital around profitable consumer concepts,” he says.

Demeter Group’s approach has produced deep relationships with beauty and food companies, which has led to the firm playing a role when those companies acquire brands. It’s had a hand in deals such as LVMH Moët Hennessy Louis Vuitton’s purchase of Ole Henriksen, Castanea Partners’ acquisition of Urban Decay and Star Avenue Capital’s investment in Macadamia Natural Oil. Menashe sees the nature of deal making in the beauty segment changing, as traditional brand incubators like Sephora evolve. Still, Menashe believes there are beauty acquisitions that will definitely make sense. “The general market is evolving and looking for brands that speak to the new LOHAS [lifestyles of health and sustainability] consumer that likes natural products, is seeking value and is racially diverse,” he says.


NEXT: Ann Miura-Ko, Floodgate, Co-Founding Partner >>


Ann Miura-Ko, Floodgate, Co-Founding Partner

Floodgate, which has invested in Refinery29, Modcloth, Chloe and Isabel and Zimride, likes to work from the ground up. As Ann Miura-Ko says, “We get involved either early or way too early. We’re looking at companies that haven’t actually raised any financing. Sometimes when they pitch to us, they won’t have the same business six months from now.” She cites Zimride as an example of a company that pivoted when its business model was forced to evolve. Initially a ride-sharing service for universities and companies, Zimride created Lyft, an app that lets customers order rides on demand from drivers in their communities who have cars emblazoned with pink mustaches. “That element of experimentation is something I look for,” says Miura-Ko.

Miura-Ko, who has a PhD from Stanford University in mathematical modeling of computer security, invests in highly technical companies (i.e., rodent brain-imaging firm Inscopix and big-data startup Ayasdi) as well as consumer-oriented concepts, and often becomes fixated with an area in the old-school consumer world that she thinks could benefit from new-school innovation. Chloe and Isabel brought the direct-sales strategy employed by Avon into the social-media sphere, for instance. Today, Miura-Ko is fascinated with elements of QVC and HSN that could be transformed with technology. “In Silicon Valley, we are guilty of looking at consumers who look like people who live in California and who have that California aesthetic, and you look at a place like QVC where literally billions of sales are done across the country online alone, how do you really translate that experience into a startup opportunity?” she asks.


NEXT: Patricia Nakache, Trinity Ventures, General Partner >>


Patricia Nakache, Trinity Ventures, General Partner


Trinity Ventures was one of the first venture capital firms to back brick-and-mortar businesses such as Starbucks, Jamba Juice and P.F. Chang’s, but these days, it has shifted its dollars to e-commerce outfits that are less capital intensive. Patricia Nakache, who joined Trinity during the height of the Internet boom in 1999, says, “I loved this focus on consumers and trying to change consumers lives for the better with technology. What’s really been exciting is watching women become the dominant drivers of social commerce and media. That’s one of my major areas of focus.”


Discussing that focus, Nakache singles out Trinity Ventures’ investment in Care.com, a care-services resource for children, pets and seniors. “As a mom of three kids, it totally resonated with me,” she says. Other investments Nakache is involved in include thredUP, Ruby Ribbon, BeachMint and Weddington Way.

An attractive Web site isn’t enough to convince Nakache an investment is warranted. “Even if you have the technology front end to a commerce business, you really have to understand the back-end operations of retail to deliver great product at decent margins,” she says. She emphasizes mobile should be a priority for social commerce companies. “I’m looking for companies that are thinking about problems with a mobile-first approach,” says Nakache, adding that she asks companies, “Assuming that all your customers are coming from mobile, how would you design the service differently?”


NEXT: Tram Nguyen, Pinterest, Partner Manager >>


Tram Nguyen, Pinterest, Partner Manager


Since its launch in 2010, Pinterest has amassed more than 3.4 billion page views from 25 million members worldwide. Nearly 20 percent of women online visit Pinterest, which is just beginning to leverage that audience to generate revenues. Tram Nguyen, who previously worked at One Kings Lane, Microsoft and Google, joined Pinterest in October as the first member of its partner team, which links the social media platform and brands. “What the vision of Pinterest is and what we aspire for users is to connect them with the things they love the most,” says Nguyen. “What brands can use our guidance on is how best to do that in a way that is really authentic to their voice. At the same time as we are working with brands to help coach them, we are learning from brands who have been on Pinterest for a long time.”


One initial step toward officially getting brands involved with Pinterest was the introduction of business.pinterest.com in November to instruct brands on setting up Pinterest accounts. In March, Pinterest premiered Web analytics tools to let businesses know how many visitors Pinterest is referring to their sites. Going forward, Nguyen says two areas of focus are “improving the actionability of the content” and “improving the discoverability.” “We want to do a better job of surfacing content that you might be interested in based on content you have already engaged in,” she says.


NEXT: James O’Hara, TSG Consumer Partners, President and Managing Director >>


James O’Hara, TSG Consumer Partners, President and Managing Director

TSG has a history of investing in the beauty industry. Alterna, E.l.f., Kenra, Sexy Hair, Pevonia and Perricone MD are currently in its brand portfolio. For the first decade or so of his 15 years at TSG, James O’Hara actively participated in every beauty deal at the firm, starting in 2004 with PureOlogy, which was sold to L’Oréal three years later. “For the last five years, I’m involved in a portion of the deals, but I oversee our diligence process as well as financing and execution. More recently, I’m involved with the across-the-board operations and management of the firm,” outlines O’Hara. When it comes to beauty brands, he emphasizes, “A hallmark of what we do is to try to put our capital to work and provide expertise for beauty businesses that really have a differentiated offering to the consumer.”

TSG is interested in midsize companies that it invests $40 million or more in to propel growth, says O’Hara. “Gross margin is a very important component because it demonstrates that the consumer is willing to pay for those differentiated benefits,” he says. At the moment, O’Hara says TSG has a strong focus on premium beauty brands and alternative channels of distribution. “Whatever pull-back in purchases or trading down that may have occurred during the 2008-to-2010 time frame, our perspective is that beauty consumers are back and increasing their purchases and the quality of brands they’re supporting,” he says. Taking stock of the deal environment, O’Hara believes it is favorable for beauty brands. Strategic beauty buyers, he says, “are very active and are looking to add growth through acquisitions in 2013 and, hopefully, beyond.”  


NEXT: Danny Rimer, Index Ventures, Partner >>


Danny Rimer, Index Ventures, Partner


As a student at Harvard University, Danny Rimer read the first issue of Wired and knew he had to be in the heart of the digital revolution. So, he left the East Coast to become an equity analyst responsible for the Internet practice at Hambrecht & Quist, a San Francisco investment bank now part of JPMorgan Chase. “My interest was not talking to institutional investors, but helping entrepreneurs build the most important companies of this new phenomena. I’ve stayed in venture because I get to work with these amazing individuals,” says Rimer.

At the forefront of e-commerce, Index, which was founded in 1996, has invested in the likes of Net-a-porter, Etsy, Nasty Gal, Asos and FarFetch. Rimer has very strong ideas about the future of retail. Malls and department stores will shrink dramatically, he believes, with transactions involving staple goods transitioning to the Web. The significance of boutiques offering a differentiated experience, on the other hand, will grow. Consumers will prize the curation abilities of the best stores, declares Rimer, who says, “Unlike many of our peers, we don’t think physical retail is going away.”  

When it comes to evaluating investments, Rimer notes Index is currently eyeing “real product creators who are leveraging the Internet to develop their own brand in a unique way.” He also notes the impact of globalization on fledgling ventures. “What has changed is that you have to be global from Day One,” he says. He stresses the importance of mobile “as the primary platform for e-commerce, period,” noting that companies’ mobile infrastructures remain woefully underdeveloped. “We are still way behind on mobile,” Rimer laments.


NEXT: Shaun Westfall, Piper Jaffray, Principal >>


Shaun Westfall, Piper Jaffray, Principal

Shaun Westfall has been an integral member of Piper Jaffray’s consumer investment banking team for seven years, focusing on beauty and lifestyle brands. The first deal he worked on was Bare Escentuals’ IPO in 2006; since then, he’s been involved in deals involving Urban Decay, Ulta and Tarte. “Some of the most innovative and high-growth companies are on the West Coast, as are the private equity firms that are interested in backing those companies, which would be TSG, Encore, Brentwood, Bertram [Capital] and Westin Presidio,” says Westfall, of the importance of being located in California.  

Assessing the landscape of possible beauty acquisitions today, Westfall says that interest is high in brands that specialize in scientific or functional products and are strong in alternative channels of distribution such as the Web or television home shopping. “In beauty, there is no more middle ground,” he says. “You are either prestige and live in prestige channels, or you have a tremendous value proposition.” In the next year, Westfall forecasts that the mergers and acquisitions market is going to be soft in beauty, because there are fewer and fewer companies big enough to be acquisition targets. Meanwhile, there aren’t many strategic buyers vying for middle-market beauty brands. “It is getting increasingly difficult to sell to strategics. What needs to emerge is a middle-market platform in beauty,” says Westfall. “There really isn’t one.”

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