Richard Gersten, a partner at private equity firm Tengram Capital Partners, has been investing in the beauty space for years, but he doesn’t always care about what’s in fashion.
“I would say we’re probably a little different to other investors that are maybe more trend focused on identifying a trend and jumping on it,” said the veteran investor. “We tend to be a little more reactive in terms of our approach. We’re looking for strong brands that have great products and a loyal consumer following.”
He used the example of luxury skin-care brand RéVive, which it acquired from Shiseido Americas in 2017. “One could say that something like RéVive that was dependent on luxury department store distribution, as an example, would not have been on trend, but we’re experiencing great success with it.”
When he invested in hair-care brand DevaCurl back in 2013, that too was pretty niche, but had a fanatically loyal following and later became much more mainstream.
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“We’re relatively category agnostic,” he mused. “We’ve been fortunate to have invested in businesses that have taken advantage of category tailwinds but is not first and foremost in the development of our thesis,” he said.
The trick to making these companies a success by bringing them to the masses, according to Gersten, is the management team he creates.
DevaCurl was founded by two professional hairstylists, neither of which had much management experience to scale the business.
“The day we invested we put in a phenomenal ceo and he built out his entire senior executive team so that investment in the team part was critical and then we made some modest changes to the packaging,” he said.
“It had the foundation of everything we loved about it, but really the team part is ultimately what got us to the finish line.”
He believes the same is true of RéVive, although Tengram hasn’t sold that yet unlike DevaCurl.
“While we haven’t sold it yet, I think we’re going to do incredibly well as investors for the same reason — a tremendous product, a brand you couldn’t kill despite 10 years of no management. We put a great ceo and team in,” Gersten added.
“If you get the people part right and get an exceptional management team and leadership, good things will happen as investors. So we spend a lot of our time on the people part.”
His advice for beauty companies looking for investors is that it’s like a marriage so founders need to know your partner before they take on the investment.
“Our industry has a mixed reputation in terms of the people and I would say really understand and get to know the people that you’re contemplating partnering with, which means start meeting people before you need the money because when you need the money you don’t have the luxury to spend the time to figure out who the best partner is,” he concluded.