This article was written by Mia Broomhall, Corporate Lawyer at national law firm Freeths.
Although the path to expansion is exciting for small beauty businesses and start-ups, it is also filled with challenges – a key one being fundraising.
A seed fundraising round typically takes place once founders have invested their own money and possibly received support from friends and family.
It is usually structured by way of the issuance of new shares to an investor.
This initial stage of funding equips small businesses and start-ups for future growth.
The purpose is not only to raise capital but to develop the business’s concept, product or service in order to gain early traction.
Male grooming brand Cleverman is an example of a beauty business that got it right.
The brand secured nearly US$2m in seed funding this year to expand the business into new categories and distribution channels.
How to land investors
Finding the right investor can help make or break a small beauty business.
It may be beneficial to approach potential investors who have a proven record of successful investments in the industry or can offer specific strategic value to the business.
Angel investors are high-net worth individuals who provide capital in consideration for a minority equity stake in the business.
An angel investor with expertise in the beauty industry could offer significant value both in terms of financial support and strategic guidance.
Another option is beauty accelerators and incubators.
Trust between the business and any potential investor is key to achieving a successful relationship
Incubation and accelerator programmes that specifically support early stage beauty businesses could provide you with valuable mentorship.
Several accelerator programmes have emerged in recent years which are specifically targeted at the beauty industry and some could also lead to direct funding opportunities.
Crowdfunding is another option and there are a number of platforms, such as Kickstarter and Indiegogo, that can help you raise the capital you need to grow the business.
There are also