Beauty Brand Investment Advice for Changing Times: Tina Bou-Saba

May 16th, 2024 | Nancy Trent, Trent & Company, Inc

Tina Bou-Saba believes that before considering raising money from investors, brand founders need to be clear on what they want for their business. In other words, how do they define success?

Once a brand raises capital, the expectation is that it will grow quickly and ultimately sell to a strategic or financial buyer for hundreds of millions of dollars. But this is not a realistic path for most brands, and it’s crucial that founders understand both the benefits and constraints that come with bringing on investors.

“In the past decade, there has been a glorification of raising money,” Bou-Saba says. “But venture capital is not appropriate for many companies. Smart entrepreneurs need to be clear on what they want, and then decide whether raising capital from investors is the right way to achieve it.”

Bou-Saba invests in purpose-driven entrepreneurs who are building the next generation of great consumer companies, including emerging brands and the technologies that enable them.

She has been actively investing in the consumer space since 2016 through CXT Investments, her personal investment vehicle, with a focus on beauty, personal care, health and wellness, e-commerce, and enabling technology.

In 2021, Bou-Saba co-founded Verity Venture Partners, an early-stage consumer-focused investment firm, which led investments in Arrae, August and Dae.

She possesses a creative and independent mindset, as well as strong problem solving skills. She is an enthusiastic and trusted partner to entrepreneurs, renowned for her keen business acumen.

Dedicated to championing female and diverse entrepreneurs, Bou-Saba is also committed to serving her community.

An Interview with Tina Bou-Saba

Bou-Saba generally focuses on emerging growth companies with up to $10 million in sales. She stresses that brand founders at this stage need to emphasize true differentiation:

• How does your brand stand out in a crowded market?
• What is your brand’s “DNA” or reason for being?

Founders need to relentlessly focus on this and ensure that it is crisp across all consumer touchpoints. Being able to connect authentically with consumers is crucial, and frequently the brand founder is the most important communicator of brand messaging in the market.

I recently spoke to Bou-Saba about her investment philosophy and her views on current beauty brand dynamics.

What kind of companies do you look to invest in?

Generally, emerging growth companies with up to $10 million in sales.

What makes a company attractive?

Investing in consumer brands requires art and science. Some people don't like investing in brands because it feels difficult to quantify the value of a brand. I appreciate this challenge; brand investing is certainly not for everyone.

You need to love brands and believe that you have an eye for great ones. In addition, go-to market strategy and founders are extremely important. Especially at the early stages, investors are investing in founders first and foremost.

What is a turn-off about a company?

1. Unsustainable fundamentals are certainly a major red flag. For example, low gross margins, low repeat purchase rates and high marketing costs with low efficiency. Generally speaking, the business model has to work at reasonable scale; otherwise, there is no real path to exit for a consumer brand.
2. Founder-business fit. I need to believe that this person is the right one to be leading the company. Are they credible and authentic as a founder? Will consumers buy into their vision for the brand? Can they create a real community around the brand? I think about this stuff a lot.
3. Outstanding products! I would never invest in a company if I didn’t believe that the products would surprise and delight the target customer. That target customer may or may not be me, and I know how to evaluate products through the lens of different consumers, but the “wow” factor must be there. Without it, there won’t be repeat purchases or word-of-mouth recommendations, and it’s almost impossible to build a solid business without those.

What is most interesting to you about the wellness sector?

Wellness is a massive sector that is evolving rapidly, which creates tremendous opportunity for entrepreneurs and investors. What was a luxury in the past may be an accessible, mainstream product or service today or in the future.

It’s fascinating how much innovation there is around ingredients, delivery, technology and so on. For example, I love what Arrae and Beekeeper’s Naturals are doing to reinvent the medicine cabinet with natural and effective remedies.

Many consumers are open to trying new things when it comes to wellness. There is significant opportunity for brands to lead with education and follow with support that together build a sticky and satisfied customer base.

Any tips on sprucing up an investor deck?

Keep it tight—10-12 slides plus an appendix. Don’t try to squeeze in as much as possible. Get your points across quickly. Be super clear and provide basic information including sales, distribution, product / service details, and so on. Tell your brand story in a way that is compelling and concise.

What makes you perk up when you hear it in an elevator pitch?

1. A big brand that I hadn't heard of. I live and breathe consumer brands, but even so, I still discover successful brands that I’d never heard of. I love this! It speaks to the huge range of consumer opportunities out there. There are so many communities that feel “niche,” but in fact represent sizable markets.
2. Brands that have both strong growth and high retention; 40-50% retention is high. I want to learn more about what is going on there.

What trends have you been spotting?

In the 2010s, there was a lot of interest in DTC brands, but of course this is no longer the case. Today, everyone wants brands to be omnichannel, and while I generally agree, there are challenges with this go-to-market strategy as well.

Customer acquisition is expensive everywhere. We all need to be eyes wide open with respect to the broader market environment. I expect that we will see more brand shutdowns and consolidation due to market saturation and limited capital availability.

What changes should a brand make in this time of transition?

Think ahead. Starting a business is always challenging. You need to know what you are getting into and how you define success. Don’t assume you can simply raise more money; this won’t solve underlying business problems. Get the foundations right. Outside capital represents “fuel,” but you need to build a working engine first.

What should wellness brands consider when seeking investors?

Expectations of business traction are higher than they were a few years ago. Founders need to be scrappy and creative and focus on solid business fundamentals. For product businesses, the efficacy absolutely has to be there, and be clearly communicated to the consumer.

Nancy Trent (nancy@trentandcompany) is a writer and speaker, a lifelong wellness activist, a globe-trotting trend watcher, and the founder and president of Trent & Company, a leading wellness PR firm. Trent & Company, which launched many health and beauty brands, grew out of Nancy’s personal and passionate commitment to helping people live longer and healthier lives. A former journalist for New York magazine, Nancy has written seven books on healthy lifestyles, serves on the editorial boards of several magazines and travels around the world speaking at conferences and trade shows on trends in the marketplace. She is a recognized expert in PR with more than 30 years of experience creating and managing highly successful campaigns.