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 of its promises to better support Black founders in 2020 following the killing of George Floyd by a Minneapolis police officer.
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The biggest pain point: access to capital has dried up significantly. Earlier this year, Crunchbase reported that funding for Black-owned brands fell 71 percent to $705 million in 2023 – the first time since 2016 that figure did not exceed $1 billion. Funding in the U.S., Crunchbase reported, fell at about half that pace.
“After the killing of George Floyd, there was a lot of momentum, and a lot of focus and focus on supporting founders of color and Black founders in general,” said Alisa Carmichael, partner at VMG Partners. “The holistic level of support has changed. There is more discussion about diversity in general than four years ago, and that has an impact.”
The dichotomy is that Black consumers’ spending on beauty exceeds that of other cohorts – and the industry overall – in the US. According to NIQ, Black consumer spending on beauty reached $9.4 billion by 2023. Dollar and unit sales exceeded both U.S. beauty spending overall and family size. They are also growing faster in categories such as cosmetics, nails, facial skin care and hair care, with significantly more spending in-store than online.
Carmichael also oversees VMG’s Parity Collective in partnership with Aurora James of the Fifteen Percent Pledge, an investment initiative for “BIPOC-founded companies on their way to becoming iconic consumer brands,” according to the website. The current beauty portfolio includes Melanin Haircare, BeautyStat and Danessa Myricks Beauty.
Carmichael nodded to that partnership, saying, “It reminds us that there are still people doing the work and pushing to make sure we understand how to help Black businesses succeed. It used to not be as big of a struggle as it is now.”
That partnership is one among a dwindling number of investors committed to Black-owned brands. Last year, the Edward Blum-led American Alliance for Equal Rights sued the Fearless Fund, an investment firm that targets women of color in businesses, alleging the fund violated the Civil Rights Act of 1866.
“We see what happened with the Fearless Fund, we see what happened with affirmative action, and we see the programs and brands that made these commitments now scaling back,” said Kendra Bracken-Ferguson, founder and CEO. officer of BrainTrust Founders Studio and its associated venture capital arm, BrainTrust Fund. “Less than 1 percent of venture capital funding goes to diverse audiences, and even less to Black women.”
Black founders echo the numbers from investors, saying there is declining interest in their brands from the financial community, despite the viability of their companies.
“When I started Forvr Mood, I heard rumblings about what it actually means to be a Black founder getting outside investment,” says Jackie Aina, beauty content creator and co-founder of the brand, who is currently seeking funding for her brand. “It was really quite a challenge.”
Forvr Mood, which makes both fine fragrances and candles and is sold at Sephora, is expected to surpass 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 never made any external investment. We have the growth, numbers that predict the trajectory of what goes well beyond exceptional,” Aina said.
Despite the brand’s success and the resilience of the fragrance category in general, raising money has been an uphill battle. “Jackie has a track record of selling products and doing brand collaborations,” said Denis Asamoah, co-founder of the brand. “Our financing journey started in 2023, we needed more financing to scale up. A lot of investors I talked to were excited about the company and then bailed.”
Aina’s experience seems to be the rule rather than the exception. Across the board, founders report that the magnitude of the opportunity is not being sufficiently recognized by the financial community.
Danessa Myricks Beauty closed a funding round led by the Parity Collective in 2022, and its eponymous founder noted the challenges in finding the right partners. “The funding we received in late 2022 came largely from a company that was mindful of 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, then you have other reasons than just revenue, which is scarier.”
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 P&L perspective, that 15 percent of the population does not equate to 10x revenue growth, which is therefore not true,” said Diarrha N’Diaye-Mbaye, founder and founder of the company. CEO of Ami Colé. The makeup line is sold at Sephora and is known for its lip products, skin tint and mascara.
“If you can focus and provide the right resources and understand what marketing to this cohort actually means, you will see where this consumer is spending her money,” 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.”
Indeed, the misconception that Black-founded brands are only marketed to and for Black people has existed for years, further worsening access to money.
“We have seen great companies in our ecosystem with challenges securing capital, even though they have proven their product market fit and ability to scale. As a beauty founder with almost 23 years of experience, 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 company, Thirteen Lune, is a retail concept that devotes 90 percent of shelf space to BIPOC brands, and currently has a national partnership with JCPenney, where she sees the appetite as those brands grow. “We are grateful for the many important lessons learned,” Grieco said, noting “the potential to expand both nationally and globally as we have seen the enthusiasm for what we are building.”
Grieco, a serial entrepreneur, attributed the increase in consumer interest to the fact that many shoppers have been largely ignored by mainstream beauty companies. “The fastest growing segment of entrepreneurs in the U.S. today is Black women, and the slowdown also has major implications for the consumers who build our economy,” Grieco said. “It’s a good thing to approach and serve a multicultural consumer. By 2040, the majority of the U.S. population will identify as multicultural.”
One founder attributed that disparity to a lack of representation in the financial industry. “When we pitch investors, 98 percent of the time they don’t look like us,” says Devin McGhee Kirkland, co-founder and CEO of wellness brand Deon Libra, which has been seeking funding for more than a year. “Both retailers and investors have asked us why there are no white people in our pitch deck. Do they ask that of white founders who don’t have black people in their deck?”
Furthermore, even when a brand is successful, challenges remain. “We have it on paper that we could double our revenue, and an investor told me that if we couldn’t raise more [money]we have to close,” N’Diaye-Mbaye said. “When you think back to the mentality in 2020, it’s really discouraging.”
Pound Cake, which won Pharrell Williams’ $1 million Black Ambition Grant in 2023 and secured a retail partnership with Ulta Beauty, still faced challenges despite the attention the brand received.
“Even after we won the $1 million, which we tried to use as a starting point to raise money, it didn’t matter that we beat 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 start working with Ulta Beauty, but it still wasn’t good enough. The goalposts keep moving and we’ve been pitching since February.”
In 2020, subsidies for Black-owned beauty businesses increased rapidly, as did incubation programs for retailers. These include the Glossier Grant program, Ulta’s Muse Accelerator program, Sephora’s Accelerate program and the recently launched Dream Makers Founder Grant, founded by Briogeo founder and CEO Nancy Twine. Even those, the founders said, appear to be getting harder to come by.
“Four years after the murder of George Floyd, many grant programs have disappeared,” Kirkland said. “And those subsidies are never enough. A $25,000 grant may cover overhead for a month or two, but that won’t fill purchase orders or pay your contractors.”
One founder, who spoke to WWD on condition of anonymity, had cautionary advice for other Black founders. “You can’t rely on just being a Black founder with a good idea. You have to have a great idea, you have to have a lot to offer, and also support from retail,” says the founder.
That founder had a pessimistic view of the future. “In 2020, [financiers and retailers] thought a little support would be all that was needed, and the continued support that these brands actually need is not paying off as quickly as they would like,” said the founder. “As a result, support has decreased. They do not exclude anyone who has not been historically excluded; it’s status quo. And many brands have suffered as a result.”
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