How Bootstrapped Beauty Brands Are Growing

It took Rodial founder Maria Hatzistefanis five years to become an overnight success.

She started her brand in 1999, using her own savings of £20,000 ($25,600) to develop a small range of prestige skincare products and getting them to market. She did her own warehousing, packing and public relations, and admitted that she took a risk when hiring a sales manager, because the business “couldn’t afford” such an expense.

“It was a very lonely time,” recalled Hatzistefanis, adding that then, there weren’t many investors eager to work with indie beauty brands. But in 2004, the business found a hit in its playfully named, skin-tightening Snake Serum, which attracted new customers and stockists. It’s been a steady climb since then: Last year, Rodial — which now also includes affordable offshoot Nip + Fab — generated $32 million in revenue. The business is still 100 percent founder-owned.

Stories like Hatzistefanis’ have become rarer and rarer in the beauty industry. In the 2010s, venture capitalists realised beauty could be a sound investment with a clear path to exit, as conglomerates like Estée Lauder and L’Oréal looked to snap up digitally-savvy labels to modernise their own portfolios. Brands like Drunk Elephant, Glossier and Too Faced have raised millions in capital, going on to fetch blockbuster valuations.

“In today’s startup ecosystem, cash burn is very romanticised and popularised,” said Shamika Haldipurkar, founder of Indian skincare line D’you, saying that the onus was simply on raising funds from investors. “But this is not how businesses built some decades ago would have been run.”

It’s perhaps not how the next generation of beauty businesses will be built, either. The past few years have shown the danger in fundraising. While beauty still remains a more appealing investment than fashion, oversaturation in the market, distribution challenges and higher interest rates have turned off some investors.

Because of those shifts, emerging beauty businesses today want to be leaner, seeking external funding outside of venture capital or forgoing it entirely.

“Consumer businesses, especially ones like ours where we’re selling a $12 deodorant, don’t need that much capital to get that started, and sometimes, it can be a hindrance.” said Sarah Moret, founder and chief executive of deodorant maker Curie.

Start-Up Capital

Venture capital has been beauty’s go-to funding route, but there are other options for brands looking for start-up capital. When launching the prestige skincare line Moussse in May this year, for example, co-founders Hélène Guttmann Chammas and Daniel Guttmann, the former chief executive of Dr. Barbara Sturm, sought out a local government loan.

The Guttmanns had just 15 minutes to pitch a small group of Genevan politicians, but they were successful, securing 300,000 CHF ($343,000) from the government, under a programme called Fondetec. The loan terms are favourable, allowing the business to repay over five years with lower interest rates. One of the few requirements is that the business stay headquartered in Geneva.

The co-founders also put in some of their own money, as well as giving a “very small” slice to an angel investor. Guttmann said he was inspired by his time at Dr. Barbara Sturm before the company had raised much outside investment.

“We had to be really strategic, but we had a lot of freedom, too,” he said.

A privilege not available to everyone is pulling from your own pockets. Curie started Moret in 2018 with just $12,000 in savings, which went entirely to product costs. Her background in accounting and venture capital allowed her to be “her own chief financial officer,” she said. She has since raised $2 million since 2020 through two rounds from friends, family and angel investors. She also secured an investment on “Shark Tank” in March 2022, though it later fell through after the show aired.

Haldipurkar also started D’You with $40,000 of her own money, including a small amount from her father. Raising money early on never made sense to her, she said.

“In Indian culture, there’s a strong undercurrent of frugality … saving is something that we’re taught from an early age,” she said.

Saying she employs “extreme” financial discipline, the business was cash flow positive by its fifth month and has remained profitable ever since, growing by five times between its second and third year. In its last financial year, ending in March, revenue was $3.4 million.

The Price of Freedom

Having no external investors – or at least, very hands-off ones – allows founders to build the business at the pace they choose.

“We launched products very slowly,” said Haldipurkar. D’you offered only one product for almost eighteen months. “I figure, if I don’t give [the customer] other options, their decision making is simpler,” adding that the strategy worked, as people converted faster, and then remained loyal because of the product’s efficacy. It now offers three products in total.

Moussse is focusing its efforts on creating a buzz and brand identity, rather than adding any new products. It offers just one item, a moisturiser called Moisture Rush Cream, which costs CHF95 (about $108). The brand is staying local in its growth mindset, focussing on its hometown of Geneva and nearby London and Paris, hoping to prompt word-of-mouth conversion. The brand has hired an external PR agency, but not added in-house roles yet.

“[Investors] want everything to link to sales,” said Guttmann, “[The expectation is] if you do something, it needs to make a certain amount of money,” he said, adding that building a brand “with soul” doesn’t work like that at the beginning, and that testing and developing a brand voice is needed.

However, freedom has its own price. “Inventory management is what most typically brings down and bankrupts CPG brands,” said Moret. Taking on too much inventory sucks up cash, while not having enough creates stilted cash flow and frustrated customers. After appearing on “Shark Tank,” Moret estimates the brand did more revenue in one night than the previous eighteen months, causing ongoing issues.

“We’d restock, and immediately sell out again,” she said.

Entering retail, oftentimes a more affordable customer acquisition tool than pricey digital ads, can be very competitive and expensive, said Millie Kendall, chief executive of trade body the British Beauty Council. She said there are often “hidden” fees like those for staff, advertising and in-store displays. Brands need to innovate to keep up, but coming up with new, trendy products is also costly, said Kendall.

Patience is a virtue, said Guttmann. “We’d love to get to $10 million in sales relatively quickly, but that’s not going to happen tomorrow,” he said.

Getting Ahead of the Competition

Without deep coffers to outspend their rivals, bootstrapped brands must rely on a combination of strategic decision-making, a scrappy attitude and a touch of luck.

“We can’t fend off the international brands launching in India,” said Haldipurkar. While D’you won’t be able to match the budgets or resources of bigger firms like Nars, Fenty Beauty and Kylie Cosmetics, all of which have recently entered the market, it can maintain its strict controls. “[Customer] acquisition is expensive for every brand, including big ones. But it’s the retention that gets you into the green side of the profit and loss statement,” she said. The slow and steady pace has worked for Curie: at the end of 2023, Walmart cold-messaged the brand; it’s now carried in 4,300 stores across the US, and revenue is eight figures. Rodial is in the process of completing registration processes to allow it launch in India, and is eyeing Latin America and Australia.

Despite the slower pace, Hatzistefanis said developing self-reliance had been worth it.

“The minute you get easy money, you start spending it easily,” she said. “The danger is that you grow too fast and add too many retailers, and with them one minute you’re in, the next you’re out. The bus [eventually] stops.”

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