one step forward, two steps back.
That’s the sentiment shared by Black beauty entrepreneurs and executives who report that the beauty industry has failed to deliver on promises to better support Black founders in 2020 following the death of George Floyd at the hands of 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 dropped 71 percent to $705 million in 2023; This figure did not exceed $1 billion for the first time since 2016. Funding across the U.S. is down by about half that rate, Crunchbase reported.
“There was a lot of momentum and a lot of interest and focus in supporting black founders and black founders in general following the killing of George Floyd,” said VMG Partners partner Alisa Carmichael. “The level of holistic support has changed. “There is more discussion about diversity in general than there was four years ago, and that is having an impact.”
Beauty spending by black consumers in the U.S. is outpacing other groups (and the industry at large), with black consumers’ beauty spending reaching $9.4 billion in 2023, according to NIQ. Dollar and unit sales have outpaced beauty spending as well as household sizes across the US. They are also growing faster in categories like cosmetics, nails, facial skin care and hair care, and are spending significantly more in-store than online.
Carmichael also runs VMG’s Parity Collective in partnership with Fifteen Percent Pledge’s Aurora James, an investment initiative for “BIPOC-centered businesses on the journey to become iconic consumer brands,” according to its website. Its current beauty portfolio includes Melanin Haircare, BeautyStat and Danessa Myricks Beauty.
Approving this partnership, Carmichael said: “This is a reminder that there are still people pushing and striving to make sure we understand how we can help black-owned businesses succeed. “It wasn’t as quarrelsome in the past as it is now.”
The partnership is among a dwindling number of investors dedicated to black-owned brands. Last year, the American Equal Rights Alliance, led by Edward Blum, filed a lawsuit against the Fearless Fund, an investment firm focused on women in multi-ethnic businesses, alleging that the fund violated the Civil Rights Act of 1866.
“We’re seeing what’s happening with the Fearless Fund, we’re seeing what’s happening with affirmative action, and we’re seeing the programs and brands that are fulfilling those commitments now shrinking,” said founder and CEO Kendra Bracken-Ferguson. He is an officer of BrainTrust Founders Studio and its accompanying venture capital arm, BrainTrust Fund. “Less than 1 percent of startup funding goes to diverse audiences, and even less than that goes to Black women.”
Black founders echo the statistics put forth by investors and say that while their businesses may survive, the financial community’s interest in their brands is waning.
“When I founded Forvr Mood, I heard rumors about what a Black founder receiving outside investment actually meant,” said beauty content creator and brand co-founder Jackie Aina, who is currently seeking funding for her brand. “It was really challenging.”
Forvr Mood, which produces both beautiful fragrances and candles and is available at Sephora, is expected to exceed eight figures in sales this year, selling more than 30,000 products in its first week. “We were completely self-financing, we never received any outside investment. We have growth and numbers that predict a trajectory that is far beyond extraordinary,” Aina said.
Despite the success of the brand and the vibrancy 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 funding journey started in 2023, we needed more funding to scale. Many investors I spoke to were excited about the business and then ghosted.”
Aina’s experience seems to be the rule rather than the exception. The founders state that the magnitude of the opportunity is not sufficiently recognized by the financial community.
Danessa Myricks Beauty closed a funding round led by Parity Collective in 2022, and its namesake founder noted the challenges of finding the right partners. Myricks stated that investors were generally hesitant despite the success of brands such as Fenty Beauty, and said, “The funding we received at the end of 2022 mostly came from a company that was deliberately carrying out its efforts regarding the Fifteen Percent Commitment.” “If you see that success and you still don’t want to invest, then you have other reasons beyond income, which is scarier.”
In other cases, the financial community doesn’t always recognize the broad appeal or viability of a brand. “Investors are looking at a very one-dimensional bottom-line perspective; 15 percent of the population does not equal 10 times revenue growth,” said founder and Diarrha N’Diaye-Mbaye. CEO of Ami Colé. Her makeup line is sold at Sephora and is known for its lip products, nudes, and mascaras.
“If you can concentrate, provide the right resources and understand what marketing really means to this group, you will see where this consumer is spending their dollars,” N’Diaye-Mbaye said. “I’m a black founder myself, but a good mascara is a good mascara—not just for 15 percent of the country.”
In fact, the misperception that black-founded brands are marketed only to and for black people has been around for years and is further exacerbating access to money.
“We have seen large businesses in our ecosystem face challenges in securing capital, even though they have proven their product market fit and ability to scale. “As a beauty founder for almost 23 years, 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 business, 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 it’s gaining traction. Because these brands are growing. “We are grateful for many important learnings,” Grieco said, noting “the potential to expand domestically and globally as we see the excitement for what we are building.”
Grieco, a serial entrepreneur, attributed the surge in consumer interest to the fact that most shoppers are largely ignored by mainstream beauty companies. “The fastest-growing segment of entrepreneurs in the United States right now are Black women, and the slowdown is also deeply impacting the consumers who make up our economy,” Grieco said. “Interacting and serving a multicultural consumer is good business. By 2040, the majority of the US population will identify as multicultural.”
One of the founders attributed this inequality to a lack of representation in the financial industry. “When we pitch to investors, 98 percent of the time, they don’t look like us,” said Devin McGhee Kirkland, co-founder and CEO of wellness brand Deon Libra, which has been seeking funding for more than a year. “Retailers and investors asked us why there were no white people in our presentation. Are they asking this of white founders who don’t have Black in their deck?
Moreover, even if a brand is successful, challenges remain. “We have it on paper that we can double our business, and one investor told me, if we can’t raise more money,” he said. [money]we have to shut it down,” N’Diaye-Mbaye said. “It’s really disheartening when I think about what the mentality was in 2020.”
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, it didn’t matter if we beat other tech companies or CPG companies. “It didn’t change anything,” said Camille Bell, the makeup brand’s CEO and co-founder. “We won the grant, we were about to start Ulta Beauty, but it still wasn’t good enough. The goal posts keep moving and we’ve been pitching since February.
Grants for black-owned beauty businesses increased in 2020, as did retailer incubation programs. These include the Glossier Grant program, Ulta’s Muse Accelerator program and Sephora’s Accelerate program, and the recently launched Dream Makers Founder Grant founded by Briogeo founder and CEO Nancy Twine. According to the founders, even these are becoming harder to reach.
“Four years after the murder of George Floyd, many grant programs have ended,” Kirkland said. “And these grants are never enough. “A $25,000 grant might cover a month or two of overhead, but it won’t cover purchase orders and pay your contractors.”
One founder, who spoke to WWD on condition of anonymity, offered cautionary advice to other black founders. “You can’t just rely on being a black founder with a good idea. You must have a great idea, have a lot going for you as well as retail support, the founder said.
This founder had a pessimistic view of the future. “In 2020 [financiers and retailers] “The founder started out thinking that all that was needed was a little support, and the ongoing support that these brands actually need is not paying off as quickly as they would like,” he said. “This has led to a decline in support. They don’t exclude anyone who hasn’t been excluded historically, that’s the status quo. And many brands suffered because of this.”
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