The beauty industry is driven by emotions, trends, celebrities, influencers, gloss, pretty packaging, and social media advertising. Although beauty may include science and tech, science and technology are never front and center. Just as the words ‘beauty’ and ‘wellness’ diminish the seriousness and massive opportunity in skin health and biotech, the whole beauty industry diminishes the seriousness and massive opportunity of tech and biotech in the industry. “It’s a cultural issue. Historically, the beauty industry has been traditional. They haven’t applied tech beyond treatments like the Hydrafacial or hardware like LED facial masks; they haven’t applied it holistically to the business,” says Rachel Ten Brink, Founding Partner of Red Bike Capital, an early-stage venture capital firm.
Lack of Support and Awareness from the Media, Conferences & Investors
The beauty industry’s media, conferences, and summits focus on consumer brands with skincare, haircare, color cosmetics, fragrance, and nail products rather than biotech, software tech, and hardware tech companies. Media companies and professional organizations such as Cosmoprof, and CEW entirely skip the tech and biotech category altogether for their annual awards; in the case of Glossy, their new tech awards are strictly given to brands. Leading industry media companies largely overlook the software as a service (SAAS) category altogether and only cover tech companies that are consumer-facing brands, such as Hydrafacial, a brand owned by publicly held company BeautyHealth, that recently partnered with Dior.
An example of the lack of awareness was demonstrated at the TD Cowen Glowing Ahead: Beauty & Wellness Summit this week, where there was there was only one panel that touched on technology in beauty. The panel was titled “Personalization and AI”, and the speakers were from skincare and haircare brands utilizing antiquated forms of personalization – with personalization strictly based on less valuable first-party data like a quiz (versus zero-party data, which is data that a consumer proactively shares with a business) and no health diagnostics to gather valuable data. Personalization based on a quiz alone is not holistic, and it’s less likely to be accurate. Now we can achieve a holistic understanding of an individual’s unique biology, lifestyle, and environment through multiple synergistic diagnostics. Notably, Generative AI was not mentioned at all.
Innovation is Stifled: The Pay-to-Play Nature of the Industry
At nearly all the leading industry conferences, such as Kisaco’s upcoming Dermatological Beauty Summit, B2B2C, SaaS, and marketplace tech companies are required to pay the same amount as investors (which is twice the price that global brands and retailers pay). It makes no sense that multi-national companies like Estee Lauder, Sephora, and institutional venture funds pay less or even the same amount as bootstrapped early stage tech startups. Additionally, at many of these conferences, such as the Dermatological Beauty Summit or the Beauty Connect Summit, brand founders/operators are not charged to speak, but tech founders are asked to pay upwards of $15,000 to speak on a panel and pay even more to do a keynote. This is exactly the opposite of how leading tech conferences such as TechCrunch Disrupt, CES, NRF, HLTH, and JP Morgan’s Healthcare conference operate; they make attendance accessible for startups, and they highlight early-stage startups in panels and emerging technology showcases. That is the draw, and these tech conferences have become very popular with founders, early investors, and strategics looking for partnerships or investment opportunities. HLTH’s popularity has increased among founders due to their networking platform for investors and founders and recently attracted and increasing number of tech startups in skin health and wellness tech.
The Startup/Innovation Showcase at Kisaco’s Dermatological Beauty Summit and Innocos Longevity Summit require startups to pay fees of $800-$1,000 to apply. There is little benefit to being featured in an Innovation Challenge at these summits. If selected as a finalist, the startups get the opportunity to do a 5-minute pitch. There is no prize, no grant money. Moreover, both of these conference communities rarely have leading early-stage investors, and often times their Advisory Team and Judges only have CPG-focused later-stage VC/PE investors and CEOs of competitors’ companies. So, a founder needs to decide if it’s worth sharing a pitch deck and private information when much larger competitors are privy to it.
Interestingly, when the tech companies get big enough, they end up being the lead sponsors and cohosts of beauty summits. Last year’s Business of Fashion Summit was sponsored by Bolt, and Perfect Corp is sponsoring the Innocos Longevity Summit and the upcoming Dermatological Beauty Summit. Perfect Corp is now hosting a summit with media partner BeautyMatter. The downside to this is competitive startups are guaranteed not to be speakers at these conferences, and tech companies are overlooked until they can become big sponsors.
Lack of Support for Innovation
Dr. Alan Scott, a Bay Area ophthalmologist, chiefly responsible for bringing Botox into medicine is virtually unknown. In his WSJ review of the book Death to Beauty, David A. Shaywitz, physician-scientist at Takeda Pharmaceuticals, described how Scott founded a company called Oculinum to coordinate the effort and struggled find investors. He funded the company with small donations and a mortgage on his house. He desperately tried to find a pharmaceutical company to buy Oculinum to manufacture and distribute its product. Eventually Allergan acquired Oculinum in 1991, for a mere $9 million, a steal. Allergan received a “drug that now sells in the billions”—without spending the millions it would have cost the company to do the initial development itself.” So much innovation in the beauty industry comes from novel biotech and tech innovations yet the early-stage beauty VCs steer away from tech and biotech.
No Infrastructure of Accelerators or Early Stage Investors
L’Oreal Chief Executive Nicolas Hieronimus said in his CES keynote address, “We believe that tech can push the boundaries of what’s possible, help us improve the lives of consumers around the world, and cater to the infinite diversity of beauty needs and aspirations of every individual.” Despite L’Oreal’s focus on tech, biotech, and longevity, the overall industry — the other stakeholders in the industry like beauty media, conferences, and investors are failing to embrace the technology-driven opportunity. During the “Visionary Investor Panel,” at the TD Cowen conference a leading investor said that he didn’t mention tech at all because he doesn’t understand it. Meanwhile, Axios Pro Rata announced last week that “For venture capital, AI is expected to be the next great source of opulent investment returns. For many venture capitalists, however, AI could be an extinction event. Some will prove smart enough, or lucky enough, to navigate the new normal, but not everyone’s skills will prove transferable. Some may just give up once they realize how much new learning is involved.”
Sumeet Shah, Founding Partner of VHS, said, “I’ve seen so many accelerators, incubators devoted to fashion, fashion tech, retail tech, and CPG brands but nothing addressing the real opportunity in consumer/wellness/beauty tech, even women’s health, hormonal health, prenatal health, large strategics looking for partnerships, and investors.” Sephora Accelerate only accepts brands with physical (non-hardware) products and has never had a SaaS company in a cohort although it acquired Scentsa, a SaaS personalized fragrance advisor, after doing a pilot.
NY Fashion Tech Lab is an example of a program that the industry needs. It’s a community-driven, relationship-building, collaboration, and business development platform. The nonprofit program was co-founded by Springboard Enterprises and key fashion retailers to support women-led companies that have developed innovations at the intersection of fashion, retail, and technology. Each year it onboards a new group of retail and brand partners. Past partners include Macy’s Inc, LVMH, Richemont, Matches Fashion, Walmart, PVH, Tory Burch, Selfridges, Burberry, Levi’s, Tapestry, and more. The program adds value to the retail and brand partners by exposing them to tech solutions available to address a pain point or remove an area of friction.
Jackie Trebilcock
Madeleine Thomas/BFA.com
NYFT Demo Day
Tech Companies Are Winning
Meanwhile, some of the biggest stars in the beauty industry are tech companies such as Hydrafacial and Perfect Corp. Il Makiage’s parent company strategically named itself Oddity Tech, ahead of going public in an effort to position itself as a tech company. In terms of valuations, it’s the tech companies in this industry that are fetching the highest valuations and the biggest, fastest exits. Case in point, Oddity acquired Voyage81 for $40M when Voyage81 had just completed its Series A round of funding and only raised a total of $12M. Oddity also acquired Revela for $76M; Revela, a beauty-focused biotech lab, launched in 2021 and only raised $4.3M. Such early acquisitions rarely happen for brands. Gloss Genius, a vertical software “business-in-a-box” for beauty professionals, recently tripled its valuation at a time when many beauty brands are raising down rounds and doing debt financing; it now positions itself not as a beauty tech company but as a fintech company.
The Biggest Opportunities: biotech, longevity skin health, teledermatology, personalization, hardware, SaaS.
Precision skincare and treatments shouldn’t be grouped with makeup, beauty, or wellness. Sure, the right skincare can make you feel beautiful. However, when skincare is peer-reviewed and held to healthcare standards and involves multiple diagnostics, it becomes “skin health.” Particularly for people 35 years old and above, skin health has more in common with longevity and the science of aging rather than makeup and fragrance, which are personalized based on seasons, mood, trends, and style/scent preferences. Diagnostics like blood tests that yield insights about hormones, vitamins and nutrient deficiencies, proteins, and allergies can drastically change product recommendations and impact efficacy. When skincare personalization incorporates many data sources and diagnostics and applies complex healthcare lenses like dermatology, hematology, and genomics, it has evolved into a new realm—Precision Skin Health.
Teledermatology has rapidly grown in recent years, partly because of the COVID-19 pandemic, the shortage of dermatologists, the convenience, and the reduced cost for patients without insurance. Precision Skin Health can be integrated into teledermatology to make it more efficient. The teledermatology market size was valued at $12.70B in 2021 and is expected to reach over $67.43B by 2030, with a CAGR of 22.4% in the forecast period of 2023-2028. Get Harley, a teledermatology start-up, received $52M in funding for its growth plans. Other leading venture-backed telederm companies include Ro Derm, previously valued at $6.60B in February 2022, DirectDerm, Curology, Musely, and SkyMD.
Understanding how the skin ages and optimizing skin health is a part of longevity medicine. Many skin issues are the result of aging, such as chronic inflammation, stem cell exertion, and the gradual loss of skin elasticity, which leads to the phenomenon of sagging. According to the National Library of Medicine, “the ‘successful aging’ paradigm, focuses on health and active participation in life, counters traditional conceptualizations of aging as a time of disease and is increasingly equated with minimizing age signs on the skin, face, and body.” The global longevity and anti-senescence therapy market size is projected to reach $44.2 billion by 2030, growing at a CAGR of 6.1% from 2021 to 2030.
The next big beauty Enterprise SaaS opportunity is Precision Skin Health personalization technology for retailers, brands, and med spas and dermatology analytics API for digital health companies — that goes far beyond the mere segmentation that basic quizzes offer and beyond a simple selfie analysis; it is a largely untouched category when it comes to enterprise software. There is a demand for high-tech personalization based on science that provides accuracy, not just a cool experience.
Hardware for Salon/Spa and Home Use
If salons and spas use robot manicure machines such as Coral to paint a 4-coat manicure in 20 minutes (10 minutes per hand), supersonic Dyson supersonic dryers with AirMultiplier technology for faster drying time, and online booking and payment platforms like Gloss Genius, they will be able to have more customers and more revenue.
According to market research company Fact.MR, the global Beauty Device Market is estimated to be valued at $34.45 billion in 2024 and is projected to expand at a CAGR of 12.1% through 2034. The market is experiencing a paradigm shift, propelled by tech innovations and a growing inclination towards at-home skincare solutions. Devices such as high-tech microcurrent anti-aging tools to blue/red light masks are revolutionizing traditional skincare routines.
Conclusion
In his keynote at CES, the CEO of L’Oreal said, “Beauty tech is a big future focus, and it will shape the industry and enable us to further strengthen our leadership. It will allow us to know our customers ever-better, bring them ever-more impactful and sustainable products and services, and become ever sharper in our execution.” The industry should recognize that retail and brand partners like L’Oreal and Oddity Tech want tech solutions that will address a pain point or remove an area of friction. The lack of support for startups is a reflection of how the beauty industry has not fully capitalized on the opportunities that biotech, health tech, software, and hardware can bring to the industry. On the bright side, that’s why these industries are ripe for disruption.
