As the leading investors for emerging indie beauty brands, Rich Gersten and Cristina Nuñez, the visionary co-founders of True Beauty Ventures, frequently encounter a pressing question: What specific qualities do they prioritize when evaluating a brand for potential investment?
This inquiry reached a new count during a recent Zoom discussion with the duo, where I asked them once more. “[There are] many factors are considered since we reject 99 out of every 100 brands we examine—there are numerous reasons to decline an investment,” states Gersten, who also holds the title of managing partner at TBV.
Founded in 2020, Gersten and Nuñez established their firm with a clear mission: to foster the growth of emerging brands by offering not only financial backing but also invaluable strategic partnerships and in-depth sector expertise. Over the past five years, the portfolio of True Beauty Ventures has transformed into a prestigious roster of indie beauty icons. Their impressive 20 brand partners encompass diverse categories, including skin care, hair care, fragrance, color cosmetics, and wellness: Ami Colé, BeautyStat, Caliray, Cay Skin, Crown Affair, Dieux, Evolve Together, Feals, Iris & Romeo, K18, Kinship, Maude, Moon Juice, Sofie Pavitt Face, The 7 Virtues, The Maker, Vacation, Youthforia, Jupiter, and an exciting brand yet to be revealed.
At its core, TBV’s unique approach appears simple but effective: “We prioritize relationship-building. We are not the type of investors who evaluate a pitch deck and think, ‘Oh, that seems appealing. I’ll invest after one conversation.’ We cultivate relationships over an extended period,” explains Nuñez. However, their decision-making process is laden with nuances. They thoroughly research and assess whether a brand aligns with their investment criteria.
“What fascinates me about this industry is the rapid pace at which it evolves. It’s quite extraordinary,” remarks Gersten. In light of today’s economic challenges and geopolitical uncertainties, they maintain an optimistic outlook for the beauty sector. “While nothing is completely recession-proof, beauty is likely one of the most resilient categories within consumer products,” asserts Nuñez. “Beauty offers small comforts and an escape from daily life, so I don’t anticipate consumers abandoning their beauty habits. They may shift from purchasing high-end luxury items to more affordable alternatives, but overall, I don’t foresee beauty suffering during a potential recession.”
In a dynamic and crowded marketplace, Gersten and Nuñez are guided by several critical factors when considering investments. “It’s not rocket science, but it certainly isn’t for the faint-hearted either. This is an extremely competitive and saturated market,” Gersten observes. Below, the two leaders behind True Beauty Ventures elaborate on the key attributes they seek in a brand, emphasizing the significance of the founders, the most relevant statistics, and what might lead to an immediate rejection.
Identifying the Right Energy: The Importance of a Vibe Check
Nuñez: “At times, when you connect with someone over Zoom or in person, the energy is palpable; you can instantly sense their commitment. They possess a unique superpower that embodies the essence, or DNA, of the brand and can propel that vision forward. They may not excel in operational aspects, and that’s perfectly acceptable because we can always enhance that later with skilled team members. However, they must be the visionary behind the brand.
“On the flip side, if [we] there is no chemistry, it’s likely a no-go. If they struggle to articulate their business, fail to express the ‘Why is this brand destined for success?’ or simply don’t resonate with us, it’s a mismatch. There’s no other way to put it.
“Our ideal founders actively reach out to us, seeking guidance—this is something we appreciate, as it signals they’ll be great partners for us.”
Demonstrating Viability: The Role of Proof of Concept
Gersten: “We strongly believe in the importance of distribution productivity. If we discover a small brand that has opened 52 retailers across 22 countries but lacks tangible results, that’s a significant red flag. Alternatively, if a brand boasts an extensive product line with 50 items but is generating only $2 million in sales, we prefer to see a more focused approach with two or three standout products partnered with a major retailer like Sephora, as that model tends to yield better outcomes.
“We also leverage various data sources. We meticulously track EMV [earned media value] data and have access to additional sell-through analytics. We maintain regular contact with the merchant teams at Sephora, Ulta, and Target. The merchant’s role closely mirrors that of the investor; both are tasked with identifying brands with scalable potential that can also generate profit.”
Nuñez: “There needs to be some existing momentum. While we occasionally invest pre-revenue, we generally want to see clear traction, proof of concept, and growth momentum.
“This can be frustrating for small brands because they often feel that they need our capital to gain momentum. I completely understand that dilemma.”
The Power of Strong Founders as Assets
Nuñez: “Brands that can break through and generate momentum on a limited budget are incredibly valuable, like Charlotte [Palermino of Dieux] and Sofie [Pavitt of Sofie Pavitt Face]… are prime examples.
“They definitely dabble in marketing for sure, but when we first invested, their growth was entirely organic. It stemmed from their community engagement, authenticity, credibility, and, of course, outstanding products. They successfully built momentum without any external investment, which is an immediate ‘yes’ for us.”
Gersten: “Charlotte’s background as a trained esthetician and Sofie’s as well—this is a tremendous asset. It allows brands to connect with consumers on a deeper level.”
Nuñez: “This is particularly beneficial on social media. There are nuanced layers in how consumers discover and engage with brands. While platforms like TikTok are immensely popular, we are also witnessing a resurgence in authentic community-building and word-of-mouth advocacy. What better way to unlock this than through founders actively engaging with their communities?
None of this is groundbreaking. However, consumers are increasingly scrutinizing brands and seeking assurance that they aren’t just falling for clever marketing or influencer hype. I believe that’s where professional founders—be they estheticians, dermatologists, or makeup artists—can really excel, as they are genuinely practicing their craft.
Gersten: “Following the iOS 14 update, which significantly increased customer acquisition costs through paid digital marketing, we began prioritizing founders who can generate organic demand. Given the high expense of customer acquisition, having a founder whose talent is creating organic demand offers a substantial competitive advantage in today’s marketplace.”
Understanding Profitability and Gross Margins as Essential Indicators
Nuñez: “As we become acquainted with a brand… we delve into their financial performance, emphasizing the necessity of a sustainable and profitable business model.
“We frequently discuss gross margin and analyze it across our entire portfolio—optimizing gross margin is paramount. It’s the most effective way to achieve profitability and provide the necessary resources to invest in marketing and talent that will drive business growth. This is absolutely critical.
“Moreover, it’s vital during an exit; prospective acquirers will closely examine gross margin. If we evaluate a business and find its gross margin to be severely lacking, that would result in an immediate ‘no.’ Attempting to correct such issues at our investment stage is simply too challenging.”
Marketing Strategy and Brand Voice as Key Differentiators
Gersten: “The world does not require any more new brands. Just to clarify, there are very few brands and products that truly possess proprietary elements. Ultimately, it’s about marketing a great product that consumers feel they must have.
“For instance, we believe that Evolve Together produces the best ‘clean’ and best-smelling deodorant available on the market. That’s a significant reason for their success. They have an inspiring mission and a compelling founder story, but fundamentally, they have an exceptional product. Can someone replicate it? Technically, anyone can imitate anything. However, can they deliver the identical experience, aesthetic, packaging, and fragrance? Probably not. If your investment criteria focus solely on products that cannot be easily copied, you might be in the wrong industry.”
The Significance of Product Quality and Innovation
Nuñez: “In this industry, there’s a risk of succumbing to the obsession with constant newness—launching products merely for the sake of having new offerings. Retailers may appreciate this, but brands that fail to introduce genuine innovations can struggle by releasing ‘me too’ products that don’t truly need to exist. We acknowledge this reality; however, we also understand that sometimes, launching products is a necessary evil to satisfy retailer demands.
Not every product launch will be groundbreaking or innovative with cutting-edge technology. Yet—this may sound cliché—the brands that resonate with consumers and deliver immediate benefits and impactful solutions are the ones that flourish. Ultimately, you must address a pain point or fill a gap in the market for consumers. Both attributes must coexist. Consumers are increasingly focused on efficacy, seeking products that provide both aesthetic appeal and therapeutic advantages.
Trusting Your Instincts: The Role of Gut Feeling in Investment Decisions
Gersten: “Given the nature of our investments, it ultimately boils down to whether your intuition tells you this makes sense. For sector-specialized investors like us, with nearly 30 years of experience, pattern recognition plays a crucial role in reinforcing the confidence in our instincts.”
Nuñez: “The entire package must be cohesive, which is why our investment bar is set high; it cannot simply be one aspect. Honestly, I prefer a brand to launch fewer products but maintain a focused innovation strategy. This approach allows them to refine their hero products—from results to experience, packaging, branding, messaging, and content—ensuring everything is perfected. This can lead to more sustainable growth. However, it does necessitate a great deal of patience from both the founder and the investor.
“It is essential, as we remind founders, to embrace continuous improvement. That’s our role as investors: to consistently reflect on past experiences and strive for better outcomes. This enables us to enhance our ability to identify winning brands early, allowing us to provide the support and value they need as they grow.”
For more of the latest in litigation, regulation, deals, and financial services trends, sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker.
