Last week, Proctor & Gamble (P&G) announced it was Plan to acquire Razer startup Billy ends Following a lawsuit by the US Federal Trade Commission to block the deal.
Last year, Edgewell Personal Care signed its debt-heavy $ 1.37 billion deal to Harry, Inc. Formerly believed to be $ 1 billion. FTC sought to block takeover.
In addition to these FTC challenges, it is also becoming clear that relying on VC-subsidized products and celebrating outrageous valuations can be problematic for D2C brands. Some amazing and rare exceptions like Rothi (Which raised $ 42 million but was profitable right from the start and generated $ 140 million in revenue within two years of launch), the D2C Unicorn enterprise financing cycle to feed growth to maintain a high valuation multiple Are accustomed to
The road to profits has become another important part of the startup versus the story of the startup.
It works for a while; However, when the path to profitability appears soft and exit options are either not visible or appear to be with very conservative multiples from nontech companies, the walls begin to crumble.
In WWD Articles, Odile Ruzol, former CEO of Lancôme who launched the venture fund Fab VenturesSaid, “Generally, the $ 1 billion valuation era for beauty companies is over. The struggling people are companies spending so much money in a few years. “He said,” Large corporations are no longer willing to spend … $ 1.2 billion, $ 1.5 billion on a brand like Glossier. “
This shift in acquirer sentiment is further compounded by recent research on the challenges of turning hypergrowth companies into profits. Your Harvard Business School case study “Direct to consumer brands, ”Professor Sunil Gupta wrote,“ It is very easy to win the DTC brand, but making them profitable is challenging. It was unprofitable even more than three years after Unilever acquired the Dollar Shave Club. “
Unilever executives found that the average cost of acquiring a new customer online was almost the same as in stores. David Taylor, CEO of P&G, said his company was still figuring out how to turn recently acquired direct-to-consumer brands into profitable businesses.
Taylor summarized this dilemma, “There are many, many launches that accelerate … A business model that makes money is a high challenge.” Since making these realizations, many Conglomerates will become very cautious when they consider acquiring a lot of venture capital-raising D2D brands.
Beauty Tech is a better bet: Meetu and Perfect Corp
What is (or were) cooler than beauty companies worth $ 1 billion? Beauty Tech SaaS companies with $ 5.2 billion in IPOs. We don’t hear much about leading global beauty tech companies Meetu And Perfect Corp because their founders are not celebrity influencers, they do not have large-scale Instagram followings in the US and are not celebrated in our media. Although their companies are based in Asia and they raised money mostly from Chinese investors, their companies are global successes.