LA, the place to be for Direct-to-Consumer Founders. FaB 2nd meeting.

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The second Fashion and BeautyTech meeting took place in Los Angeles on September 17th, hosted by the iconic Upfront ventures, on their awesome rooftop. 80 founders and investors came to share their learnings in an insightful conversation (the 80 lucky ones had signed up early, and the meeting was sold out in a few days, so don’t forget to subscribe to the newsletter to know more about next events!).

For those of you who missed the meeting, this post is highlighting the take away. The content was dense content, so we’ll try our best! I, Odile Roujol, am writing this Medium post with Camille Çabale, as we both believe LA is the place to be in the years to come.

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We have both lived in San Francisco, the city of tech, close to Stanford and Berkeley, growing leaders in data science and Artificial Intelligence, with most tech companies and social networks being there. For sure, the Silicon Valley has a bright future as it is a place supported by a huge concentration of Venture Capitalists.

LA is the city of multicultural leaders, close to Asia and Latin America. The city of creative minds, change makers, bold entrepreneurs coming from different culture and backgrounds (tech but also entertainment, urban fashion, streetwear, lifestyle entrepreneurs, …) and a fast moving ecosystem supporting them (suppliers, content creators, designers, growth hackers, fashion and beauty influencers, celebrities, investors…).

So let’s focus on Direct-to-Consumer Brands and our Guest Speakers who have founded new retail concepts in clean beauty, wellness or fashion platforms. They began by building communities, having a deep knowledge of their customers, and are fast growing companies: Tradesy (fashion), Ritual (daily supplements), Skylar (scents), The Detox market (beauty/wellness), Goop (beauty/wellness/fashion).

Cumulating their fundings, all together have raised more than $300 Million.

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The first panel discussion was about fundraising from a DTC brand perspective. This panel interviewed:

Deborah Benton, Ex-president of Nasty Gal and COO of ShoeDazzle

Erica Moore, CFO at Goop

Katerina Schneider, Founder & CEO of Ritual

Tracy DiNunzio, Founder & CEO of Tradesy,

and was moderated by Sarah Peluso, VP at Silicon Valley Bank, who helps to lead the consumer team in Santa Monica.

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RAISING MONEY. DO’s and DON’Ts.

The panel discussion was open by Zack Parker, our charismatic FaB chapter leader in LA. He’s the founder of LÜK network (a platform for models and brands) and has just closed his new round. He had at the same time his second baby (Congrats!). He introduces the meeting saying he heard a lot of things about raising money when he founded his first company before this one. And he would have loved to listen to other founders at that time to have a clearer view about what investors expect from founders, how to choose the relevant ones for the company and build a trustworthy relationship with them as long term partners.

Yes, everybody says it.You need the Metrics.

“CAC, churn and retention rate, life time value of the customer, cohort analysis”. Definitely the metrics, measuring your growth and potential revenues, says Erica Moore CFO Goop.

But metrics change at every stage of the company. That’s where you have the feeling being an entrepreneur is learning something every day. Great testimonial by Deborah Benton, now an investor (Kaktus capital early stage, consumer companies and consumer tech) and ex President of Nasty Gal and COO of ShoeDazzle,

Vision First.

A Venture Capitalist will first choose you for what you stand for. And the role of the founder is to “maintain confidence, have the best story-telling, inspire people”. « It is not so much about brand but about the story and bring the investors to a whole journey to the future. The sense of confidence and a clear vision are key ». says Tracy DiNunzio founder of Tradesy.

Tracy bootstrapped the company in its early days by renting out her bedroom on Airbnb and sleeping on the couch. She claims to be an artist-turned-entrepreneurs.

She shares the story of a Xmas break where no VC sent her back the term sheet she wanted to sign. “It’s family break” they said. It was a wake-up call for her, as a tiny team and running out of cash. When she came back in January to pitch investors, she had an entirely new way to tell her story and share her vision for the company, and she finally chose different partners for scaling her business model, which enable her to be where she is now: a leading online peer-to-peer resale marketplace for buying and selling women’s luxury and designer contemporary fashion. Today with 7 Million customers, Tradesy has attracted $100 million in funding from top-tier investors like Kleiner Perkins and Richard Branson. Based in Santa Monica, she’s one of the key players with The Real Real, and Poshmark (also Californian!).

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Katerina Schneider is the Founder and CEO of Ritual, daily supplements. She had the idea to create her company when she was pregnant. She was struggling to find the right vitamins and that time and thought there was a need of something new on the market, adapted to women’s needs.

“I wanted to do things differently in an industry that desperately needed change”, thus starting her vitamin business.

Founding her company based on her personal needs helped her to be at the top when pitching investors. She was assertive about her solution and products (assembling a scientific team), and sharing women’s insights in a convincing way, feeling confident by the research she had led. Indeed, « the value that you add through research is very important. It is not only about marketing and packaging because everyone can do that ».

It’s interesting to notice that prior to founding Ritual, she was a venture partner, managing a portfolio of over 70 tech investments (2014 Forbes 30 under 30 List for Venture Capital). We love the idea as we strongly believe in creating bridges between investors and founders. That’s how and why the Fab Community was created.

Take care of your Board dynamic.

Each founder on stage said it, it takes a lot of time and energy to raise money. And when you are done with it, you start to grow and you’d better be ready for the next round.

Board members are like part of the team. You need to take care of each of them, specially between two Board meetings. Making sure you share your vision and priorities, says Deborah Benton.

Talent. Business strategy. Partnerships. Priorities to scale.

Guidance to the founder for execution. You need the Board as much as your executive team in your circle of trust.

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Zack chose the second panel echoing a lot of conversations that he had with friends asking him: what does really mean “Clean Beauty”?

In an era where people care about expressing who they are, but also about their impact on the planet and on what they put on their face, body and hair, exactly as people are aware of what they eat and drink makes what they are, let’s talk about the “new natural” made in California.

The second panel was about clean beauty and sustainable fashion and gathered:

Elise Loehnen, Chief Content Officer at Goop

Cat Chen, Founder & CEO of Skylar Body

Romain Gaillard, Founder & CEO of Detox Market

and was moderated by Amanda Groves Plus capital, an LA venture advisor firm.

There are so many brands in the clean/natural market. But also you can see a lot of confusing expressions such as“natural beauty”, “non toxic”, “vegan”, “cruelty free”, “green”, “organic”, … so many words and a expressions where the customer could be lost in the choice and claims, following the hashtags on instagram.

It is complicated to have a clear understanding about the products, its ingredients and its impact on our skin and health. Even more in the US market where the FDA doesn’t forbid as many ingredients as in Europe in the beauty sector (11 chemicals versus 1000 in personal care products are banned in the US), not mentioning they barely control the huge number of startups claiming to be clean.

It could be compared to the subject of It’s a little like organic food in the US versus the « bio » compared to the bio criteria in Europe, where there is with a more rigorous and certified process.

That leads to the question « Can we trust the “all natural” labels ? What does « clean beauty » even mean?

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Clean is the new Natural

« Clean is constantly changing, redefined by brands and retailers. There is so many ways to define clean, says Cat Chen, CEO & Founder of Skylar, a hypoallergenic fragrance brand. Cat is an expert of clean through her experience as an executive at Clean Living Powerhouse and at The Honest company.

« We love the word « clean » at Goop says Elise Loehen. « Natural » is a greenwashing term. Many things are natural but problematic. It is messy and it does not mean sustainable ».

« There is a shift in using the word « clean » and even Sephora did it » says Cat Chen.

How do you step up when you create a Direct -to -Consumer brand?

Many ingredients have to be used:

- Education

- Research

- Transparency

- And mixing online and physical presence in stores.

Education

« It is also about education more than the product itself » says Cat Chen. « Consumers back in the days they did not ask so much questions, they did not read the ingredients lists, the one that are hard to read…These days, people are asking a tons of questions. Most of the time we know the answers, sometimes it is so technical we have to ask the suppliers and then go back to educate on the website ».

Education is key in such a moving and changing industry where words, language, processes and certifications are constantly progressing.

Research

You need the research, and make sure your language is simple and relevant, asserts Elise Loehnen, Chief Content Officer Goop, the highly successful lifestyle platform founded by Gwyneth Paltrow dedicated to keeping its readership informed and inspired.

«People can’t be fooled. The consumers are so smart and so savy. They know so many things that we even do not know. So doing a lot of research and being real is important » continues Cat Chen.

For sure, there is more customer awareness: they check the ingredients, they look for “simplified formulas with fewer ingredients and preservatives”, trying to understand the process of manufacturing.

Natural doesn’t always mean better. For example, Essential oils are extremely potent plant compounds and not regulated by the FDA. This can be extremely problematic when it comes to skin care ( who has tried a brand with hemp oil and a massive concentration of pepper mint -as an essential oil drop- without having an allergy or even having breakouts ?).

It’s also imperative to look at the processing of the ingredients. “Clean means that when created a beauty product should have considered human and environmental health. Much like eating clean rejects the idea of processed foods.”

The organic certification is expensive. So many small brands with independently label ingredients claim to be organic on their packaging, despite not carrying an official seal.

The concept of accountability is also very important in our industry. It comes with an understanding of all the products used to make one and also where they come from.

Cat found out she was pregnant with her daughter when safe ingredients went from a professional responsibility to a personal necessity. As a self-proclaimed, no make-up person, Cat’s signature was and still is perfume. Skylar is about ‘fresh, refined scents we love with ingredients that love us back”. She works with true artisans in Los Angeles, a local perfume house to craft artisanal formulas.

For her, the new natural is hypoallergenic fragrances that are safe for consumers. How the ingredients were sourced matters: ethically and proven to be safe for the environment.

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Transparency

“There are a lot of pushes made by the consumers to make us (brands) even better in terms of transparency.» All founders and leaders on stage are eager to be transparent, on the products they sell but also through the content they publish on social media, in order to help customers navigate the now fragmented market.

“no parabens, phthalates, and sulfates” is the new normal. But who will explain to a customer that “no artificial” “no chemical” fragrances is a stretch in fragrances and could be misleading as most scents are? Fragrances are a trade secret and do not have to be disclosed.

Romain Gaillard, founder of The Detox Market — an online and retail brand that sells natural & toxin-free health & beauty products — saw a demand for answers in the complicated word of “greenwashing. He decided to create a toxic-free space on his online platform that combines the Green of California with the flair of Parisian Chic. It is a place where people could trust to find products that are safe and also effective. The Detox Market was founded in 2010, first with a pop-up store on Abbot Kinney in Venice, now with 9 locations and 2 sites in the US and Canada.

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Work with Retailers or Multi-brands players

Romain Gaillard reminds all of us that in the past the customers came to department stores. They went then to multi-brands players online with the internet. Now, DTC Brands want to sell directly to their customers on their website and on social media. Thus knowing a lot about their preferences by collecting data to improve their products and services. “Selling online directly to their consumers means to have the time to experience and experiment as well. Not having the sales pressure works in our favor.”

However, in order to have an immersive experience of the brand, DTC brands now “rediscover the value of having a retail store or a corner where people can touch the product, feel it and benefit from human touch. DTC brands still need the retailers, it also helps their revenue because multi-brands players drive a lot of traffic”.

To the question “ Are brands coming for distribution or for validation at The Detox Market? Romain argues that that brands come for validation but also because it is a profitable channel. Indeed, Multi channels could be the future for sustainable growth because building a digital-only community is a great cost for startups and young DTC brands. Influence and paid media could reach a tipping point if it is not done in synergy with other channels that boost revenues and growth.

Conclusion

Definitely San Francisco and Los Angeles are the cities where most platforms and DTC brands are born. Successful Direct-to-consumer brands now expand globally and I was personally happy to see All Birds store in Shanghai, with Leonardo Di Caprio as a spokesperson in the window!

We both agree that it will be interesting to see what will happen in the next years to come in LA. We bet on a fast growing ecosystem. The Inspiring founders and leaders we met on stage for this FaB event are showing us that new talents are growing, and soon the new generation will be ready to found their own companies, following the example of San Francisco where Tech companies such as Google, Facebook have helped the new Stripes, Slack and Lyft to emerge.

Our host, Upfront Ventures is one of the most emblematic VCs in LA and the largest venture capital firm. Its presence along many new ventures funds show us that capital is increasing in LA. Just to mention some metrics: $6,4 Billions of dollars have been raised in LA in 2018 (source: Amplify LA) and over 60 new funds have been created the last 6 years in LA. There are also a lot of celebrities choosing to be business angels and active investors (Ashton Kutcher, Jared Leto, Kim Kardashian West, Lady Gaga to name a few)…

So let’s be some Direct-to-consumer brands and especially beauty, wellness, new luxury for home and fashion will be a focus. After all, we all seek our place in the world, and connecting with people, feeling confident and at the best, expressing ourselves is vital. Beauty and Fashion industries are not the “cherry on the cake”, but huge market in revenues, with high margins. But do not forget that first and foremost, they are part of helping us to live our lives at the best.

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Fab Fashion and BeautyTech https://www.beautytechcommunity.com/ and https://www.instagram.com/fab_fashionandbeautytech/

Next meetings: Miami Sept 24, Philippines Oct 5, SF Oct 9, Paris TBC, London Nov 4, Fab Africa Launch in Paris Nov 7, Paris Nov 19th, Berlin Nov 14

Odile Roujol Twitter @Odile_Roujol Fab Co-Creation Studio www.fabcocreationstudio.com

Camille Çabale Twitter @CamilleCabale Connecting Dots https://www.linkedin.com/in/camille-%C3%A7abale-t%C3%A9hard-79212616/

Zack Parker Twitter @Iamzackparker LÜK.network https://luknetwork.com/

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We are a community of 5000+ startup founders and investors sharing their learnings in Beauty, Fashion, and Retail. With 15 chapters worldwide #SanFrancisco #LA

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