For anyone watching the beauty industry closely, it feels like another brand or retailer shutters almost every day. Operating in a crowded marketplace like beauty is inherently challenging, but add in a global pandemic followed by inflation, sky-high interest rates, unanticipated legal trouble and rapidly changing technology that impacts how one reaches their consumer, and the cause of these closures becomes more clear.
Today’s Confessions subject has experienced many of the above obstacles over the past six years in business, but she says they’re just part of the emotional toll that a closure takes on a person. This female founder has a background in finance and, in 2017, saw an opportunity to take her corporate experience into a sector she deeply loved: beauty. She first opened a brick-and-mortar business, then pivoted in the pandemic to direct-to-consumer.
She has accepted less than $2 million in total funding, including two friends-and-family rounds and one institutional round. During the pandemic, her business was granted various government loans to keep her 45 employees employed, but by this summer, she couldn’t hold on any longer.
While the details of her brand have been removed to protect her privacy, she speaks candidly about hope, identity, debt and knowing when to move on, ahead.
I have been following your brand for many years and, from the outside, it looked so unique and successful. What happened?
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“We went through a lot of ups and downs, as any company does. This summer, we were growing but we weren’t yet profitable, and so we would’ve needed to raise more money. At that point, I felt like I had done it for long enough that I wanted to do something new, and I didn’t really have it in me to go out and raise again. With the fundraising environment being what it was, even if I had tried to raise money, I don’t think I would’ve been able to.”
Take me back to when the brand’s revenue started dipping. What were some of the biggest obstacles that led you to here?
“Customer acquisition cost was probably the biggest one. I hired a CMO in summer 2022, and when he joined, our customer acquisition costs were hovering around $70. We did a bunch of really great work, and by September, we were able to reduce customer acquisition costs down to $45. So now we had the right unit economics to start scaling [again], so we did.
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We purchased a bunch more inventory to support this future growth that we assumed we’d be able to sustain. DTC was fine in 2020 and 2021 with the tailwinds of Covid, but once the Apple iOS14 update happened, which made it so you couldn’t track people across apps anymore, ads became a lot more inefficient. [Meta] also had a lot of turmoil then, so ad prices went up significantly and it became a lot more volatile.
Customer acquisition cost sustained for a while, but by January it was up to $55 and then $65. It was at $80 by the time we shut down.”
That must have been so frustrating. …
“We spent a lot of our resources internally trying to figure out what happened, trying to get our customer acquisition cost back to where it was in October. Really, what we should have been doing was completely pivoting our channel strategy because DTC wasn’t working for us anymore. DTC is not what it was before.”
I can only imagine this whole experience has taken a massive emotional toll on you.
“Part of what made the couple of months leading up to closing so difficult as a founder and as a leader is that you have to live this dual life. You’re facing this very real reality of cash running out. There is a chance that this isn’t going to exist anymore. And also, I personally was putting a lot on the line to try to make it work because you have so much that you’ve put into it already, I thought, ‘I’ve got to make it work!’
There’s this duality of, ‘OK, it could continue, and if it does continue, I need everybody to think that everything’s OK.’
The day before I made the decision to close, we were buying ads and we were investing in new products. Until you make that decision, it has to be all or nothing. … It’s very difficult to live in those two places at once, just from a personal psychological standpoint, as well.”
When did you know it was time to call it?
“I actually heard a great quote — I think it was from Harvard Business School Professor Christina Wallace — that said, “A startup knows it’s time to shut down when they’re out of hope and money.”
If you have hope, but you’re out of resources, you will find the next check. You will find a way to keep going. If you don’t have any hope, but you have resources, you just go into robot mode to keep charging through. But when you’re out of both hope and resources, that’s a really tough spot to be in as a founder, and it’s likely the time to shut down.”
What’s something that you learned through this process that you think other founders may find useful?
“For better or for worse, it’s pretty easy to make products today, but it’s hard to do something that is truly different. People used to think that a direct-to-consumer [business model] is going to make it easier for brands to connect with customers. But it’s actually quite hard now because it is so easy [to start a brand], there’s so much out there. [Beauty] is very crowded, so it’s hard for customers to find authentic connections with brands.”
Do you have any lingering thoughts about how the beauty industry surprised you?
“The environmental impact makes me sad. I love innovation and products and brands. I love all that, and I love that it’s easy to launch stuff and for people to be creative and flex that muscle. But at the same time, I’m like, ‘Does the world really need another serum?’”
One area that is often ignored during these conversations is how debt is structured. Were you able to make it here without taking on personal debt?
“Unfortunately, I did end up with a bit of personal debt from the business. Part of the reason the last few months were so challenging was because of the personal risk I was taking on trying to make it work. Every day that I waited to make the call to close down gave us another shot at securing funding, but it also meant another day of burn, increasing my own personal financial liability if we didn’t make it through.
Initially, the debt was really hard to come to terms with. But I did a lot of helpful reframing and leaned on my mindfulness and meditation practice to help ease the stress and shame I felt. Specifically, I reframed the debt as the price of the education and experience that I got as an entrepreneur, similar to the money I spent on tuition for undergrad and business school. I also focused a lot on gratitude … for the people I got to work with, the customers I got to deliver joy to, the art I got to help put into the world. … And that was a lot more helpful and productive than focusing on the debt and ‘failure.'”
Are you going to dissolve the brand or try to sell it?
“The brand is for sale. We did a lot of work over the years to make the name synonymous with quality and design, and I think there’s still a lot of brand equity there. For example, we were able to launch our e-comm site and do 5-figure sales on our first day with a brand new product and zero paid marketing, thanks to our brand. We’ve had a few preliminary conversations with potential acquirers and would love to see the brand live on with new owners.”
If you could go back and change anything, would you?
“I think just trusting my gut more. Even when you have advisors who have done something before and have experience in something, their experience is not a 100% match for your experience.”
Editor’s Note: For our Confessions series, we provide anonymity to fashion and beauty industry insiders to allow them to openly share their perspectives and give readers genuine insight. The author of a Confessions story is aware of the identity of the speaker and has validated their title and position.
