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In spite of the strength of Black consumer spending, funding for Black-founded beauty startups remains stagnant, even declining, exacerbated by growing competition for limited grants and venture capital.
Investment data from Crunchbase illustrates the dramatic shift. In 2024, Black-founded beauty brands raised just $16 million — 5.36 per cent of total US beauty industry funding — a sharp decline from $73 million in 2022, which accounted for 9.56 per cent of industry investment. This drop-off comes at a time when Black consumers are spending $9.4 billion on beauty products globally, with spending growth outpacing that of the broader US beauty market, according to a 2024 Nielsen IQ report.
So why has funding faltered?
Part of the problem is that funding has decreased across all consumer categories. Further data from Crunchbase shows a decline in total US beauty funding; descending from $1.49 billion in 2021 to $290 million in 2024 to date. Yet, what appears as a rough patch for the wider industry, has a harder, knock-on impact for Black-owned brands that have historically faced investment bias and market marginalisation — a page that only turned for the better following the 2020 uprising and pledge for greater diversity across the industry.
“The landscape has changed drastically. Investors are now focused on profitability rather than growth projections,” says Tendai Moyo, founder of haircare brand Ruka Hair, who raised over £2 million in funding in 2021, made up of crowdfunding and early-stage VC funding. Noelly Michoux, co-founder of skincare brand 456 Skin, raised €2.2 million in seed funding in 2022, but has recently run into challenges when trying to raise more. As a skincare brand, 456 Skin is focused on developing an inclusive skin tone research lab — a lab dedicated to testing formulas on skin of colour as well as prioritising research and innovation that will help melanin-rich skincare concerns. However, Michoux has found that in the current sales-favoured climate, funding to scale the lab is scarce.
“There’s a misalignment between our research-first approach and investors’ demands for rapid commercial traction. We’re told to hit financial benchmarks before receiving funding, but without funding, it’s a vicious cycle.”
Investors are feeling the effects of economic uncertainty, leading to a more conservative approach. “It’s the economic downturn,” says Nicole Crentsil, angel investor and founder of cultural consultancy Black Girl Fest. VC firms are tightening their purse strings, making it harder for new entrants to secure funding. “Recent high-priced acquisitions have underperformed, prompting investors to reassess the sustainability of their investments,” says Hannah Bronfman, founder of venture fund Pres10 Ventures. “Coupled with higher borrowing costs, venture capital is increasingly risk-averse proving harder for newer entrants to secure funding.”
Crentsil and Bronfman add that the new normal requires Black beauty brands to present high returns and numbers, and strong product sell-throughs and retail traction, at a minimum. They must, most importantly, also showcase innovation or provide a solution to either a long-standing or an emerging concern that’s unique to Black consumers. “If Black beauty brands can leverage their knowledge of specific skin, hair or wellness concerns (such as hyperpigmentation, keloids or textured hair) and position themselves as leaders in innovation in those areas, they’ll prove differentiation and funding potential,” says Bronfman.
An investor’s wishlist
In the current climate, investors are looking for more than just strong brand projections. Nnenna Onuba, M&A strategist, British Beauty Council executive and founder of 100 Allies, an initiative that seeks to improve diversity in the beauty boardroom, says, “Brands need the trifecta: capital, connections and customers. The brands that get this right — balancing community growth with scalability — are the ones that thrive.”
One critical shift is the need for beauty brands to show retail success beyond direct-to-consumer (DTC) platforms as consumers shop across channels and platforms. “DTC alone isn’t enough for investors anymore,” says Joël Palix, founder of Palix Unlimited, an M&A advisory and investment firm. “Investors want to see brands thriving on social media and performing well in major retailers like Amazon, Boots or specialty pharmacies. These indicators show that a brand’s community extends beyond its own channels.”
However, retail opportunities can be difficult to navigate for Black founders who either lack the retail connections, resources and funds from the offset, or once available in-store, struggle to meet sales and performance targets as they are at the mercy of a retailer’s customer base, marketing, advertising and partnership strategies — hindering the brand’s profile. “Entering into a retailer as a small, Black self-funded brand was not easy or cheap — especially as a textured hair brand that is often a new and niche category for retailers,” says Titi Bello, founder of haircare brand Ori Lifestyle, who launched in Harrods in 2020 and exited this month for cost reasons. “I had to invest more to sell more and the way that big retailers are set up is not for smaller, emerging Black brands to thrive.” (Harrods did not respond to requests for comment regarding its efforts to support Black-owned brands in stores.)
Crentsil suggests that retail partnerships, in these cases, must be strategic. “It’s not about being in every store. Founders need to analyse a retailer’s customer base and initiatives to ensure it aligns with their target market.” She highlights the example of Ruka Hair, which launched a successful pop-up at Westfield Stratford City in 2022, as part of the retailer’s Black Pound Day initiative (a marketplace and directory dedicated to encouraging consumers to purchase from Black businesses).
The partnership ensured the brand was positioned at multiple spots throughout the centre over a three-month period, exposing Ruka to the retail centre’s footfall, which was reported at over 12 million during the same period. This approach helped open doors to a more permanent partnership with Selfridges. Alongside a curated retail positioning, Crentsil also advises that brands allocate a budget for a marketing and communication plan to sustain retailer activations and consumer engagement.
Innovation is another key differentiator for investors. “Beauty investors are increasingly looking for brands that offer innovation in product formulation, sustainability or delivery systems,” says Bronfman. A standout example is Myavana, an AI-driven haircare brand that recently raised $5.9 million in a seed round led by Ulta Beauty’s digital innovation fund. The brand created a software system that informed consumers about their hair’s texture, type, condition and health before providing them with product recommendations. For founders without technical backgrounds, investors suggest integrating AI in smaller ways, such as chatbots to enhance the customer experience. “What we want to see is AI, in some way, making the customer’s journey smoother,” says Crenstil.
While catering to the Black consumer remains essential, expanding to a broader audience is crucial for long-term growth. “Start by addressing the needs of Black consumers, but have a plan for appealing to a wider market whether expanding the product line or marketing strategy,” Bronfman advises. However, demonstrating an engaged community is vital at the pitching stage. “Our focus is on strong brands with compelling metrics and consumer loyalty. We want to ensure that a brand resonates with its consumer and that the consumer keeps coming back,” says Caroline Weintraub, VP of investment firm True Beauty Ventures.
If venture capital remains a struggle, grants are a recommended alternative. “They [grants] don’t have the additional pressure of fast growth and high returns,” says Bronfman.
And for smaller brands, they offer opportunity. “Winning the Black Girl Festival x Glossier Black Beauty Grant programme in 2023 allowed us to launch our first pop-up store, something we would have to have done much later in our company’s journey. It also served as a powerful form of validation within the industry, signalling that the key decision makers believe in your vision and want to support it,” explains Koba skincare founder Thérèse M’Boungoubaya. Grants themselves often come with high competition, therefore to stand out, strategist Onuba advises brands to position themselves with industry-critical and robust statistics, proving their market potential. Or if budget allows, hiring a grant-writing specialist to improve the chances of success.
The new reality requires a hard reset and a pitching approach for Black-owned brands — but investors are hopeful. “Deals are still getting done for Black businesses but they must show the right financial discipline and innovative, product-market fit,” concludes Bronfman.
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