Why VCs Are Hungry for Beauty Data Startups

Picture standing in the beauty aisle, facing shelves upon shelves of shampoos, face creams, nail polishes – how quickly (and easily) can you make a decision?

It was in this exact predicament that Poshly Co-Founder Doreen Bloch had the idea for the beauty data analytics startup. And it is the very problem that she hopes to help fix for consumers and beauty brands in the $382 billion industry.

“We started the company with the goal of using data to empower consumers to discover the right products for their needs,” Bloch told FOXBusiness.com. “It’s a gut check for brand insiders.”

When Poshly launched in 2012, it opened its digital doors as a give-aways website, where consumers are invited to answer a rolling questionnaire through which Poshly collects data (and the consumer has the chance to receive freebies of products). According to Bloch, the team is incredibly mindful of privacy, so the information Poshly gathers is strictly anonymous and aggregated when it comes to brands actually seeing it.

So far, Poshly has created some 1,300 questions and counting, and has collected over ten million data points. Poshly uses this data to power personalization tools such as hyper-targeted sampling solution Poshly Precision and real-time research platform Poshly Insights. With the kind of data they’re collecting, Bloch says they can arm brands to improve on real-life consumer concerns, such as 35% of women cite their biggest beauty concern is how to care for their skin. Other intriguing data points include: 45% of acne sufferers say the most important feature of treatment is overnight results; 25% of people are loyal to certain fragrance brands and shy away from trying new scents; and 37% of people are most influenced by bloggers and editors as to what skincare products to purchase.

Funding Dreams

Poshly has been revenue-generating for some time, Bloch said, and has raised $3 million to date from Frontier Equities VC, Astia Angels, 645 Ventures and Corigin Ventures, among other investors.

Poshly’s venture-backed success overcame challenges that face some women-led companies seeking funding. In fact, a 2013 PNAS report found investors prefer pitches by male entrepreneurs over female entrepreneurs by a 60% margin, even when the content of the pitch is the same.

Victoria Pettibone, vice president of Astia – which is committed to propelling the success of women-led businesses – says less than 5% of VC funding goes to companies with women CEOs and even less to companies with women founders. “We’re here to help move that needle,” Pettibone told FOXBusiness.com.

Astia Angels, a program within Astia, is a membership group of accredited investors who have an exclusive look at all the companies applying for venture capital funding. Poshly was one of those companies, and Pettibone says there was so much interest in Bloch’s startup that a large group of investor members invested in Poshly as an LLC.

“So many people are looking at the big data question, it’s hot right now, and Doreen’s method of approaching it and dealing with it … is so concrete and clear,” Pettibone said. “She really has a great solution to this frontier.”

The New York and San Francisco-based company had originally planned to take the giveaways website down, but then, several now-brand partners called up, curious about working with the young company. Bloch says the idea is still to engineer a separate search engine of sorts for beauty and cosmetics, but for now, Poshly's investors have turned them onto market research.

Bloch said she remembers them saying, "You're sitting on data," and urging her to really dig into the information. Poshly IQ now produces the syndicated report series and has about two dozen brand clients including L'Oreal, Revlon, SkinFix, People Magazine and Colorescience.

Paying It Forward

Poshly is now working to help other women-led ventures get on their feet.

Colorescience, a brand new Poshly giveaways partner, is a multifunctional makeup and skincare pioneer with a pledge of bringing “all-in-one” products, such as their best-seller Sunforgettable Mineral Sunscreen, for customers who don’t want to compromise health for beauty. The beauty brand, which is currently undergoing a re-branding effort, fuses luxury with medical skincare innovations, and CEO Mary Fisher says “there’s color in everything we do.”

The company already has a strong celebrity following. In the past two years that Fisher has been at the helm, Colorescience has secured $25 million in funding. Fisher explains, “It’s our unique niche … that allows us to stay competitive. We’ve created a new category in cosmetics.”

While other details of their newly-minted relationship with Poshly are still being ironed out, Fisher said it is just the beginning.

“This type of data will really help as we develop new product marketing tactics and messaging, shaping how we speak to the beauty consumer,” Fisher said.