The next big opportunity: FemTech

You might be wondering - what in the world is FemTech?! I'm launching an incubator in New York City focusing on start-up businesses targeting women, or those run by female founders. The world's first FemTech Lab.

This Lab will focus on the world's largest emerging market: WOMEN.

Did you know? Women drive the world economy. Women represent 72.8% of US consumption directly or through influence according to the Harvard Business Review. Women account for 85% of all consumer purchases. Globally women now control $20 billion in annual consumer spending, and that figure could climb as high as $28 trillion in the next five years.

There are a lot of business sectors that seem to be ripe for disruption when it comes to targeting women, from consumer packaged goods, fashion, child care, education to fitness, aging and wealth management. Many of these sectors employ “old school” business models run mainly by men. Therein is the opportunity for disruption, and we will be encouraging our member companies to start by using innovative technology to leverage data sets that profile behaviors and unmet needs.

Many companies simply have much to learn about selling to women. Jenny Darroch, a subject matter expert, is a professor of marketing at The Drucker School of Management at Claremont College, the author of a 2014 book“Why Marketing to Women Doesn’t Work”, and a blogger for the Huffington Post. She notes that lots of the marketing that targets her as women just doesn’t make sense.

Darroch talks about the expression “shrink it and pink it” used by some companies – like BIC and their pink lighter targeting women which is designed to be easier to use, or Black & Decker who makes pink power drills designed to be more user-friendly for women. They still drill the same holes in the wall...so what's the benefit?

While such theories may have worked in the past, the tech enabled generation demands products and services that solve real pain points. Changing the color and size is simply not enough. Efficiency, convenience, personalization, quality and affordability are paramount to the customer. The priorities of the female consumer are universal and together we represent the largest emerging market in the world.

Darroch observed that when pink is used it falls into the connotations of femininity: Sweet, demure, modest, loving, friendly, kind – all the stereotypes linked with femininity. “Shrinking and pinking” sure doesn’t synch with the characteristics of many start-up founders.

Entrepreneurs build businesses to solve pain points - the product or service is built from day one with the customer archetype in mind. They simply can't afford to just change the color and hope for the best. They are relentless innovators and their out of the box thinking and fearless attitude empowers them to ask the tough questions and challenge the norms.

Male or female, founders are able to quickly build tech enabled businesses while collecting real time feedback and data from customers. It's not about their preconceived notions; it's about real results. While it's obvious that women are most aware of what features would enhance their everyday and are building businesses to do just that, the FemTech lab will also mentor male run startups and provide the requisite sounding board to create more diverse perspectives that focus on the true needs of the target customer.

It's imperative that businesses are built with the consumer stakeholders perspective in mind. The FemTech lab will encourage diverse teams as it's well documented that it's truly better for everyone.

Corporate America: Take Note

While big companies spend millions on trying to understand women, they seem painfully slow to “get it.” Our founders will take a nimble and agile approach, using fast pivoting business models in order to greatly increase their likelihood of succeeding.  

As Steve Jobs once said “I want to put a ding in the universe.” Our mission with the FemTech Lab will be to help some interesting start-ups empower the world of the female customer, and create an environment where they can have lots of fun in the process.

FemTech: A Chance to Go Big

So my definition of “FemTech” goes well beyond a clever play on words or “shrinking and pinking” as a marketing approach. FemTech is about thinking big and on a strategic level, to go after an under-served $25 trillion market. The FemTech lab will push boundaries and break stereotypes to truly understand how to serve women better. 

The FemTech lab with provide a symbiotic environment for the participating companies – using highly detailed consumer profiles / segments based on real-time big data and the best technology to create companies that improve the everyday of women. Together 20 start-up companies will create businesses based on innovative solutions targeting women.

Bare Facts about Start-up Success in Cosmetics.

Continuing our look at business / investment opportunities in “The Female Economy” we now turn to the beauty sector, and a woman founder who discovered pure gold in the hyper-competitive make-up marketplace.

We like what Leslie Blodgett has done by creating and then growing makeup and skincare company BareEscentuals and its flagship product line bareMinerals - which was founded in San Francisco and recently moved its headquarters to New York City.

 Blodgett shook up the swanky cosmetics business by selling her products on home shopping channel QVC. She’s been described as a founder with “guts” whom single-handedly made the mineral-makeup trend real starting back in the mid 1990s. 

After a career in product development at Neutrogena and Max Factor, Leslie Blodgett became CEO of Bare Escentuals in 1994. Back then it was little more than a bath and body retailer in Northern California. But they had an unusual product – a mineral or powder-based makeup. However the fine powdered makeup line offered shades that didn’t match real complexions. Blodgett took this as a challenge and set out to build her company.

WOMAN CAN DISRUPT A CATEGORY BY REDEFINING IT

Blodgett started by relaunching bareMinerals with new shades of eye-shadows, blushes, foundations and brushes. In the early days of the company she found herself staying up nights worrying about how to market the line; as a result she ended up watching endless hours of shopping networks on cable TV. This experience sparked an idea.

In 1997 she was offered a slot on QVC and quickly sold out her entire $45,000 inventory. Eventually she was selling $1.4million of product an hour. This was a far cry from the traditional way higher end cosmetics were sold at department and drug stores.

She then strengthened her distribution network, bypassing traditional distribution channels and focusing on company boutiques, and in specialty cosmetic stores like Sephora and Ulta, all the while continuing to sell on QVC.

WOMEN CAN EMPATHIZE WITH THE NEEDS OF OTHER WOMEN

Blodgett  started getting lots of feedback on her QVC appearances. She began to respond personally to e-mails and letters. “What I realized is when you touch a woman’s face a few minutes after you meet her, you form an emotional bond; it’s powerful stuff.”

One woman wrote: "Dearest Leslie, I've always been overweight. I've never felt pretty. I lived without cosmetics for 15 years. In 2008, my younger sister convinced me to try bareMinerals. I did -- and then I cried. Finally, at 49 years old, I was pretty."

“Sometimes they come to you after a bout of cancer or an emotional trauma, so what we do is not superficial kind of stuff that only helps women look good for their husbands.”

Leslie concluded “We are in the business of helping women feel good about themselves.

WOMEN FOCUS ON CREATING AWESOME PRODUCTS

Bare Escentuals is widely credited with beginning the trend of “mineral” makeup – loose powder that looks more natural than traditional cake powders and foundations.

Leslie noted “Back in 1994 everyone used liquid foundation, which seeped into your pores and gave you zits. A powder foundation that was good for your skin made great sense.”

The company gained particular traction with young American women concerned with their complexion, and willing to pay top dollar to improve it.

The company continues to be committed to “creating innovative products that are powered by nourishing, skin-loving minerals” according to its website. “We formulate our products with purity in mind, so you can feel good about everything we make” which includes facial “get started” kits, foundation, finishing powder, correcting concealer, multi-wrinkle repair, and “marvelous moxie” lip gloss.

WOMEN CAN CREATIVELY OVERCOME OBSTACLES TO GROWTH

 In 2006, Bare Escentuals went public shortly after its sales had jumped over 60% for the first half of the year.  But soon after the IPO, Bare Escentuals felt the pressure of the economic crunch which capped consumer spending.

“While we didn’t go looking for Shiseido,” Leslie notes, “we were looking for better inroads into Asia. Shiseido has been in business for 140 years with distribution in 87 countries, so it makes perfect sense.” In early 2010 Shideido Co, Japan’s largest cosmetic company, made the $1.7 billion deal, it’s largest acquisition in its 83-year history.

SUCCESSFUL WOMEN FIND WAYS TO HAVE IT ALL

Leslie Blodgett had two-year-old son Trent when she founded the company. Now he’s 22. She made a bold decision with her husband Keith back when she first took her job with Neutrogena.

Keith was working in film production, and they agreed that whoever was making more money would keep working when they started their family. Keith has been a stay-at-home dad ever since. Leslie observed “He does everything around the house. I don’t even know how to turn on the dishwasher.”

In April of this year Blodgett announced that she was departing Bare Escentuals from her role as an advisor to join the recently created Shiseido Americas Creative Center.

“While I look forward to embarking on my next chapter, I leave with an incredible sense of pride around what the company has achieved—including the community we have built—and at the same time an amazing sense of purpose. I will remain connected to Bare Escentuals through my role as an advisor to Shiseido Americas, and I look forward to seeing the new ways in which the brand will continue to inspire and connect women around the world.”

Seems like Blodgett is well poised to reinvent herself, and continue to act as a role model for women founders who are creating growing companies and exciting investment opportunities in the process.

Quadruple Bottom Line: Money, Community, Health, Women! The Happy Family Story.

The Harvard Business Review article entitled “The Female Economy”  identified big business potential for companies targeting female customers in six business sectors, and likewise promising opportunities for women-founded start-ups.

A notable example of a female founded company in the Food and Beverage Sector is Nurture Inc. - the parent company of Happy Family Organics! A mom-founded and operated premium organic food that “changed the way we feed our children”, according to the company website.

 WOMEN FIX PROBLEMS THAT THEY EXPERIENCE: 

We like what founder Shazi Visram set out to do back in 2003 when she observed that lots of moms were not happy with the selection of baby food sold in grocery stores. Seems that baby food-in-a-jar from Gerber was just not doing it when it came to feeding their babies quality meals.

Visram was a recent graduate of Columbia Business School, and created a clear mission and vision for her new company: To fill a gap in the marketplace by creating a line of nutritious organic baby food. As Forbes recently reported, she had her "ah-hah moment" not in classroom at Columbia, but rather while chatting with a friend. She was a working mother of twins, who was feeling guilty for not being able to make homemade food for her babies.

 After researching the market Visram learned that baby food had changed little since the 1930s, offered low margins for retailers and was ripe for disruption with a much better organic offering made from high quality ingredients.

Happy Baby (which was renamed Happy Family) was founded in 2003 and went into production and launched on Mother’s Day in 2006 – with a line of organic, fresh-frozen baby meals sold through a New York Grocery Store Chain. Visram, who is 39-years-old and is married with a six-year old son, raised $550,000 in seed financing from friends, family and angel investors.

WOMEN BUILD DIVERSE TEAMS 

We like the fact that Shazi immediately sought out industry expertise that she lacked, and that complemented her own expertise. With a background in marketing but not production, she started networking and identifying advisors such as Gary Hirshberg former CEO of Stonyfield Farms, to learn the ins and outs of the food business.

WOMEN FOCUS ON BUILDING QUALITY PRODUCTS: HEALTH FOOD

Happy Family’s product line targets babies, tots, kids and expecting moms using “delicious, premium organic foods that always offer the best possible nutrition using a wide range of natural ingredients. 

These ingredients include naturally gluten-free amaranth grain, coconut milk, DHA (an omega-3 fatty acid important for baby’s brain health), Salba chia from Argentina and quinoa, once considered so sacred to the Incas they called it “Mother Grain.”

 “We always avoid using unnatural food or additives,” Visram said of the company products, which may be an understatement based on the clear effort the company has made to deliver an amazing array of high quality organic food products.

Visram’s new food business began to gain traction in earnest. Plenty of mothers wanted to buy healthy baby food, and Happy Family’s revenue skyrocketed. By 2011 it grew to $34 million in revenue, nearly doubled in 2012 to $62.3 million and reached $100 million by 2013. Larger players were taking notice, including Danone.

WOMEN GROW THOUGHTFULLY AND YIELD SOLID RETURNS.

"I knew that at one point we would want to bring on a major partner to take the business to the next level," she said, adding that Danone's focus on health and social responsibility made it an optimal fit.

Visram accepted Danone’s offer and sold 92-percent ownership in June 2013. Confidentiality agreements preclude her from revealing what it was sold for, but analysts said it was likely to be in the range of $250-300 million, based on gross sales. That is certainly “life changing money” for the founding mom.

We like the fact that Ms. Visram did not consider an IPO or private equity funding because she wanted to focus on continuing to improve her products, and a partner like Danone offered R&D and consumer marketing expertise in line with her health and wellness focus.

She and her partners maintained an 8 percent ownership stake. Distribution is now reported in 17,000 stores nationwide and includes Whole Foods Markets, Target and Amazon.com. They’ve stayed with the company and expanded the brand include food for tots, kids and even expecting moms.

WOMEN BUILD COMMUNITY IN THE PROCESS.

The company has also built a variety of communities including child-care experts(pediatricians, pediatric psychologists, and a global food industry analyst). The company also has “Happy Mamas” who are real moms with real answers ready to support their customers. 

Forbes went on to report that Visram wants to see Happy Family become a billion-dollar brand, and they have the potential to achieve that in the next 10 years. She added the goal is also to "keep the heart and soul of the brand alive."

Seems there may be a nearly insatiable appetite on the part of many moms to give their kids health and good tasting foods, so we’d say the Happy Family sales goal is a realistic one.