This Beauty Retailer With A Social Mission Is Raising Money Through A New Kind Of IPO

The online beauty counter is a busy place. So when Gina Kohler and Hil Davis decided to start a beauty retailer, they knew they had to find an approach that would resonate with potential customers.

Davis, who previously founded the men’s apparel company J.Hilburn, and Kohler, a beauty industry vet, launched BeautyKind in late 2014 with a business model designed to include customers in the brand in several ways. BeautyKind has a direct-to-consumer selling model—J.Hilburn was built on one as well—and a give-back program that allows customers to chose the cause they want to support. And the retailer is now one of the first companies to raise money through a Regulation A+ IPO, which allows individual investors to buy shares.

Though Davis had raised venture capital for J.Hilburn, the founders decided this route was "an interesting way of raising money and it was befitting for us as it allows customers to get involved,” says Kohler. In a nutshell, the Reg A+ IPOs, made possible by the Jobs Act of 2012, are a sort of intermediate step for companies that have some traction but are not ready for a traditional IPO. And they are open to a broader range of investors. BeautyKind shares are priced at $6.25 in the IPO run by WR Hambrecht that opened April 20^th and will soon close. Kohler says they expect to raise between $5 and $10 million.

The founders met through a mutual acquaintance at a time both were ready for their next move. As they brainstormed, including taking a retreat in Oregon with a handful of advisors, BeautyKind’s model took shape. At J.Hilburn, Davis had frequently fielded requests from women for the store to donate to a cause, and Kohler, as a mother of two, knew how much women wanted to contribute to non-profits. “If we were going to build a beauty retailer, we wanted to include giving back in the model from the beginning,” says Kohler.

At focus groups they held in four markets around the country, the give-back component “got a resounding ‘yes,”’ says Kohler. The founders also got confirmation that customers also wanted benefits for themselves as well, so they amped up the rewards features.

BeautyKind’s model encourages customers to build networks and flex their social media power. BeautyKind customers can direct 5% of their total purchase to a cause of their choice. If they don’t find one they want to contribute to among the 20,000 or so organizations on the site, they can submit the name of a group. If the non-profit is in good standing with vetting agencies such as GuideStar, BeautyKind will make the donation. Contributions come out of the company’s take. Through the company’s sharing program, when a customer refers a friend, the friend receives $25 off their first purchase. Once a friend buys, the customer who referred them gets a $25 credit toward a $50 purchase. BeautyKind’s Ambassador Program rewards customers and their referrals points with points that value to both the customers and the causes.

Bringing on brands hasn’t been as fast as Kohler expected. The site launched with about 50 brands, and now has about 130 brands selling makeup, fragrances, skincare, hair, nail and body care products. In addition to online sales, BeautyKind has begun selling in the Bloomingdale’s Outlet in New York and has created pop-up shops, including one in support of the Lupus Foundation of America.

As BeautyKind gains traction—sales were $1 million in 2015—Kohler expects more top brands to come on board. “The bigger brands are starting to take a look,” she says. “We’ve met with everyone."

Mastering the art of patience, Kohler says, is key to thriving as a founder. Although Kohler has worked with several well-funded startups, this is her first spin as a co-founder. She says she quickly learned that building a company from the ground up can be a roller coaster ride. “I learned early that pivoting does not mean failure,” she says. “You have to be ready to go in another direction and recognize that it just means that the business needs something different right now. Maybe the idea you had will work in a few months or a year.” That kind of optimism works, too.