Direct to consumer retail provided opportunities for many indie brands to launch into the beauty space over the past several years. But as we near 2023, the path to success has become more complicated. According to Kevin Gould, founder and CEO of Kombo Ventures, to scale, beauty brands must have a diversified distribution strategy across DTC, Amazon and retail.

Gould’s Kombo Ventures is a diversified holding and operating company with business interests and ownership across consumer brands, entertainment and technology, including beauty brands Glamnetic, which sells artificial nails and lashes, hair extensions brand Insert Name Here and fragrance and candle company Wakeheart.

Named to Variety Magazine's 2019 Dealmakers Impact List, Gould is also active as a venture investor and advisor to a number of startups. His Kombo Ventures Syndicate has deployed in excess of $7 million in investments across a variety of businesses and industries. In 2020 he was recognized by Business Insider on its list of top investors in the influencer economy.

Kombo has three core business strategies—building and operating brands from inception, venture investing and acquiring brands and using their infrastructure to scale them.

According to Gould, while many early- to mid-stage brands got in the mindset of a DTC business, it may not be the avenue to success. In fact, he’s predicting that 2023 could be a rocky road for many indie brands.

We asked Gould to share his insight.

HAPPI: What are the major issues the DTC brands—including those in beauty, personal care and wellness—have to contend with right now? For example, I believe you say operating solely DTC, rather than diversified is unsustainable—why?

Gould: It used to be “easy” to start a brand and difficult to scale it. Now it's harder than ever to even start a brand and get it going, and almost impossible to scale it. Post iOS, the DTC ecosystem has really been hit hard with rising acquisition costs. In order to scale today, brands need to ideally have diversified distribution across DTC, retail and Amazon; otherwise, it's really tough to make the economics work.  

HAPPI: Why are your brands set up for success as we move into 2023?

Gould: Success is certainly never guaranteed and should never be taken for granted, but I think we have spent the last few years building the right infrastructure to allow us to scale. We still, to this date, have not raised outside capital so we were always very conscious about making sure we did our best to put every dollar to work in an efficient manner. My co-founders and I are 3+ years into building these brands now and we have invested heavily since we launched in building a community, marketing and overall brand storytelling, and so we are beginning to see a lot of those things really compound as the years go on.  Also, to note, we have certainly made our fair share of mistakes along the way—it's important to try to learn from them and not make the same one again but that's business and life and you can only continue to iterate and improve as you go.

HAPPI: Let’s talk about funding within indie beauty. If you have to dispense one piece of funding advice for indie brand founders, what would it be?

Gould: I think the #1 thing that it always comes down to is the founder. Do you feel she/he will be able to execute and bring their vision to life. Everyone has ideas but executing on them is another story. The fundamentals are certainly important—product and quality, differentiation in the marketplace, branding and storytelling, size of market, etc—but in my experience founders that have “it” will figure it out and those other things are secondary.

HAPPI: There are so many indie beauty brands right now. So, if we can, let's talk about the quality of companies in this space…Are there just too many right now? Are we likely to see more closures or acquisitions of indie beauty brands in the coming year? 

Gould: You’re completely spot on. There are still opportunities and gaps in the market for sure and there always will be, but going back to the point earlier, very few of them will break through and get to scale. I think we are entering an era of real consolidation in DTC/indie brands.  Over the next 12-24 months a number of brands are going to a) go out of business because they just can't make the economics work and b) others will find that rolling into a larger infrastructure will provide a lot of benefits, from people resources, supply chain efficiencies and cost savings. We will see lots of rolling up and consolidating happen in 2023 and 2024.

HAPPI: Do you have advice for indie brand founders as they get set for what can be a rocky 2023?

Gould: Take a 7-10 year vision on your brand. You can’t short cut time. Particularly in this difficult environment we are operating in, you have to take a step back and really envision where you see your brand years down the line and make sure you are moving toward that long term goal. I think a lot of founders try to start a brand and have the dream of start, scale and sell in three years. The reality is that scenario is really rare and it takes much longer to build a real stand out brand. And specifically as it relates to 2023, buckle up it's going to continue to be rough waters particularly with DTC—become experts at cash flow, be realistic with your projections and focus on all of the small wins as there won’t be one major thing that you can do to scale, but a sum of all the small things that will add up.