The tech themes driving venture financing in the health and beauty industry

The development and adoption of disruptive technologies, such as e-commerce and Internet of Things (IoT), are driving increased activity in venture financing in the global health and beauty market. According to GlobalData, the number of venture financing deals grew by 65%, from 194 in 2020 to 320 in 2021, while the value of disclosed deals grew by 92%, from $1,535 million in 2020 to $2,492 million in 2021.

Ecommerce has pushed retailers to adapt

E-commerce has had a tremendous impact on how people shop, forcing retailers to fundamentally alter their strategies to survive. It was the top technology theme driving venture financing activity in the global health and beauty market in 2021, accounting for 10% of deals recorded, and its influence will only grow over the coming years. GlobalData estimates that the global e-commerce market will grow from $178 billion in 2020 to $509 billion in 2025. As online engagement with consumers evolves, through channels such as social media and the metaverse, e-commerce solutions have diversified into sub-channels that include social media commerce, quick commerce, and direct-to-consumer.

Health and beauty brands that understand the changing online shopping behaviours of consumers and quickly adapt are more likely to excel. In 2021, the e-commerce theme was a driver in venture financing rounds for 31 health and beauty companies globally, including Beauty Pie’s $100 million Series B funding round, ClueMetic’s undisclosed seed funding round, and Pangaea Holdings’ $68 million Series B funding round. The e-commerce theme has continued to drive financing rounds into 2022, including Dinette’s $6.5 million Series B funding round, and Visage Lines Personal Care’s $21.5 million Series C funding round.

IoT drove seven venture financing deals in the global health and beauty market in 2021

IoT is an umbrella term referring to the ability of everyday physical objects to connect with other devices over the internet, enabling them to send and receive data. IoT was the second leading technology theme driving venture financing rounds in the global health and beauty market in 2021. Common examples of IoT in this industry include Point of Sale (PoS) devices, virtual try-on mirrors, and radio-frequency identification (RFID) tags. However, in the future, we can expect a growth in retailers using IoT technologies for other purposes, such as in ambient commerce (also known as checkout-free retail), and product personalization.

From driving one venture financing deal in 2016, IoT drove seven in 2021. For example, Chiaro Technology, the parent company of women’s health technology brand Elvie, raised $17.6 million in its Series C funding round; Preemadonna, maker of the robotic Nailbot, raised $5.6 million in seed funding; and Odore, digital product sampling platform, raised $0.8 million in seed funding.

Big data, AI, telehealth, VR, and AR technologies are growing forces

Although driving fewer venture financing deals in the industry over the past few years, technologies such as big data, artificial intelligence (AI), telehealth, virtual reality (VR) and augmented reality (AR) will grow in importance as health and beauty brands look to leverage technologies that will improve operational efficiency, consumer engagement online and instore, supply chain management, and revenues.

For example, in 2021, Perfect Corp, (a provider of virtual try-on solutions leveraging AR and AI technologies) raised $50 million in its Series C funding round and announced plans in March 2022 to go public via a merger with a blank-cheque company, Provident Acquisition Corp. Meanwhile, German telehealth skincare pioneer, Formel Skin, raised $33.7 million in its Series A funding round. Precision skincare brand, Revea (Compass Beauty), uses big data and precision medicine to create identify personalized treatments and raised $3.5 million in seed funding.

Moving into 2022, AI and big data are already driving further venture financing deals, including an initial $2.5 million investment in South Korea-based Lululab, a beauty brand that uses AI, by SK Shields. Meanwhile, Brazilian-based haircare brand Revo Technologia e Beleza (JustForYou), which uses AI technologies for personalization, secured an undisclosed amount in venture funding from Eurofarma.

As disruptive technologies develop—particularly as a result of greater investment from Big Tech, growing interest in themes such as the metaverse, and changing global environments due to crises such as the Covid-19 pandemic—brands exploring and deploying these technologies will generate higher value in funding rounds.

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