Monday, August 12, 2019
Unicorns Built by and for Women
We hear a lot about unicorns in technology, finance, and the sharing economy. But many of us do not realize that a number of unicorns are owned by women and a number of those focus on make-up and skin care--products geared to a female audience. Female-owned beauty unicorns are all around us . . . .
Why should we care? Well for one thing, female-owned businesses have historically been somewhat rare. (In 1972, women-owned businesses accounted for only 4.6% of all firms, e.g.) And for another, it has been noted that women often have a tough time financing their businesses. (See this 2014 U.S. Senate Committee report and other sources cited below for some details.) Also, it may be interesting to some (it is to me) that a business in such a traditional space can succeed so well in private capital markets given the competitive dominance of major conglomerates (most of which are publicly traded). Also, as I note in closing below (for those teaching in the business law area), the facts and trends in this space may be fodder for great exercises and exam questions.
Women-owned businesses are beginning to catch up in the race for space in commercial and capital markets. The National Association of Women Business Owners (NAWBO) represents on its website (based on data from an American Express report, updated here) that "[w]omen-owned firms (51% or more) account for 39% of all privately held firms and contribute 8% of employment and 4.2% of revenues." The Women's Business Enterprise National Council (WBENC) notes that "From 2007 – 2018, total employment by women-owned businesses rose 21%, while employment for all businesses declined by 0.8%." Women Owned, a WBENC initiative and WEConnect International, asserts that "[o]ver the past 20 years, the number of Women Owned businesses has grown 114 percent compared to the overall national growth rate of 44 percent for all businesses." More relevant to the matter of female-led unicorns, however, the NAWBO reports that "[o]ne in five firms with revenue of $1 million or more is woman-owned" and that "4.2% of all women-owned firms have revenues of 1 million or more."
Yet, unicorns owned by women are the exception rather than the rule in women-owned businesses. Overall, according to the WBENC, the revenues generated by businesses owned by women contribute only 4.3% of the total revenues of private sector firms, despite the fact that they constitute almost 4 of every 10 privately held businesses. WBENC also reports that "88% of women-owned businesses generate less than $100,000 in revenue," noting that "[t]his group is growing at a rate that is faster than the growth rate for larger women-owned companies." So, women still have some work to do in producing gender equity through the creation of large, independent, private firms--whether in the beauty industry or another sector.
Why would an investor fund a female-owned beauty unicorn? Here's an answer from one who did--Glossier, well-known by me for its lip glosses, founded by Emily Weiss:
“A category that is mostly acceptable price points with high margins and consumable products—that’s a pretty good business setup,” says Green, who was the first person to back Glossier. Green points out that the momentum women like Weiss and Soare [Anastasia Soare, founder of Anastasia Beverly Hills, a leader in eyebrow products, including its famously popular Brow Wiz®] have created has forced investors to reevaluate what has historically been considered a niche women’s space but is on track to grow to $750 billion by 2024. It has also unleashed a harras of unicorn foals—entrepreneurial hopefuls working to emulate this kind of megawatt success in the cosmetics industry and beyond. “Beauty companies have never been considered companies that are changing the world,” says Weiss. But they are changing the dynamics of who’s in the boardroom.
Venture firms go where the money is, and it appears the beauty market is not yet saturated. One needs only note the soaring popularity of Korean beauty products in the United States to understand that this is a big market. Women are credible business leaders in this industry as key, long-term consumers of beauty products.
There is much more data out there on various aspects of women-owned businesses and unicorns. I plan to poke at these topics more from time to time in this space. Information about these types of firms--as part of a growth economy--may be useful to both law academics and legal practitioners--especially those working with, or engaged with issues relating to, entrepreneurs, start-ups, or small businesses.
The mainstream business news media already has taken note. Witness this article on Glossier in Forbes and this one in Business Insider on Anastasia Beverly Hills, the two firms mentioned above. And, of course, the fashion retail media and blogosphere are awash with information on these firms. That's where I learned about these beauty unicorns in the first place. Some super exercises and exams questions may come out of this space. I already base an experiential exercise on Urban Decay, which once was a privately held female-owned beauty business. See this case for details. Other ideas for how to use the information and trends presented here are, of course, invited. Leave a comment to share yours.