The African beauty industry holds immense potential for growth and innovation. Yet, despite this promise, African beauty brands face significant hurdles in securing the funding necessary to scale operations. This is largely because the roads to financial support are fraught with challenges such as limited access to funding networks, a lack of investor understanding of the market, market fragmentation, intense competition, and sometimes, governmental policies. For beauty brands in the continent, overcoming these obstacles requires strategic planning, a deep understanding of the investment landscape, and a proactive approach to attracting investors.
Unlike many other industries such as technology, food and agro-business, and oil and gas, access to capital is a critical issue for the African beauty industry. When Wendy Agboyibor founded BlackRam Capital in 2023, the main aim was to connect as many early-stage Black and African beauty founders to investors. “The beauty industry holds as much opportunities as other industries like fintechs—from research down to packaging—but there are no dedicated funds to support the ecosystem,” Agboyibor tells BeautyMatter. “African beauty scientists need funding, researchers need funding, and so do entrepreneurs,” she continues.
The global beauty industry is thriving with significant investment. Per Pitchbook data, the venture funding for the beauty space abroad reached $3.12 billion across 358 deals in 2023, up from $1.41 billion across 283 deals in 2022. However, African brands often find themselves at a disadvantage. A key reason for this is the fluctuating economy, and countries like Nigeria are a prime example. “Africa receives the least amount of venture capital, compared to other continents, and that’s because it unfortunately has a bit of a bad reputation, currency wise,” Sarah Dusek, investor, venture capitalist, and founder of Enygma Ventures, says to BeautyMatter.
“Investors focus on the sophistication of economies, and although the opportunities are enormous in African countries like Nigeria, South Africa, and Kenya, the relatively unstable currency can pose a big risk, making the beauty industry woefully underfunded,” Dusek continues. Through the South Africa-headquartered Enygma Ventures, Dusek has invested $10 million to women-led start-ups in the Southern African Development Community region, including beauty brands like The Good Mineral by sisters Ego and Natasha Iwegbu.
In many African countries, the infrastructure for venture capital (VC) and private equity is still developing. This makes it difficult for entrepreneurs to connect with investors who can provide the financial backing needed for growth. “There seems to be a notable lack of investor understanding of the African beauty market, and this lack of knowledge can lead to hesitancy and missed opportunities for both investors and entrepreneurs,” Dusek says, speaking to how many investors are unfamiliar with the unique dynamics and opportunities within the sector. “To bridge this gap, it is essential for African beauty brands to not only educate potential investors about the market but also to showcase their unique value propositions effectively,” Agboyibor adds.
However, these challenges aren’t only unique to Africans in Africa. Even those in the diaspora still bear the brunt, and this doubles down when race and gender come into the mix. According to the World Economic Forum, VC funding for Black-owned businesses declined sharply in 2022, with women receiving an even more disproportionately small share. A recent report by Goldman Sachs says that this has made Black women face obstacles in leaving a financial legacy. “I believe that being a woman, and my race, have played a role in the rejections I’ve faced,” Eniye Okah, founder of sunscreen brand, Beame, says to BeautyMatter. “Unfortunately, biases still exist, and these factors can influence investor decisions,” she continues. She also cites that investors are reluctant to back brands at early stages, and even when they do, seek products that are tech-driven—one of the key successes of The Folklore Group, a luxury e-commerce platform whose founder recently raised $3.4 million in seed funding, and spoke to BeautyMatter about its plans for the African beauty industry.
Despite these challenges, there are several strategies that African beauty brands are employing to secure funding and position themselves for growth. “Crowdfunding is the best strategy for me right now because I spent the whole of last year seeking investment to build my capital-intensive product without success,” Okah says. “With [it], I can engage my target consumer to back the product idea in its prototype stage, which will fund my product development,” she continues. Okah plans to use Kickstarter to reach new customers globally and tap into their community by creating a compelling campaign. “Additionally, crowdfunding provides real-time insights from customers about their pain points, which will help refine my product before the first production run,” she adds. Ghanaian-American shea butter beauty connoisseur, Abena Boamah-Acheampong of Hanahana Beauty, recently raised over $130,000 using this strategy.
African beauty brands are building compelling business initiatives, which are crucial for attracting not only investors, but building trust with customers. “Inspired by LaunchBoom, I’m implementing a reservation funnel where customers can reserve the product for a small fee (£1/$1). This approach helps gauge interest and ensures I have a committed group of people likely to back the product once it launches,” Okah says, and adds, “[as] this method provides an early indication of demand and helps secure initial funds, making the campaign more likely to succeed." Dusek enjoins that African beauty brands need to clearly articulate their value proposition, market potential, and growth strategy. “This includes providing detailed financial projections, market analysis, and demonstrating a deep understanding of consumer needs. A well-prepared business plan can significantly enhance a brand’s credibility and appeal to investors,” she adds.
Brands and industry stakeholders alike are also looking to overcome the knowledge gap by educating investors about the African beauty market. They aim to achieve this through targeted marketing efforts, investor presentations, and sharing success stories. They’re also highlighting the unique aspects of the market, such as consumer trends, cultural influences, and growth opportunities, hoping that it builds investor confidence. “African beauty brands often have unique selling points that differentiate them from international competitors,” Agboyibor says, “including the use of indigenous ingredients, traditional beauty practices, and a focus on catering to the specific needs of African consumers. Highlighting these USPs can make brands more attractive to investors who are looking for unique and differentiated products,” she adds.
Similarly, they’re calling on governmental policies and support, which can play a crucial role in facilitating access to funding for African beauty brands. Initiatives such as grants, tax incentives, and capacity-building programs can provide much-needed support for SMEs in the beauty sector. Governmental focus on creating a conducive environment for investment, by improving regulatory frameworks and fostering public-private partnerships, is also a key instrument in garnering interests. Securing funding in the African beauty industry is undoubtedly challenging but not insurmountable. By building a strong business case, leveraging networks, educating investors, exploring alternative funding sources, strengthening digital presence, and highlighting unique selling points, African beauty brands can enhance their attractiveness to investors. As the African beauty industry continues to evolve, proactive and strategic approaches to securing investment will be crucial in unlocking its full potential, with a promise of high returns and rewards for those taking the investment leap.
