You will often hear of fintech or blockchain startups securing eight-figure funding rounds from optimistic investors, but for beauty brands, that kind of confidence is significantly less frequent.
Madison Reed, a San Francisco-based brand of hair dyes and other products, is built partially on a subscription model that saw significant growth during the pandemic -- in 2020, its sales jumped by 130%. It also operates 60 hair salons across the country and sells its products at stores like Ulta (ULTA), Target (CBDY) , and Amazon (AMZN).
Wait, What Does Jay-Z Have To With This?
Following a number of earlier funding rounds that puts total funding raised at approximately $220 million, Madison Reed announced that it has closed another $33 million investment round. (The company has not been commenting on total valuation.)
While growth equity firm Sandbridge Capital led the round, a very famous face also participated: Jay-Z, the influential rapper and record executive who also happens to be married to Beyoncé, contributed an undisclosed amount to the round.
Also very influential in the sphere of fashion, Jay-Z built the urban-style Rocawear brand from 1999 to 2007, at which point he sold it to Iconix Brand Group ICON for $204 million. He regularly invests in companies in which he sees potential; most recently, that his firm Marcy Venture Partners with Jay Brown and Larry Marcus invested in vegan wine brand Avaline, co-founded by Cameron Diaz.
Representatives from Sandbridge Capital and Marcy Ventures will both get observer seats on Madison Reed's board.
The money from the round will go toward opening 20 additional Madison Reed salons and hiring 850 colorists in New York City, South Florida, California, Chicago, Washington D.C. and Texas.
The additional funds will also, as first reported by Bloomberg, also go toward growing Madison Reed's online presence and customer base -- on the same day that news of the funding round became public, the hair company announced that it had reached 100,000 subscribers on Instagram.
"A milestone worth rooting for 🥳," the hair company wrote on its account. "We're so thrilled to hit 100,000 followers and SO grateful for all the gorgeous hair aficionados who love a great hair day as much as we do."
Are Fashion And Beauty Subscriptions The Future?
Madison Reed's skyrocketing growth comes at a time when subscriptions for everything from salads to beauty products are popping up at every corner.
Beauty product boxes predate this current trend somewhat -- Birchbox has been sending subscribers curated monthly packages of makeup and hair items since 2010 --- but are currently benefiting from the increased interest in having items you use regularly shipped to you.
Many newcomers to the space came after seeing demand increase during the pandemic.
Some models work better than others. Five years after launching its Play! beauty box, Sephora discontinued the subscription service in 2020. While Birchbox was the dominant service during its early days as a company, brands like Ipsy and FabFitFun have been pushing it out with new subscribers.
"As more players enter the industry, consumers can choose from beauty subscription boxes at a variety of price points that specialize in clean beauty, offer full-size products rather than beauty samples, or send products that also incorporate health and wellness products," Janine Perry wrote for Bloomberg Second Measure, adding that consumers now have "more choice than ever."
