The wonder founder flight is picking up pace. 

While founder exits usually are not a latest phenomenon — and sometimes occur under essentially the most amiable of circumstances — a spate of exits in recent months raises questions as to simply what’s fueling the trend. 

As a refresher: In January, Gregg Renfrew left her role as executive chair and chief brand officer at Beautycounter, the brand she launched in 2013 and sold to the Carlyle Group in 2021 in a deal that valued the corporate at $1 billion.

Shortly after, Melisse Shaban exited her role as chief executive officer of hair care brand Virtue Labs. She transitioned as an alternative to an adviser role just because the brand raised a latest financing round led by its majority shareholder, Combe, and Clearasil. 

In May, Sharon Chuter stepped away from day-to-day operations at Uoma Beauty, relinquishing her CEO title and her board seat, while a late-June LinkedIn post by Rochelle Weitzner, founding father of menopausal beauty brand Pause Well-Aging, revealed that she was also stepping down as CEO.

And after nearly 25 years on the helm, Dermadoctor founder Audrey Kunin shared via Instagram that she is going to depart her brand in November, two years after its acquisition by NovaBay Pharmaceuticals for $15 million.

There are, after all, myriad reasons behind these departures, including that it is solely not the established order for a founder to remain on after an acquisition. 

But a typical thread in CEO exits, particularly those occurring early on in a brand’s life, is friction between investors — specifically enterprise capital — and founders. 

In keeping with data from Pitchbook, the quantity of VC money in beauty has surged from barely anything on the turn of the century (there have been, quite literally two beauty VC deals in 2003) to billions of dollars annually. 

Beauty VC peaked in 2021 with a complete 351 deals price a cumulative $3.1 billion. Last 12 months, the speed slowed to 273 deals valued at $1.4 billion, still classifying the second highest number on record. To this point in 2023, 87 deals have been recorded.

“Getting investment funding is a catch-22; what you would like and what you’ll be able to actually get, may not coincide,” said Kunin, whose two-year tenure as chief product officer at NovaBay was decided on the time of Dermadoctor’s acquisition. “You must ideally select a partner that’s bringing something apart from just money to the table.”

Selecting an investor to bring a brand to its next stage is amongst essentially the most pivotal decisions a founder could make. To that end, Skyn Iceland founder Sarah Kugelman, who left the business in 2022, emphasized the importance of “[Making] sure that you just and your investors are aligned in your long-term goals.” 

Cassie Cowman, a cofounder of View from 32, a beauty consultancy that works with each founders and investors, advised founders to play the sector during their search.

“You’re going into a wedding, almost, so you must be sure you’re playing the sector first — getting references from each successful partnerships, and non-successful partnerships,” she said.

Product roadmap, channel distribution and international expansion are among the many topics Cowman suggests discussing to gauge whether a partnership is a fit.

“Just getting very personal and understanding what are the interior capabilities each investor is offering: Are you in search of them to be very necessary and support you in that way? Are you in search of them to be very hands off and allow you to do the thing?” Cowman said. “We hear sometimes from brands they’ve a lot pressure on them to hit their goals that investors have set, they lose sight of the vision.”

Once a possible suitor has been chosen, so begins the “dating period” as Robin Tsai, general partner at VGM, puts it. 

“I’m all the time a fan of working with investors before you’re formally partnered up,” he said. “In the event you’re going to bring someone on, give them hard things to see what they do — see whether or not they’re willing and in a position to help, and the way they do it,” he said.

Wealthy Gersten of True Beauty Ventures likes to take an analogous approach. “We get to know the founders for nine or 12 months, oftentimes prior to investing, since it’s a partnership. It’s a wedding, it’s a relationship, whatever word we would like to make use of. We wish to be sure that the founders understand what the partnership goes to be like and who they’re partnering with. 

“I believe too persistently, founders might chase the very best terms and valuation of an investment and don’t necessarily appreciate the importance of that partnership,” he continued.

But not all brands have the posh of courting multiple investors. In lots of cases, cash-strapped brands are dealt take-it-or-leave-it scenarios to get to the subsequent stage, through which they’re only in a position to land one investor option.

Kugelman said: “I believe we only hear concerning the corporations who, out of the gate are scaling exponentially, and all of the investors are fighting over them and wanting to take a position. But probably about 90 percent of corporations usually are not like that. We actually ignore that.”

For ladies, the challenge of raising money is even steeper. Dana Kanze, assistant professor, organizational behavior at London Business School, said: “I hope that, with time, female founders will likely be in a greater position to vet their investors just as investors are vetting them. Unfortunately, that process has been more one-sided for female founders as they’ve been struggling to absorb capital from any source, and thus are unlikely to have the opportunity to show down funding on account of aspects like long-term goal misalignment when their short-term focus is survival. In other words, it’s a luxury to say no to an investor because their long-term goals usually are not aligned with you as a founder, and girls haven’t been ready of bargaining strength to barter terms in ways in which their male counterparts have been in a position to historically.”

It took Weitzner nearly two years to get Pause Well-Aging off the bottom on account of a scarcity of investor interest — or understanding — in menopausal beauty on the time. 

“I desired to be the primary to market. I felt it was necessary to be that first [menopausal beauty brand] on the market, and that another people can be on my heels quickly — I didn’t need to lose any more time,” said Weitzner, previously CEO at Erno Laszlo and chief financial officer at Laura Mercier. 

After an unexpectedly tedious investor search, Weitzner landed a majority investment by Grace Beauty Capital.

“We sort of had this verbal agreement that if I gave up the quantity of equity that I did, then that will be it — I wouldn’t should be the one to lift money in the longer term. I could just concentrate on constructing the corporate,” she said. 

Things didn’t quite pan out as such.

While Pause Well-Aging indeed made strides within the years that followed (Weitzner was right — the menopausal beauty space began gaining market share shortly after the brand’s debut), she and her investors didn’t all the time see eye-to-eye on decisions regarding company personnel and the associated fee of growth. 

“My voice was heard, I’d say, for the primary three years; it was the last 12 months that I began to feel more like an worker than the founder with a powerful vision,” Weitzner said. 

On the suggestion of her investors, Weitzner ended up replacing team members (“I reluctantly let my head of selling go – she was my right hand and superstar worker,” she said), and when it got here time to lift money again, it was Weitzner who was asked to get in front of potential investors. 

“It became, ‘OK, you’re the one that should tell the story — you must do the raise,’ I used to be back in that situation of doing every little thing I didn’t need to do,” recalled Weitzner, who doesn’t view the circumstances that led to her departure as a blame game, but a lesson. “I made all the choices along the best way, and I made a variety of mistakes. Even essentially the most seasoned person could make some mistakes,” she said.

Most founder/VC investor clashes stem from two likely scenarios, based on Erik Gordon, clinical assistant professor at University of Michigan’s Ross School of Business.

“It’s doing things related to the speed of growth; expanding the product line, expanding distribution — the founder wants narrow distribution, because that’s their image, but to grow fast you’ve got to have wider distribution, or you may have to expand the product line — things the founder isn’t all for,” he said.

One founder, who asked to stay anonymous, added: “In terms of clashing, founders have an extended term view. They need to construct something for the long run. An acquirer wants you to maximise for the long run, but additionally they have shareholders, so additionally they have to point out short term and it’s the short term, long run that’s sort of the dynamic.”

One other founder had minimum growth rates put into their deal, which in the event that they didn’t meet would trigger “serious” rates of interest, not accounting for events out of their control, comparable to pandemics and recessions.

A minority investor also can still determine the valuation in the case of getting more capital.

“Minority deals can have minority protection rights which are as draconian as majority deals,” the source said.

To guard interests if the deal does turn sour, Gordon pointed to an employment agreement, but stressed that such arrangements namely serve to ensure a specific amount of going away money, which can are available in the shape of either stock or severance. “They’re not going to conform to allow you to be CEO for all times.”

His top tip is to seek out legal counsel who’ve negotiated VC deals on behalf of entrepreneurs: “You would like a proper employment agreement that clearly states under what conditions you’ll be able to be fired, and what happens whenever you’re fired.”

One founder, who asked to stay anonymous, said: “Have a superb lawyer. I believe my mistake also was that, like most founders, the lawyer for the corporate was also my lawyer. And I believe sometimes that’s a conflict of interest.”

There are instances, after all, through which founders step down of their very own accord.

“The founder is likely to be a product development guru who prefers to offer up the CEO title to be able to concentrate on creating great products, or they may just be burned out,” said Lila Sharifian, fractional chief financial officer and head of beauty at Stage1 Financial and operating partner at BT3 Ventures.

Quite than in search of VC investment, founders who seek to take care of long-term control over their corporations may profit from partnering with angel investors as an alternative.

“A wealthy family, someone who has an interest in beauty — they will likely be patient — they don’t have their very own investors beating them on the pinnacle,” Gordon said. “In the event you’re a beauty entrepreneur and your idea is, ‘Hey, I would like to construct this, I would like to expand it quickly, and I’ll do whatever it takes to expand this business, then VCs are your best friend.”

But should you’re playing the long game, seller beware.