Strategic Financing for Emerging Beauty Brands: Insights from Jackie Bae of Lunr Capital

Recently, Lunr's Client Success Lead, Jackie Bae, sat down with Monique Benoit, host of the Scaling Emerging Beauty podcast. Monique’s show features conversations with industry experts, focusing on early-stage beauty brands growing from 0 to $20M. In this abridged interview, Jackie shares her insights on strategic financing for emerging beauty brands. Drawing from her experience, including six years at Target, Jackie sheds light on the unique challenges and opportunities in the beauty retail space. This conversation offers valuable insights for beauty entrepreneurs navigating the complex landscape of retail expansion and financing.

Q: Can you tell us about Lunr Capital and what inspired the focus on financing solutions for consumer product brands?

A: Our founding partners, Jeff Klinefelter and Michael Hoffman, have decades of experience in the consumer space. They created Lunr after investing in a rapidly growing consumer company and realizing the need for financing solutions that support growth without early dilution. We've built a team that understands retail hurdles, including myself with six years of experience at Target. Our goal is to enable passionate founders building products that benefit consumers.

Q: Can you explain the financial challenges beauty brands face when expanding into retail?

A: Many brands don't realize that working with major retailers like Target doesn't produce immediate cash flow. It's actually a significant burden on your business growth. You could have a three to five-month cash outlay, from placing the first factory deposit to seeing any revenue. This gap is what we're trying to address at Lunr Capital. It's a necessary step to succeed in omnichannel retail, but it can be a major hurdle for emerging brands.

Q: How does Lunr Capital structure its financing to address these challenges?

A: We tailor our repayment terms around each client's unique supply chain and cash conversion cycles. We want to truly understand our clients' cash flow to build terms that work for them. Some companies offer short-dated payment terms that can put brands in a cash crunch, or longer-dated terms that result in unnecessary interest. Our goal is to provide short-term, recycling funds that align with the business's actual needs.

Q: How does Lunr Capital differentiate itself from traditional financing options?

A: Our biggest differentiation is our retail background. We understand what it's like to bring brands into retail, so we can speak the same language as our founders. We recognize the challenges of building inventory months before receiving a purchase order, managing seasonal buys, and planning promotions. 

Q: Beyond financing, what other support does Lunr provide to brands?

A: One of our most valuable offerings is sharing real-time insights from our other clients. We can tell brands what challenges they might face with specific retailers, whether it's chargebacks, shipping terms, or new accelerator programs. This information comes directly from our clients' experiences, so it's current and relevant. We've received very positive feedback on how we're helping beyond just providing capital.

We also act as a strategic partner, offering advice based on our retail experience. We connect our clients to valuable services, people, and ideas. My background in demand planning and inventory forecasting allows us to collaborate on future funding needs and ensure we're aligned on projected sales and inventory levels.

Q: How does Lunr Capital fit into the overall financing landscape for beauty brands?

A: It's important to understand that Lunr is one piece of the broader financing picture. We provide debt financing for inventory, which is a major solution for many brands. But there are other funding options out there. For example, venture funding can be great for innovation and marketing. While it's becoming increasingly competitive and hard to secure, it's still a valuable option. The key is to recognize that different types of funding serve different purposes in your growth strategy.

Q: What advice do you have for early-stage beauty founders looking at financing options for retail expansion?

A: Start early. Network and have conversations with different funding partners to understand their requirements and expectations. This allows you to build relationships and work towards meeting their criteria. When you're ready to launch into retail, you'll have established connections and a clear path forward.

Q: How do you envision the future of financing for beauty brands, and how is Lunr Capital evolving to meet changing needs?

A: The future of financing will continue to evolve with changing consumer behavior. We're focusing on keeping up with how and where consumers are shopping. We've built a platform to make the funding process seamless, and we're exploring ways to provide valuable insights to help brands make informed business decisions. Our goal is to ensure our financing meet the needs of brands as the retail landscape continues to change.

As the beauty industry continues to evolve, strategic financing plays a crucial role in helping emerging brands succeed. Lunr Capital's approach of combining funding with industry expertise and support offers a valuable partnership for brands navigating the complexities of retail expansion.