Founded in 2012 by Jay Lucas and Karen Ballou, LB Equity is a growth equity firm investing within the wellness, beauty and personal care brands space. The New York-based firm invests at a very early stage; when the emerging brand has hit around USD1-3 million in revenues.
The investment strategy works as a kind of reverse engineering, according to Lucas, in that they look at a strategic acquirer three years or five years down the line and at what they are going to need in their portfolio within that time frame.
“We invest at a much earlier stage than most private equity firms. In some ways we are almost like a feeder fund to some of the other private equity firms and the strategics,” he explained.
“What we are really trying to figure out is, number one: is there something proprietary here that can be leveraged? Number two: is there enough space around this segment and brand in order to create something that can be really valuable? But at the same time, some of the numbers that we look at are things around the customer. Even though it’s early days: what’s the loyalty, what’s the repeat purchase behavior? What we’re trying to do now is build brands and communities around them,” Lucas continued.
In addition to growth equity capital, LB Equity provides value add, hands-on expertise in order to grow the companies and its portfolio includes brands such as Immunocologie (luxury skincare), Soapbox (crafted soap products), Herb Essentls (cannabis infused skincare), as well as Marula Beauty, Olika, Defunkify and Standard Dose – a digital retail place for plant-based wellness products.
The two experienced American co-founders have a particular knack for seeking out the factors that will lead to sustainable growth, and ultimately to the potential of scaling up a business long-term.
“For us it’s being able to focus on the ingredients, but also the technology and the science is really important. Not just yesterday’s technology but also forward thinking. Knowing that we have something different to offer consumers is vital, strategically as well,” commented Ballou.
She continued: “A lot of the time there’s a lot of good marketing going on, but many brands don’t have the information to back up what they are saying. So, it’s very important that we do our due diligence on ingredients and on the founders, in terms of what they bring to the table. It has to be a match.”
Immunicolgie – founded and managed by Karen Ballou herself – forms a part of LB Equity’s portfolio and is an example of such a natural, luxury plant-based wellness brand. It is based on science around how different products affect the skin, according to Ballou.
“We’re now at a place where we’re becoming more conscious of what we put on our skin; we’re drinking more green juices; we’re working out more and participate in more activities for mental health and well-being,” she said.
With regards to the tremendous and on-going growth of plant-based products, the duo spotted an opportunity within this area early on. “[The plant-based trend] is very strong, it’s a long-term trend. It’s something that we noticed about five years ago. Not only the trend toward natural, but also the trend toward plant-based. And so, many of our early investments have been around that,” said Lucas.
The move to digital is another key theme LB Equity looks at when it comes to backing new, emerging brands. “The world has changed so much in the last three to five years – brick and mortar is still important but today, digital strategy is something that you really need to have absolutely front and centre of your strategy,” said Lucas.