Bridging beauty: What L’Oréal and Estée Lauder look for in startup tie-ups

In Europe alone, there are more than 9,600 small and medium-sized enterprises (SMEs) operating in the region’s EUR 104 billion cosmetics and personal care market, according to trade association Cosmetics Europe. And the number of startups is growing, with more than 2,000 beauty startups based in France alone and over 1,000 in the UK.

So, just how important are these startups in the wider, larger beauty market? And how interested are big beauty companies in the ideas and innovations coming out of these smaller teams?

Two of the biggest beauty companies in the world – L’Oréal Groupe and Estée Lauder Companies – discussed this at last month’s Cosmetic 360 tradeshow in Paris, France, detailing how dedicated accelerator and startup engagement programs work to onboard innovative ideas, people and products. And according to executives at both firms, startups and entrepreneurs are a critical part to beauty’s future.

A “transformative” beauty landscape

Adonis Bouzid, global director of open innovation for digital and marketing at L’Oréal Groupe, said the beauty major is always looking for innovative startups to work with. L’Oréal’s startup accelerator Station F Beauty Tech, for example, which is led by Bouzid, was established in 2018 to keep the company up to speed in everything tech related and has since worked with 88 startups from all over the world and invested around 260 million US dollars into these companies.

“The job of L’Oréal’s Station F Beauty Tech accelerator is to identify partners that we could start a connection with–identifying startups that are likely fragile in terms of finance but have very strong potential,” Bouzid told attendees at Cosmetic 360. These startups are then onboarded for six months to work on product development and pilots and establish if long-term collaboration is worthwhile for both parties, he explained.

Speaking to Premium Beauty News after his presentation, Bouzid explained that L’Oréal looks for very specific characteristics when scanning the market for eligible startups to work with – notably “resilience”, “speed of execution” and “capacity to pivot”.

“...We’re at an age where, in digital and marketing, so many transformative elements are happening around us,” he said. AI is developing fast and capital is increasingly hard to access amidst ongoing political tensions worldwide, he explained, so a “capacity to stay on-course, have a clear vision and deliver on expectations is paramount”.

Beyond this, the ability to deliver fast “matters a lot”, given how competitive the beauty startup space is today, he said. “And then (…) because of this need to stay the course and deliver fast, the leader at the helm of the startup needs to be a particularly brilliant woman or man, especially in the marketing universe. I would say, having founders that pivot multiple times under a six-month execution program is becoming more and more the norm.”

Money, time and energy

Lucas Nanini, Vice President of Fragrance Innovation at The Estée Lauder Companies, said aligning with two key corporate beauty priorities – money and time – is also critical for startups wanting to work with the bigger players.

“The reality is that priority number-one is to make money and the second is to save time,” Nanini told attendees. So, when a major beauty firm onboards a startup or wants to invest in a new idea, it has to be financially promising, win time and optimize resources, he explained.

Startups, Nanini said, typically have “high agility” and “short lead times” versus bigger beauty firms that have a “more rigorous set-up” with quarterly, even annual, objectives. “We talk about agility in smaller startups and it’s true that bigger companies are slightly less agile,” he said.

Making partnerships work, therefore, centers around energy, he said – from the energy behind a startup’s pitch through to the energy required to activate and onboard the new tool or idea internally.

Bouzid agreed, noting that successful tie-ups rely on good time, money and energy management.

Startups, he said, are driven, often compelled, to operate at speed given the expectations from many venture capital investors but big beauty corporates can’t always respond to ideas or processes quickly, with validation sometimes taking weeks versus days. This is why “building a bridge between the large company and the early-stage, agile startup” is crucial–to help manage timelines and cashflow accordingly, the executive said.