VC igniteXL looks to make returns through pre-seed investment in woman led, diverse companies
Venture capital firm igniteXL started in 2014 to help startups, mainly out of Korea, get their foot in the US market, said founding partner Claire Chang. While that model was effective at getting early-stage companies started in the US, a few factors drove a change in the VC’s tactics.
First, she said some of the female founders became frustrated by how difficult it was to find female investors. Additionally, Chang said she wanted to engage with companies between the family, friends and angel investor period and the seed investment period.
With those considerations, igniteXL transitioned to a pre-seed investment firm that focused on investing in the $5 trillion global personal care and wellness market. The VC also focuses on investing in companies run by women and diverse teams, which Chang said is a pathway to investment success.
While women make 85% of the purchasing decisions for consumer goods, only 2.2% of female-led companies across all sectors were backed by a VC in 2019, and that number dropped in 2020, Chang said.
“This is a $5 trillion oversight,” Chang said. “Investing in diverse-led startups isn’t about charity. Rather, this is about capturing an opportunity to back startups whose leadership understands untapped market needs.”
By investing in these seldom VC-engaged companies between family-friend-angel investment and seed investment, Chang said igniteXL is able to write fairly small checks for innovative companies.
Many of the companies igniteXL invests in either have very small valuations or no valuations at all. By scouting for promising companies, Chang said they can get involved in the company at low monetary levels before they’re proven in the market and have multimillion-dollar valuations.
At this time Chang said the VC is interested in technology in beauty. She said technologies from product innovations to distribution channels like social media, live commerce, direct-to-customer sales and subscriptions, and personalized consumer engagement and experiences, are becoming more prevalent in beauty.
“All of these technologies are pushing access to, data from, and interactions with the consumer to the edges of the network,” Chang said. “This creates opportunities for brands both small and large to get insights into, have conversations with and generate commerce from consumers in more personalized and in-the-moment ways.”
The VC also wants to tap into the $140 billion buying power of Gen Z consumers, who are demanding more sustainability, inclusion and transparency. Chang said companies are not able to ignore the demands of these customers and those concerns are affecting aspects like ingredients, manufacturing and packaging.
By considering the roles of technology and young consumers in beauty, and finding promising early-stage companies led by women and diverse teams, Chang said igniteXL wants to “find the next L'Oreal, Stitch Fix or NOOM.”