The Pitch: "When you shop for cosmetics online, it's hard to know if an eye shadow or foundation will really fit your skin tone. Smackages is like an online makeup counter. Women come to our site, sign up for a subscription, and get free samples sent to their door. Cosmetics brands will pay us to distribute samples, because sampling is the most effective way to get consumers to buy new products. We're raising money to add features that will let users review samples and post reviews on Facebook. We also want to hire a sales team and license a skin-color-matching tool that helps women find the perfect foundation shade."
FOUNDER: Rosilyn Rayborn
LAUNCHED (BETA): September 2010
SEED FUNDING: $20,000 from Capital Factory, an incubator in Austin
2010 REVENUE: None
2011 PROJECTED REVENUE: $360,000
PRICE FOR SUBSCRIBERS: Free. The company plans to offer a $10 monthly premium subscription.
PRICE FOR MAKEUP COMPANIES: Free in beta. Smackages plans to charge $5,000 to $10,000 per deal.
FUNDING SOUGHT: $1 million
Rayborn has two challenges: getting consumers to subscribe and getting brands to pay. The harder part will be getting cosmetic companies on board. If Smackages charges them in addition to asking for samples, it's a much harder sell. I'd recommend charging consumers. Another company, Birchbox, is doing it that way and is having some success. For now, Rayborn should raise a smaller seed round and prove that she can acquire users and give them good samples. Once she can demonstrate that the model is working, she can go out and raise $1 million.
Bessemer Venture Partners, Larchmont, New York
Go beyond samples
There's nothing wrong with building a small company that distributes cosmetics samples, but that's a small market, and venture capital firms are looking for a much larger outcome. To be more scalable, Smackages needs to go way beyond samples. One way would be to create a broader social e-commerce site that lets cosmetics companies share information about their products and lets users try items—both digitally and through samples—and place orders. As it is, this business might be better suited for a small angel investment or a smaller venture fund.
Rho Ventures, New York City
Get brands to pay now
Funding of $1 million seems high, considering where the company is today. Smackages needs to prove it has a core base of cosmetics companies interested in this. This service will be valuable to them if Rayborn can provide data on who purchased products after receiving samples. If Rayborn can get some cosmetics brands to pay for this service now, during the beta test, perhaps she won't have to raise outside investment—or give up any equity—yet. Then, later, after Rayborn finishes beta testing and has more customers, she can go after financing.
Golden Seeds, New York City