Ipsy, a cosmetics-subscription service with $150 million in annual sales, raised $100 million in a second round of funding led by TPG and Sherpa Ventures.
The deal values the startup at more than $500 million, said a person with knowledge of the matter, who asked not to be identified as the valuation isn’t public. Ipsy will use the money to expand abroad, step up marketing efforts and invest in products. Total financing to date is about $103 million.
Ipsy sells a $10 monthly subscription online for a "Glam Bag," an assortment of makeup and beauty products such as mascara, eyeliner and foundation. Customers can tailor their selections and get discounts for buying additional goods, and watch product tutorials produced by Ipsy. Dollar Shave Club and Harry’s also have a similar model with shaving razors and supplies. Ipsy was co-founded by Michelle Phan, a social-media celebrity, and Chief Executive Officer Marcelo Camberos, an early employee at Funny-or-Die, a popular humor website.
"It’s a huge industry, the more I learn about it, the more excited I get," Camberos said in an interview. "It’s more than $450 billion around the world and has really attractive margins."
Ipsy, which has 1.5 million subscribers in the U.S. and Canada, works with cosmetics giant L’Oreal SA, which had more than 22.5 billion euros ($30 billion) in revenue last year. The cosmetics giant has acquired at least two brands that Ipsy had regularly included in its Glam Bags, according to Camberos. Ipsy gets discounts and free samples from beauty brands to include in the Glam Bag.
David Trujillo, a partner at TPG who led the investment, said that San Mateo, California-based Ipsy is connecting big cosmetic companies to a generation of Instagram and YouTube celebrities, which helps to market the products and drive purchases.
"It’s very difficult for them to access that ecosystem directly and know who the right people are to target with the great growing audiences that will be brand ambassadors for them,” Trujillo said.