It turns out, Birchbox wasn’t a very good investment.
One of Birchbox’s existing investors, Viking Global, has agreed to invest $15 million of new cash into the business, Recode reports. This deal means that Viking is wiping out Birchbox’s other investors, including Accel Partners and First Round Capital, who will now walk away with nothing.
Birchbox has been looking for a buyer for a long time. It was reportedly in discussions with Walmart and other potential buyers last summer. And it was also in talks with QVC in what Recode says would have been a fire sale, cutting off CEO Katia Beauchamp’s control over the everyday operations of the company.
The startup, founded by two Harvard Business School graduates, launched with much fanfare eight years ago. The company hoped to disrupt the beauty business by modernizing the experience of discovering new products at a department store’s beauty counter. Customers could sign up for a monthly $10 box full of premium product samples tailored to individual beauty and skincare needs. The goal was always for customers to eventually buy full-sized products on the Birchbox website or store, but consumers didn’t have much incentive to buy from Birchbox when they could just as easily buy the products from Sephora, Amazon, or Ulta.
Birchbox had raised $90 million in financing since 2010, and was once valued at a half billion dollars. But it is currently heavily in debt. Viking Global appears to be betting that Birchbox can pivot to a more profitable business strategy.
When we reached out to Birchbox, the brand’s publicist pointed us to a prepared statement by Beauchamp:
The next phase for Birchbox is about amplifying the impact we can have on our customer and accelerating our growth as a company . . . Viking Global Investors, a long-time investor in Birchbox, has provided a growth equity investment in exchange for a majority interest in the company. As an independent company with renewed investment, we are in a position to actively pursue plans that help further our mission and fuel our ambitious goals in the U.S. and in our global markets. As part of that strategy, we are prioritizing product innovation, the evolution of our digital experience, and scaled partnership opportunities.