There is a common saying that “beauty is in the eye of thebeholder”. While this is arguably true, we in Latin Americaare not afraid to put in the extra work to ensure that we arealways looking our best. This helps explain why LatinAmerica, with more than 700,000 beauty salons, is one ofthe largest beauty markets in the world. But don’t take ourword for it: In Colombia, there is 1 salon for every 800people; Mexico is ranked as one of the top 10 beautymarkets globally with a 9% YoY growth; and in many parts ofBrazil, there are as many as 10 salons per city block. In short,the beauty business is booming across the region. What youmight not expect after reading these facts is that despitebeing such an integral part of our daily lives, the beauty sector is one of the least served industries. Ask any business owner in the beauty industry and they’ll tell you that 40% of sales are lost due to stockouts; an inability to control working capital prevents these small businesses (many of which are the life-blood of tens of thousands of families) from expanding; and a lack of traditional finance starves these businesses from accessing capital to make necessary investments to remain competitive. Our portfolio company, Morado, a B2B marketplace that helps small- and medium-sized (SME) beauty salons to procure inventory 100% online while better managing working capital is what we at H20 Capital is hoping will be a long-awaited answer to the sector’s many problems.
Like similar industries where H20 has backed B2B} marketplaces, the beauty sector is marked by structural inefficiencies that have not changed in more than 40 years. Conversations with SME business owners revealed that they struggle with high minimum order values, elevated costs for tools and equipment, lost time due to manual process of ordering products, stockouts due to poor inventory planning, lack of order and data tracking, and the frustration of having to deal with +7 channels to buy products at high prices. As a consequence, beauty shops have a hard time buying their supplies, resulting in overpriced low margin products and trapped cashflows.
From the first day we met Angie and her Morado team, we immediately knew that this was a company to support. Having backed several B2B marketplaces in the region and analyzed many more, we knew that Morado’s offering was what beauty salons were craving. So how does the solution work? Step 1 is focused on getting shop owners the products they need as quickly and easily as possible using an online marketplace which replaces the offline process of calling or negotiating face-to-face with distributors. Step 2 will provide inventory and cash flow management tools to help shop owners understand product demand so that they only purchase products based on when the end-consumer needs it. And Finally, Step 3 centers on providing stores with financial services to grow their business.
In addition to the sound business model, we were convinced that Angie and her team had a clear vision on how to solve the many problems in the Latin American beauty market. We saw in Angie the passion, expertise, and capacity to execute which is necessary to take over such a huge and fragmented market. For us, the value proposition of Morado was and continues to be rock solid: the “everything store” for the beauty and wellness industry with an ambition to enable customers to grow and diversify their business by providing more affordable prices, inventory planning, product recommendations, and live order and data tracking.
At H20 Capital, we are proud to have invested in Morado’s pre-seed round alongside world class investors such as Tiger Global Management, Andreessen Horowitz and QED. Since our investment in February 2022, the company has achieved exceptional results in their 100-day milestone since launch, proving product-market fit with impressive traction. We invested in Morado because of the possibility to create a huge company that disrupts a traditional industry in both the supply and the demand side, providing the possibility to generate significant positive returns to our investors and also generating a huge impact by increasing the revenue of women, specifically single mothers, which represent 34% of the beauty and wellness industry workforce. We are excited for what’s to come and will continue to support Morado, for “beauty’s sake”.
Please visit Morado’s website to learn more about the onestop beauty shop revolutionizing the industry