If you’ve been following Birchbox’s tough year, (as we reported here), you’ll probably agree that this round of financing prompted a big sigh of relief at the cosmetic subscription giant.
Here’s how Mashable reported the story.
The original subscription service needs a lifeline.
Birchbox, the once-buzzy beauty startup, raised $15 million in additional funding from current investors in an effort to stave off a cash flow problem, Recode reported.
The money is needed to shore up the company after two rounds of layoffs this year and a $60 million investment in 2014 that pressured the startup to operate at a higher level than it was quite prepared for.
The company, founded in 2010, was the first to master the subscription service, offering samples of beauty products for a $10 monthly fee. Subscribers could then buy full-size versions of the products through Birchbox’s website.
Since 2010, the subscription service model has taken off, with Dollar Shave Club’s $1 billion acquisition as the most recent success story.
Meanwhile, Birchbox exploded until it had to cut back. Now, it’s focusing on reaching profitability.
“Obviously, 2016 has been a very hard year from many perspectives,” Birchbox co-founder and CEO Katia Beauchamp told Recode. “But the idea is to be in control of our own destiny, and now we’ll be able to become profitable very soon and going forward.”
Here’s what Recode had to say…
It’s cold out there for unprofitable startups.
It’s cold out there for unprofitable startups. Lucky for beauty startup Birchbox, its existing investors are continuing to back it.
Unable to secure additional investments on good terms from new investors, the six-year-old company has raised a new $15 million investment from its current investors to shore up its balance sheet amid a cash crunch. Birchbox’s investors include First Round Capital, Accel Partners and Viking Global Investors.
The new money is coming in the form of a convertible note — a type of loan that eventually converts to an equity stake — and is meant to hold the company over until it can become cash-flow positive. The startup is also securing a separate credit facility of several million dollars.
The new funds follow two rounds of layoffs Birchbox carried out so far this year. The startup laid off 15 percent of its staff in January and another 12 percent in June, saying it needed to get to profitability quicker than planned because of a shift in how investors are valuing growing, but money-losing, startups.