Beauty’s NewGoldfinger V.C.

Prelude Growth’s Alicia Sontag has carved out a sweet spot in beauty, investing in ascendant but proven brands just as they’re hitting their stride, and then applying her retail expertise and post-D.T.C. strategy to help them thrive. In the small world of beauty investors, she’s the new queen.

This summer, as beauty industry M&A activity finally reaccelerated—with billion-ish dollar deals for Touchland, Rhode, and Medik8—one name kept coming up in my conversations with investors and dealmakers: Alicia Sontag, the co-founder of Prelude Growth Partners. A former exec at Lauder and Johnson & Johnson, Sontag has racked up one of the best records among early-stage investors in the space. Prelude’s exits include Sol de Janeiro, Naturium, Phlur— one of Sephora’s fastest-growing fragrance brands—and Summer Fridays, which sold a majority stake to TSG Consumer last year at a rumored $700 million valuation. The fund’s portfolio also includes Tower 28, Westman Atelier, and OneSkin, among others.

After decades in the business, Sontag appears to finally be getting her due. After previously raising a $250 million fund in 2021, Prelude closed a $600 million fund in August. “Most investors are just capital sources,” said a high-profile founder, whose company hasn’t taken money from Prelude. “Alicia is one of few investors who actually knows what they’re talking about.” The founder went on to explain that Sontag was “playing earlier” at a time when brands struggled to get strategic exits, and in the process created a niche for herself: She became the interim step after seed capital but before private equity, once market fit is established but before the real scaling takes place—a “P.E.-light investor who writes about $20 million to $40 million checks,” as this person put it.

The challenges that typically befall brands in this $20 million–$75 million revenue range are complex (debt, cash cycles, trading up management, maximizing wholesale partnerships, etc.), but the upside is also manifest. While other funds try to get in early on companies that show initial promise or heat, Prelude gets involved once a brand has proven itself capable of scaling. She also knows to get out before growth slows. With Summer Fridays, for example, Sontag and her co-founder, Neda Daneshzadeh, got in when the brand was about a $10 million revenue business and exited several years later when the line was still in hyper-growth mode and approaching $200 million in revenue.

Bucking for a Raise

Beauty doesn’t generally offer a natural return profile for venture capital or private equity. A really good beauty brand may exit for hundreds of millions of dollars, or in rare cases a billion or more—a lot of money, to be sure, but paltry compared to A.I., healthcare, industrials, real estate, etcetera. Only a few private equity shops, like Tengram Capital, were investing in beauty as far back as 15 years ago, and most venture capital firms didn’t really take notice until Glossier took off. Founder Emily Weiss was famously turned down by every investor until Forerunner Ventures’ Kirsten Green agreed to put $2 million into her business and its disruptive D.T.C. strategy.

Afterward, the online beauty floodgates opened, venture-backed beauty brands were everywhere, and investors followed. Weiss soon became a household name, and Green came to define a group of investors who themselves got elevated as if they were the product. In 2016, Forerunner achieved its first major windfall when Unilever paid $1 billion for Dollar Shave Club, a portfolio company. But it was the firm’s proximity to Weiss that catapulted Green into celebrity V.C. status.

Green quickly became the prototype for a new type of high-profile investor who offered social or networking cache for the brands and founders she was involved with. “They tried to become brands in and of themselves in the consumer space, but most of them really did not see how specifically Millennial their investments were,” a high-profile insider remarked of investors at the time.

Of course, investing themes change. Forerunner, which closed a $500 million fund last year, seems to have shifted their focus to artificial intelligence. Direct-to-consumer has somewhat fallen out of favor. Other V.C.s have retrenched as L.P.s have renewed their focus on their returns rather than valuations. And yet, beauty remains a profitable niche for players like Raymond James’s Vennette Ho, who can capitalize on the departure of larger capital sources. In many ways, in fact, Sontag has fulfilled a role that Green once occupied.

Goldfinger

Anyway, it’s a good time to be a beauty investor on the rise. After a chilly period for M&A, exacerbated in part by the uncertainty surrounding Trump’s tariffs, deal activity is finally picking back up. There are currently a couple of start-ups that insiders are buzzing about behind the scenes–one hinges on the success of a global product launch; another is one of the only newish lines to crack into a coveted luxury space.

Sontag has emerged into this moment as a major powerbroker just as her philosophical outlook for the category—long retail, short D.T.C.—has been vindicated by the market, and her strategy of prioritizing omnichannel and retail partnerships proved to be ahead of the curve. Her time at Lauder and J&J gave her deep retail experience in both prestige and mass, and she tends to know where the market is moving. “She was early to understanding that D.T.C. was stupid,” one of these people told me.

That combination of traits appeals to founders looking for a genuine thought partner, not just another chatterbox on the cap table. One ruthless industry dealmaker described Sontag as “the best right now,” while another insider, who knows Sontag from her time at The Estée Lauder Companies, even referred to her as “Goldfinger.” I’ve been told Sontag is too disciplined to suffer from FOMO, and doesn’t “force founders to apply the same strategy as other brands in her portfolio,” an insider said—a common gripe.

As Prelude continues to scale, the real challenge will be maintaining its reputation and hit rate as well as its competitive edge as it cuts bigger checks and competes with larger firms. Sure, Forerunner experienced early breakout success with Dollar Shave Club, Bonobos, and Warby Parker. But as the size of the company’s funds increased, its I.R.R. went down. We’ll see if Sontag and Daneshzadeh can avoid the same fate.