Investing in AI to shape the future of skin care

26 Oct 2021 --- Personalization is a leading consumer trend that dominates buying behaviors and influences beauty brand selections. Beauty consumers want a product that fits their individual, specific needs. “As we get used to personalized content, we expect the same from fast-moving consumer goods (FMCG) products,” notes Natalia Martynova, Co-founder and Chief Financial Officer at beauty startup Openface.

The expansion of personalization is now tapping into consumer demand for new formats and solutions, prompting Openface to launch a dedicated beauty solution that provides personalized cosmetics. Whether connecting with beauty brands and products from a digital or physical environment, experiencing the same level of personalization through an omnichannel approach is also propelling the trend forward. “Modern consumers are used to digital products being tailored to their interests and they expect the same from traditional offline products,” says Martynova.

Click to EnlargeOpenface saw how the smartphone was becoming the go-to solution provide.Ongoing interest, intrigue and accessibility mean the sampling and scrollability appeal of a personalized beauty brand is also crucial to create a buzz and produce engagement. “Consumers are also used to constant interaction with the product,” Martynova confirms. “A few years ago, the concept of digitalization for large FMCG companies was limited to getting a social media account and conducting occasional web projects. But today's consumer is accustomed to interacting with a social media feed that adapts to their interests and they expect the same flexibility from offline products.”

When designing its personalized beauty solution, Openface saw an opportunity to create a relationship where it is “constantly in touch with the user,” through answering questions, providing tips and offering advice. As mobile commerce is prolific among users, Martynova notes: “A modern consumer is used to solving almost all issues using their smartphone.” As a result, the beauty technology brand created its algorithm with on-the-go in mind, enabling users to identify skin concerns by sending a selfie, obtaining the test results and finding the optimal solution through the brand’s digital platform. 

Personalized cosmetics - a smart investment

In September, BPC Insights reported that AI-powered cosmetics was getting a boost as venture capital fund Digital Disrupt was investing in OpenFace. Following its investment, we wanted to know what it was about the combination of cosmetics, artificial intelligence (AI) and personalization that appealed to Digital Disrupt. 

“Creating a product that is a perfect fit for each individual is one of the biggest consumer trends in cosmetics, nutrition, sports and hygiene products,” says Martynova. “Netflix analyzes every click of 100 million users to create TV shows, and Nestlé is testing the Wellness Ambassador personalized nutrition program with vitamin drinks and capsuled snacks in Japan.” 

Today, consumers go to shops, cafés, salons, and gyms for the services they provide, for new experiences, entertainment, communications and memories shareable in the form of images and videos. “Therefore, personalization also taps into a need for new formats and solutions,” highlights Martynova.

Click to EnlargeDigital Disrupt seeks future-looking startups for investment.During the creation and production process of a personalized beauty item, Openface says a particular client’s formula may change depending on their changing needs. As well as ongoing communication, Openface uses a machine learning algorithm which enables it to identify the problem using a client’s selfie and tests responses to find the optimal solution.

Set up in 2020, Digital Disrupt is a closed venture capital club. “We have been working in the digital sphere for a long time and have accumulated enough experience and competencies in this sphere that we want to share them,” outlines Dinara Gazetdinova, Advisor at Digital Disrupt. 

First and foremost, Digital Disrupt is about making smart investments. “When considering projects, what matters to us is the project team, its ideas and how we can help the project and what we can give,” shares Gazetdinova. “Our goal is to invest in projects that will really change the digital world, to support breakthrough solutions. It is not so much a pooling of capital, as of the goals, efforts and opportunities that each participant puts in to make this or that idea take off.” 

Today, Digital Disrupt’s portfolio includes more than a dozen startups and pre-IPO shares in companies such as Momentus, SpaceX and Kraken. The fund invests both independently and together with worldwide IT partners, including Mindrock, Amadeo, Waarde Capital and Starta Ventures.

With a project horizon of between three and five years, Digital Disrupt is interested and actively looking for opportunities to invest in a broad variety of industries. “We try to diversify by the sectors in which our projects operate,” says Gazetdinova. “On the whole, we are interested in projects which have the potential for scaling and globalization, which already have sales abroad, or are aiming there.” 

By Natasha Spencer-Jolliffe, BPC Insights Senior Journalist