Oddity—the tech

Jun 23, 2023

In hindsight, Oddity Tech CEO Oran Holtzman is thankful he listened to his investment bankers.

Oddity Tech, an Israeli makeup brand creator behind Il Makiage, had been planning to go public last year. But as investor interest for IPO shares dwindled, Oddity’s lead bankers at Goldman Sachs, Morgan Stanley, and Allen & Company advised against it.

“Thank God we didn’t launch this last year,” Holtzman, who cofounded Oddity in Tel Aviv with his sister, Shiran Holtzman-Erel, told me yesterday morning, shortly before Oddity’s shares started trading on Nasdaq under the ticker ODD.

Last year—which turned into the driest IPO year in about three decades—was a poor time to rally investors. But the delay also worked out rather well for Oddity, which would go on to release its second brand—a skin and hair product line called SpoiledChild—that would garner $100 million in revenue in less than a year, Holtzman says. By the time Oddity started its investor roadshow a few weeks ago, the company was boasting a net income of $19.6 million for the year ending in March 2023, up more than 553% from $3 million the year prior, according to filings. Holtzman says it wasn’t hard to get investors on board during the IPO roadshow.

“As an entrepreneur, most of the time people don’t believe you. And then you get to a point…In front of so many investors and, one after the other—they finally get it,” he says.

Oddity and its first investor, L Catterton, which owned 11.4% of the company’s voting shares at IPO, raised nearly $424 million by Tuesday evening, selling shares at a price of $35—$1 above the range Oddity had originally presented on its Securities and Exchange Commission filings. Shares of ODD later opened Wednesday afternoon on the Nasdaq at $49.10 per share, giving Oddity a market cap of a whopping $2.8 billion, though they dropped slightly to $47.53 by market close.

Oddity’s financials likely helped. The company has been profitable since 2020, according to Holtzman. And Michael Farello, the managing partner at L Catterton who led the firm’s investment, says the company didn’t bring any other investors onto the cap table for five years after his firm invested $40 million in the summer of 2017—that was when Oddity began considering an IPO, and Fidelity, Franklin Templeton, and others joined in a $130 million round.

Both the CAVA and Oddity IPOs have sat under the consumer hood—which raises questions over whether some of the enterprise tech unicorns in the queue would have the same success rate, and be able to maintain their lofty valuations in the public markets.

The good news for those companies is that machine learning and computer vision are a core part of Oddity’s business, which has a tech team spanning 40% of its headcount, according to SEC filings. The company uses a proprietary dataset of its 40 million customers to make projections about their preferences and match them with products. And it is using what’s called “hyperspectral vision technology” on photos people share with them to detect, and later analyze with A.I., skin and hair features or facial blood flows, and create melanin and hemoglobin maps. That helps Oddity utilize its machine learning models with less data and develop products and brands more quickly, it says. (Holtzman says Oddity never sells any of the data and that user data is kept separate from their photos.)

Through an acquisition earlier this year, the company formed “Oddity Labs” out of Boston, where scientists are using machine learning-based tools and synthetic biology to discover new molecules that can be used to develop beauty and wellness products. The company says it is incorporating that into its product development process. (None of Oddity’s products have been approved by the FDA.)

Farello told me it was Oddity’s data-focused approach to product development that first impressed him with the company, and he said what Oddity determines to ultimately do with its technology in the future could be really compelling—”things like using the imaging to be able to give a more effective assessment than a dermatologist or makeup artist would do—so that you’re actually having a better consumer experience online.”

Will Oddity offer the (second) much-needed vote of confidence for the 2023 market?

Oddity’s IPO “tells us that CAVA was not just a one-off,” says Matt Kennedy, senior strategist at the IPO index and ETF firm Renaissance Capital. And more important than either of these successful debuts is the broader pickup in IPO returns, he says. (Its IPO ETF is trading up nearly 50% from the beginning of this year.)

“Clearly there is demand for quality growth names that are profitable or near profitability,” Kennedy says.

Now who’s next?

Sequoia shakeup…Five Sequoia Capital partners have left the firm—reducing its investment staff by 15%, The Information reported yesterday. That includes the esteemed Michael Moritz, who has been with the firm for 38 years and is known for backing Google, PayPal, and, more recently, Stripe and Instacart (Moritz is going to focus on the firm’s independent wealth management business, Sequoia Heritage, according to the report). Also leaving the firm recently were general partner Mike Vernal, Michelle Fradin, Kais Khimji, and Daniel Chen. You can read the full story here.

In other news…Stanford University’s president has resigned following the completion of the Stanford-sponsored investigation into whether he had manipulated research data.

And Skims, Kim Kardashian’s apparel company, is worth $4 billion after raising $270 million in new funding from investors including Wellington Management, Greenoaks Capital Partners, D1 Capital Partners, and Imaginary Ventures.

See you tomorrow,

Jessica MathewsTwitter: @jessicakmathewsEmail: [email protected] a deal for the Term Sheet newsletter here.

Jackson Fordyce curated the deals section of today’s newsletter.

VENTURE DEALS

- Neura Robotics, a Metzingen, Germany-based A.I. and robotics startup, raised $55 million in funding co-led by Lingotto, Vsquared Ventures, Primepulse, and HV Capital.

- Hightouch, a San Francisco-based data syncing platform, raised $38 million in funding. Bain Capital Ventures led the round and was joined by ICONIQ Capital and Amplify Partners.

- Cosmic Wire, a Miami-based Web3 and blockchain solutions provider, raised $30 million in seed funding co-led by Solana Foundation and Polygon.

- Isometric, a London- and New York-based carbon removal registry and science platform, raised $25 million in seed funding from Lowercarbon Capital and Plural.

- SiPhox Health, a Burlington, Mass.-based home health testing company, raised $17 million in Series A funding. Intel Capital led the round and was joined by Khosla Ventures, Kortex Ventures, Alumni Ventures, Metaplanet, Shorewind Capital, LongeVC, Overlap Holdings, and Duke Capital Partners.

- BusRight, a New York-based school bus technology provider, raised $7 million in Series A funding. Las Olas Venture Capital led the round and was joined by Ubiquity Ventures, Underscore VC, Long Journey Ventures, SilverCircle, Automotive Ventures, Alumni Ventures, CreativeCo Capital, and other angels.

- Portrait Analytics, a Boston-based generative A.I. platform developer for investment research and thesis creation, raised $7 million in funding. Unusual Ventures led the round and was joined by .406 Ventures and others.

- Higharc, a Durham, N.C.-based intelligent home building platform for design, sales, and construction, raised $6.5 million in funding. Standard Investments, Home Depot Ventures, and others invested in the round.

- Verse, a San Francisco-based clean energy procurement and management company, raised $5.75 million in seed funding. Coatue led the round and was joined by Twine Ventures, MCJ Collective, firstminute capital, Collaborative Fund, Future Positive, Incite.org, and others.

- InspectionGo, a Tyrone, Pa.-based home inspection experience platform, raised $5.5 million in Series A funding led by Wasatch Equity Partners.

- Nitrofix, a Petah Tikva, Israel-based green ammonia company, raised $3.1 million in seed funding. Clean Energy Ventures led the round and was joined by SOSV, Zero Carbon Capital, UM6P Ventures, High House Investments, and others.

- Alpha Grid, a San Francisco-based EV charging infrastructure development software company, raised $2.5 million in funding. Asymmetric Capital Partners led the round and was joined by Twine Ventures.

- SquadTrip, a Tulsa, Okla.-based automated payment solution for group trips, raised $1.3 million in funding led by Atento Capital.

PRIVATE EQUITY

- TPG agreed to acquire Nextech, a Tampa, Fla.-based clinical and administrative health care technology solutions provider for specialty physician practices, from Thomas H. Lee Partners for $1.4 billion.

- Mainsail Partners invested $32 million in ProShop, a Bellingham, Wash.-based software solution provider for machine shops.

- Clearhaven Partners acquired a majority stake in Korbyt, a Dallas-based digital signage and workplace experience software provider. Financial terms were not disclosed.

- Right Time Group of Companies, backed by Gryphon Investors, acquired Knight Plumbing Heating & Air Conditioning, a Calgary-based plumbing, heating, and air conditioning services provider. Financial terms were not disclosed.

- Sequoia Financial Group agreed to acquire Cirrus Wealth Management, a Cleveland-based wealth management firm. Financial terms were not disclosed.

OTHER

- CISO Global acquired SB Cyber Technologies, a Chesapeake, Va.-based cybersecurity company. Financial terms were not disclosed.

- Kearney acquired Silicon Foundry, a San Francisco-based tech-focused advisory firm. Financial terms were not disclosed.

PEOPLE

- Warburg Pincus, a New York-based private equity firm, promoted Jeffrey Perlman to president.

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