Brand Incubator Squared Circles Closes $40M Series A Funding Round Led By L Catterton

Squared Circles, the venture studio and incubator behind Kelly Slater’s personal care brand Freaks of Nature, has closed a $40 million series A funding round to fuel brand creation.

The round was led by L Catterton, the private equity fund with Beauty Industry Group, Thorne, WTHN and Kiko Milano in its portfolio which was also a part of Squared Circles’ $5.3 million seed round last year. Wildcat Capital Management, the family office of TPG Capital founding partner David Bonderman, led the seed round, and Regeneration.VC, the climate-focused venture capital firm backed by Leonardo DiCaprio, participated in it along with L Catterton.

In a statement, Jon Owsley, managing partner of L Catterton’s Growth Fund, says Squared Circles develops “some of the most forward-thinking and innovative products that leverage science and AI to meet the needs of the consumers of tomorrow. Their targeted approach to consumables, expert grasp of consumer mindset and behavior, and seamless fusion of science with culture fill an important gap in the market. Squared Circles is set to lead the next wave of profitable, impactful innovation that benefits both people and the planet.”

Founded in 2020 by Lukas Derksen, former managing partner and co-founder at creative agency Sid Lee, and Osman Khan and Alexander Gilkes, who together previously co-founded online auction house Paddle8, Squared Circles has introduced three brands on the market today. In addition to Freaks of Natures, the brands are hypochlorous acid-centered skincare brand Magic Molecule and algae-centered cooking oil brand Algae Cooking Club. In the past, Squared Circles invested in brands it didn’t incubate, including Phyla, Pangaia, Hooray Foods and MUD/WTR, but it plans to only incubate brands going forward.

Squared Circles expects to roll out two to three brands annually, and Gilkes says the series A funding will allow it to launch five to 10 brands over the next three years and take them to their series A rounds. The goal for all the brands is to reach $50 million in sales within their first five years. The company generally pours as much as $1 million into getting brands to their minimum viable product stages and then raises $2 million to $3 million on a convertible note for their launches.

For Freaks of Nature’s launch, for example, Squared Circles raised $2.5 million from investors, including Michael Meldman, founder of Discovery Land Co. and co-founder of Casamigos, and actor and filmmaker Jonah Hill. Like every Squared Circles brand, Freaks of Nature is legally a separate company. Squared Circles usually holds majority ownership in the brands it develops and has a seat on their boards. With external contractors, 30 to 40 people can work on incubating and scaling a Squared Circles brand. Its internal team has about seven people.

“Squared Circles is set to lead the next wave of profitable, impactful innovation that benefits both people and the planet.”

“There’s so many different shades of gray with incubators and venture studios, and some of them are literally using the word ‘sausage factory,’ where they take a small equity position, and they just throw them through a program of three months and good luck founder. We’re way more hands-on than that,” says Derksen. “We are there from the inception of an idea of building it, and then typically we attract a founder along the way as we’re building it. By the time it’s built and ready to go to market, we bring on a CEO to run it basically, but we were very involved.”

Squared Circles’ brands are designed to gain traction in direct-to-consumer distribution before landing in big-box or specialty retail. For forthcoming brands, the venture studio and incubator is looking into the destigmatization of male health issues,  GLP-1 drugs’ effects on nutrient depletion and further applications of oils derived from algae.

Similar to other fields, science and artificial intelligence—or at least nods to them—are proliferating in beauty and wellness, but it remains unclear what advancements will ultimately change consumers’ lives and spending. At Squared Circles, where licensing scientific intellectual property rather than producing it is the order of the day, they’re entering the picture to woo so-called “conscious consumers” increasingly weary of brands that make promises based primarily on principles over performance.

Drilling down into the pool of conscious consumers, the venture studio and incubator zeroes in on a group of 46 million largely gen X and older millennial Americans it labels “conscious maximalists.” Derksen describes them as simultaneously indulgent and discerning, especially when it comes to impacts on their health and the earth. Once they buy into a brand, he says, “They stick to their guns, and they’re willing to spend a premium up to 50% on what’s out there for something that’s more sustainable, but only if it’s a great quality product.”

Squared Circles enlists known personalities to help deliver messages that resonate with conscious maximalists and break down scientific jargon. It’s partnered with chef and Eleven Madison Park owner Daniel Humm on Algae Cooking Club as well as Slater and Ocean Ramsey, a free diver and model, on Freaks of Nature. Gilkes says, “It’s not celebrity for the sake of celebrity to bring an audience. It’s those who are truly authoritatively tied to the mission of the product.”

Incubators have had a mixed track record in beauty and wellness. While a few have been successes (see The Center and its $355 million sale of skincare brand Naturium to E.l.f. Beauty last year), there have been plenty such as Brandable and Arfa that have either folded or pivoted. Gilkes argues Squared Circles’ approach to brand incubation that arises from clearly identified consumers, their needs and white spaces that speak to them distinguishes it from the incubator pack.

He says, “Building this real expertise around this particular audience allows us to deploy and rinse and repeat a lot of distribution and economies of scale.”