Three Ships Beauty Raises $2.5M To Fuel Its Next Stage Of Growth

Three Ships Beauty has raised $2.5 million in funding to strengthen its team and marketing as it eyes a bigger presence in the United States.

The round was led by Thrive Venture Fund, a woman founder-focused venture capital fund from investment firm BDC Capital backing late seed-, series A- and series B-stage companies, with participation from angel investors. Bringing Three Ships’ cumulative funding to roughly $4.4 million, it’s the Toronto-based natural skincare brand’s first priced round and gives it a post-money valuation of $20 million.

“Because we achieved profitability in 2023, which was our North Star, now we can control our destiny. We know that our business model works,” says Three Ships co-founder Connie Lo. “With all the success, we thought it made sense for us to take more capital and pour more fuel into the business.”

Thrive Venture Fund is a returning investor. It took part in Three Ships’ $1 million haul in 2022. The brand’s trajectory since the earlier investment convinced the fund to continue to support it. Lo points out that Three Ships’ sales advancement—it saw sales increase 65% last year and is forecasting a similar increase this year—and profitability in a consumer packaged goods landscape littered with brands that have seen sales slow and losses mount stood out to investors.

“It has been truly remarkable to witness Three Ships Beauty’s impressive growth, expanding customer traction and recognition in the North American market,” says Mona Minhas, partner at Thrive Venture Fund, in a statement. ”The company’s evolution to date, coupled with their steadfast commitment to improving transparency and sustainability in the skincare industry, fills us with anticipation for their next exciting phase of growth.”

Lo discloses that Three Ships’ direct-to-consumer channel is profitable on the first order, and it has a customer lifetime value (LTV) to customer acquisition cost (CAC) of five to one. The brand sells 23 individual products, including bestsellers Skin Hero Bakuchiol + Calendula Bio-Retinol Serum and Dew Drops Mushroom Hyaluronic Acid + Vitamin C Serum, priced on average at $28, and its average order value is in the mid-$80 range. Its repeat customer rate is in the low 40% arena.

First Light Vitamin C + Caffeine Eye Cream is Three Ships’ latest product launch, and it sold a unit every 30 seconds upon its release on Feb. 23. The brand plans to deepen its bench of acne and anti-aging products and jump into the sun care category.

DTC distribution is responsible for 70% of Three Ships’ sales. However, it predicts DTC and retail sales will become evenly split as its retail sales climb. Three Ships rolled out across Whole Foods’ full store network North America last year. In total, the brand is carried in nearly 1,000 doors at retailers such as Credo, Indigo, The Bay, Holt Renfrew, The Detox Market and Beauty Heroes. Canada and the U.S. represent equal parts of its business, but the U.S. contribution is projected to account for a larger share going forward.

A key distribution goal for Three Ships is placement at a beauty specialty retailer such as Ulta Beauty or Sephora. “Looking at our consumer base and comparing it to the average offer at Sephora and Ulta, there is so much alignment,” says Lo. “We see a lot of consumers shopping at Ulta and Sephora that are looking for high-quality science-backed naturals, and that’s our sweet spot.”

“We see a lot of consumers shopping at Ulta and Sephora that are looking for high-quality science-backed naturals, and that’s our sweet spot.”

Three Ships’ core customers are millennial women aged 25 to 45 years old. They often enter the brand in pregnancy or new motherhood as they search for natural alternatives to potent skincare ingredients. A secondary group of Three Ships’ customers are 16- to 25-year-olds beginning to think harder about what they’re putting on their skin and earning greater income to spend on products for it.

Lo started Three Ships as Niu Body with co-founder Laura Burget in 2017. They dedicated $4,000 from their personal savings to get it off the ground. In 2020, Niu Body rebranded as Three Ships. The brand was previously stocked at Target until the chain shifted its strategy to lower-priced skincare merchandise, and it exited.

Three Ships is nudging its marketing budget up from last year, when it was 25% of revenues. In the past, it concentrated on performance marketing, but is moving into brand marketing. Pop-ups, consumer events, sampling initiatives, in-store training and influencer partnerships are on the 2024 docket. Three Ships estimates it will dole out 95,000 samples and execute almost 4,500 hours in the field at stores this year.

The brand recently brought its store educators in-house. It has 13 full-time employees and is currently in the process of hiring for four roles: account manager, brand manager, e-commerce manager and marketing retention professional.

In today’s market, Lo and Burget assert Three Ships’ price positioning at the lower end of prestige and higher end of mass, a sector frequently called masstige, is particularly relevant. Brands like The Inkey List, Byoma and Naturium have thrived in the sector as consumers demand performance from skincare products without having to pay steep prices.

Three Ships’ natural formulations distinguish it from competitors. Burget shares that the brand defines natural as using ingredients that are 100% either from plants or minerals. She says, “A natural consumer can be very different from a clean consumer. We believe that there should be a legal definition of ‘natural,’ and it should be a regulated term.”

Asked about the difference between clean and natural consumers, Burget elaborates, “Within the food space, someone that chooses to buy organic is going to be a more specific subtype of the consumer than a consumer that chooses to shop products that are better for you who might not care that a product is organic or non-GMO. We have the mindset that, if you are choosing to shop a product that is natural within the beauty space or that is organic or non-GMO within the food space, you should get a product that aligns with the buying expectations you have.”

Imagining a future liquidity event, Burget suggests Three Ships’ emphasis on natural will separate it from the clean beauty crowds. In addition, she says, “Our products are very, very sticky. So, once people purchase, they tend to purchase more and more within the line. We are not known for one hero SKU, which I think is quite unique, and it gives our business more sustainability over time.”