How Israel Is Leading the Beauty Tech Revolution

Inside Israel's Beauty Tech Boom

In the brave new world of beauty tech, Israel, aka “The Start-up Nation,” is the leading destination.

Multinationals, like L’Oréal and Natura, and industry investors are increasingly homing in on developments in the beauty tech space there, which percolates with cutting-edge innovation.

“We have always seen Israel as a key area for us around partnerships, as they have an incredible ecosystem of start-ups that are innovating in tech,” said Guive Balooch, head of the L’Oréal technical incubator. “Beauty tech is an area we believe strongly in, and we must work with people around the world that have the best competencies around technology in every field.”

One way companies find novel ideas in Israel is through Tech It Forward, an innovation agency based in Tel Aviv, which helps introduce international corporations and investors to new Israeli innovations and technologies that answer needs and challenges, according to Jennifer Elias. She cofounded Tech It Forward with Jessica Rosner about six years ago. It is comprised of international female consultants with French-, American- and British-Israeli backgrounds.

“We realized that Israeli start-ups are amazing at creating innovative and original technologies, but they could benefit from an outsider’s eye with an international point of view in order to connect [with] foreign markets,” said Elias.

She noted Israel’s tech ecosystem has always been robust — especially in biotech, pure tech, virtual retail or retail tech — but that it’s garnered even more interest of late, as has the country’s beauty scene.

Groupe Rocher purchased the totality of Tel Aviv-based Sabon in 2018, and Fosun Group acquired Ahava, headquartered in Holon, Israel, in 2016, for instance. Meanwhile, the pace of M&A keeps quickening.

“The last couple of years have been really record in terms of the number of start-ups, exits and unicorns, so it has attracted even more players,” said Elias.

Recently, some of her agency’s clients have been looking more into technologies also related to wellness — both physical and mental. “Beauty personalization [tech] has been big,” she said.

So, too, has been research into boosters for skin care solutions, sometimes including nanotechnologies.

Many executives launching beauty tech start-ups in Israel hail from different industries.

After a Ph.D. in biotechnical engineering, Hilla Ben-Hamo Arbel started working in Israeli start-ups, mostly related to genomics. While traveling abroad, she learned about the beauty industry. While at a start-up focused on digital health using personalized drugs, she met Coralie Ebert, a Ph.D. in computational biology.

Six months ago, they left their jobs to cofound and begin working on MeNow!, a platform using data to help people make skin care choices based on their own personal needs. There’s a plug-in version in beta destined for e-commerce and skin care websites, as well.

“We knew that we needed a very simple system, [whereby] people can answer some questions and get the products we match for them,” said Ebert, explaining those include queries about lifestyle and skin tone, as well as medical background. “A lot of family history and diseases like diabetes can have a [big] impact on your skin.”

Scalability is key, therefore big data is, too, and the executives delved into product ingredients lists in order to predict their effects on individual people’s skin. Forecasting natural products’ results has proven particularly complex, so they’ve studied plants’ structures and molecular compound properties.

The next step was to create an in-depth database, including their own findings as well as reviews from websites of retailers such as Walmart and Amazon.

“We did a lot of scraping, took a lot of data in order to analyze reviews,” said Ebert. They compared those with their predictions from product ingredients to see whether there were matches.

“We believe that the world doesn’t need more products,” reasoned Ben-Hamo Arbel. “It needs the right matching ­⁠— meaning that when you go to buy a product, you will be 100 percent sure that it’s not going to cause any side effects, and even that it’s going to be effective.”

In MeNow!’s survey, questions are asked according to answers. Then the machine-learning system gives specific product recommendations on the spot. The platform should be launched in approximately two months.

“We’re continuing developing it,” said Ben-Hamo Arbel, adding that the future could involve microbiome and DNA results, as well as skin imaging.

MeNow! is a win-win solution, she said, for both consumers and brands, explaining: “Everyone will be satisfied, [with] higher sales, better retention, and then the user is happy because he’s getting the right products for him.”

After skin care, hair care is up next for the platform.

Smart Resilin, another beauty tech start-up, was founded by Liron Nesiel, a Ph.D. in biotechnology, about four and a half years ago. It uses biomimicry, or taking what nature invented and introducing that into other industries.

“We decided to combine the strongest material from the plant kingdom, nanocellulose, which is a hydrolized form of polysaccharide, with the most elastic material from the insect kingdom, which is resilin,” she explained.

Nesiel, who serves as Smart Resilin’s chief executive officer, said resilin, a biomaterial, is a protein allowing for the remarkable jumping and flying mechanisms of insects. (A flea, for instance, can in one jump rise 100-times higher than its size.)

Using genetic engineering, her company is now making resilin through a fermentation process. Smart Resilin is poised to create its first cosmetics product ⁠— a hair straightener ⁠— with that material.

“What we do differently is we are using biomaterials in comparison to the chemicals that are used in this industry today,” she said. “Most [straightening] processes use hazardous chemicals that change the inside structure of the hair, and therefore keeps it straight. But that could be very harmful both for the client and the hairdresser ⁠— mainly the hairdresser, because he keeps using them and breathing [the chemicals in].”

Smart Resilin’s method coats the hair with harmless biomaterial, which is also biodegradable. As it wears off, clients can use an at-home maintenance product.

Nesiel and her team are working on the final products, which could take one year to commercialize, while taking regulatory steps.

Simultaneously, Smart Resilin is fundraising. It’s also created a new company that signed with a separate group to produce resilin jointly as a raw material on a large scale for all industries. That could take about two years to set in motion and can ultimately be used for other applications in cosmetics, as well as in the automotive and aerospace industries, plus 3D printing and packaging, according to Nesiel.

Sustainability is top of mind.

“We’re looking to replace the most polluting materials you can think of, like rubber, plastic and nylon,” said Nesiel.

One Israeli beauty tech company is taking a different tack and going crypto. Oddity, the parent company of direct-to-consumer beauty and wellness brands Il Makiage and SpoiledChild announced the launch of the Oddity Token in late April. It’s a digital security token built on the Ethereum blockchain, and Oddity claims that with the move, it becomes the first noncrypto company to link a digital security to equity ownership.

“We are democratizing investor opportunity by broadening individual access to Oddity securities, as we continue to disrupt and redefine the beauty and wellness category,” said Oran Holtzman, cofounder and CEO of Oddity, in a statement. “Crypto and blockchain technology unlock massive opportunity for consumers and capital markets. With this offering, we are building a new bridge to link traditional markets with the vibrant world of digital assets, where the innovation potential is huge.”

“We believe in a future where securities are not just records of ownership, but also functional lines of code,” continued Lindsay Drucker Mann, global chief financial officer of Oddity. “The potential use cases of this technology are enormous, and as a digital- and technology-powered company, we believe we are especially well-positioned to help drive it forward.”

The Oddity token digitally converts into Oddity Class A ordinary shares at the time of an Initial Public Offering at a 20 percent discount to the IPO price.

Oddity has had a busy 2022. In January, it closed a second funding round of $130 million, which valued the company at $1.5 billion. And last year, its Il Makiage brand acquired Voyage81, a hyperspectral imaging software company, for more than $40 million. In the scope were Voyage81’s systems, which will help Il Makiage’s machine-learning capabilities and lay the groundwork for new brand introductions in the beauty and wellness domains.

Investors keep actively taking stake in Israeli beauty tech start-ups. Another example came in mid-October 2021, when Amkiri, whose founders hail from Tel Aviv, closed a $3 million financing round led by Welltech Ventures for expansion and growth. Amkiri produces “visual fragrance,” through scented temporary tattoos.

Multinational tie-ins are plentiful with Israeli beauty tech start-ups. During the most recent Consumer Electronics Show in Las Vegas in January, L’Oréal presented a fruit of its partnership with Coloright, an Israeli tech company the group acquired in December 2014, which develops hair fiber optical reader technology. At CES, the Coloright advanced coloring system for salons using artificial intelligence was unveiled.

How it works is that the machine starts by analyzing individual clients’ hair, assessing various factors that can influence color’s effectiveness, from natural color and grayness to length and density. Then it dispenses a precise combination of dye, developer, base cream and other ingredients, essentially creating a personalized recipe for clients, with up to 1,500 custom possibilities, the company said at the time.

“We will start deploying the Coloright experience in the next year, and we believe that guiding consumers with technology to get the right hair-color formulas every time with smart data and AI will be an important part of the future of the salon experience,” said Balooch. “We are working with our portfolio brands, and parts of the experience will, for sure, be deployed in many of our salon brands at some point in the future.”

L’Oréal’s delving into Israeli tech doesn’t stop there. In December 2021, the group and Breezometer, an Israeli company, said they’d inked a new research and tech partnership. Balooch explained Breezometer has “some of the most accurate algorithms around climate, which tie into our knowledge of how exposure to the environment can impact day-to-day lives of our consumers around skin health.”

“We are working on a number of services we plan to bring to people around the world with their unique knowledge of skin biology, tech and health,” he said.

Natura has been operating with an open innovation model for more than two decades, and in 2021 it was invited by Brazil’s National Confederation of Industry to be the first company from the country to establish a partnership with the Israeli global open innovation company SOSA.

The idea was “to access some of the best start-up ecosystems in the world, which include Tel Aviv and New York, to build joint solutions for Natura’s business challenges,” said Agenor Leão, vice president Brazil Natura. “The main goal consisted of using innovation and technology to boost Natura’s direct-selling network, composed of 2 million beauty consultants, around a common purpose: strengthening beauty and well-being through relationships of trust, mainly on the digital environment, which has been gaining [traction], especially after the COVID-19 pandemic.

“By running this corporate challenge, we were looking for high-impact solutions capable of enhancing our customers’ experience and, at the same time, boosting the sales of our beauty consultants through our digital platform,” he said.

Participants were from around the globe, and they took part in open innovation activities, such as Natura’s internal design-thinking workshop, to tackle predefined pain points and find solutions.

Through the program, more than 250 potential solutions were identified, and of them, 38 were scouted and validated. Six groups presented their ideas to Natura, which selected two yet-to-be announced start-ups to enter the prototyping phase.

“The solutions are connected to our goal of being transparent about our formulas and allowing the public to learn more about our sustainable and natural products,” said Leão.

CNI and SOSA had already teamed up once before, in 2019, for a different corporate challenge, called Zero Waste Packaging.

“Open innovation is an ongoing process, and corporate challenges are only one out of the many tools we use to tap the innovative ecosystem,” said Leão.

“In Israel, we see huge potential, and have been actively partnering with many start-ups in fields around AI, computational science, personalization, climate tech and much more,” said Balooch. “To create the beauty tech of the future, we need these types of strong assets. In addition, we see many new start-ups that are applicable to beauty tech directly that we are constantly connecting with in Israel and will continue to grow.”