(Yicai) Sept. 25 -- The global and Chinese funds of overseas beauty brands have moved the focus of their investments in China to upstream raw material suppliers mastering new technologies from domestic make-up brands.

China's cosmetics industry is experiencing a change in key investment and financing direction, Yicai learned from insiders. Rising make-up brands would easily secure funds from foreign companies before, but receiving additional investments has become hard in the past two years. Meanwhile, upstream cosmetics raw material firms have recently been getting more financing.

In 2019, Chinese cosmetics brands' fundraising amounts reached an average of CNY337 million (USD46.1 million), while the figure now has fallen to only millions to tens of millions of Chinese yuan, data from China Venture Investment Consulting showed. On the other hand, over 10 cosmetics raw material firms have secured funds this year.

The Shanghai investment arm of French cosmetics giant L'Oréal Group said on Sept. 22 that it invested in Shinesky Biological Technology to obtain a minority stake in the Chinese cosmetics raw material firm. The move aimed to make full use of special functions of Shinesky's new products for the development of innovative formulas to be applied in skin, hair, and scalp products, L'Oréal noted.

Shinesky and L'Oréal carried out joint research and development on various types of active ingredients for skincare, make-up, hair care, and hair dye before the investment, said Zhang Jiaheng, founder of Shinesky. L'Oréal's investment and partnership are crucial for the application and industrialization of Shinesky's cutting-edge technologies, Zhang added.

Trautec Medical Technology, a Chinese startup developing recombinant collagen technologies, announced last week that it had raised over CNY200 million in its latest Series B fundraiser, led by L Catterton, a global equity firm founded by L Capital, the private equity arm of France's LVMH, and US private equity firm Catterton.

Japanese cosmetics giant Shiseido was the leading investor of Trautec's CNY200 million Series A financing round last year.

China's make-up sector focused more on marketing in the past, but now, market players have found that they ultimately need to rely on product strength to survive longer, analysts told Yicai. This means that leading raw material firms that achieved scientific innovations are easier to be noticed by overseas capital, the analysts added.

Editors: Tang Shihua, Futura Costaglione