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Investing in fashion start-ups: What VCs are looking for

#FashMash at Soho House - talking investing in fashion start-ups
#FashMash at Soho House

We recently held a #FashMash breakfast event at Soho House in London featuring three venture capitalists talking to the fashion and technology start-up space. Among them were Antoine Nussenbaum (AN) of Felix Capital, Tracy Dorée (TD) of Kindred VC and Suzanne Ashman (SA) of LocalGlobe. Here, we look at some highlights from the discussion, including what technology they’re seeing impacting the fashion industry and exactly what they look for in the businesses they invest in.


#FashMash: Given everything happening in the world right now, is it a good time to start a business?

TD: I think people start businesses because they have to solve a problem, because they can’t think of doing anything but that one thing, and I don’t see that type of macro trend of the uncertainty of Brexit or Trump or anything else that’s happening in the world affecting a great quality entrepreneur of getting started.

SA: I think it’s also easy to overstate kind of how the political turmoil over the last year has somehow impacted the funding landscape, because certainly at a really early stage we are backing entrepreneurs for five, seven, 10 years time. So, actually Brexit didn’t impact our investment cycle at all, we still made 25 odd investments last year… When we look back at our portfolio over the last 20 years we find that some of the best businesses were built in 2000 post the dotcom crash and 2008’s credit crunch, because people are looking for something new.


#FashMash: What technology are you seeing out there impacting fashion?

SA: I’d say the thing I’m seeing most of at the moment is the intersect between augmented reality and fashion. At the moment the vast majority of pitches that we’re seeing are very deep tech teams that have interesting products but not an end product that a consumer would actually wear – style is bottom priority and tech is top priority. I think the quality of those teams will improve over time as technical founders realise they need to work with someone with relevant domain experience to create a product that a consumer might want to wear. I got pitched an augmented reality t-shirt company and you know, it looks great, but at the moment it’s a t-shirt for 14-year-old boys. I can see over the next 12 months in this particular space that we’ll just see better and better things coming through.

TD: I also think we’re seeing less friction within payments thanks to mobile. People are designing experiences from a really mobile-first perspective. The first wave of online retail kind of looked like people were taking a warehouse and putting it online and it’s just a horrible sort of catalogue of walking through merchandise. But now people are really designing experiences for the platform on which they’re being delivered. I think the challenge with funding a B2C business, where you’re taking a new approach with your unique perspective, whether that’s to do with visual search or it’s to do with augmented reality or it’s to do with payments, any unique edge that you’ve got, is that you have to be able to show that the brand is going to have some type of longevity.


#FashMash: Which start-ups or new brands do you think are doing a good job and starting to prove they’ve got longevity?

AN: There’s a brand in France, which is great, called Sézane. The founder characterises exactly everything we’ve been talking about, to be extremely focused on the customer relationship and to be very true about what she’s building. It started off as a lifestyle business and grew into something very authentic with the customers.

SA: The brand I’ve seen recently that I think is executed super well, is Heist Tights – anyone that uses any form of social media will have seen their adverts. The founder there is also really interesting – he is super impressive and he’s all about the numbers. It helps if you can help us out by having some of the kind of standard metrics that we expect to see around a really strong repeat rate… Certainly things in the fashion space that we see, we really like people to have not just a product but some early numbers when they come to speak to us. From a tech perspective, I also think Hullabalook is an interesting example of two founders without a base in fashion, who have ultimately built a software enabler for e-commerce.


#FashMash: So beyond the numbers, what are you looking for in the start-ups that come to you?

TD: In whatever industry we’re looking at, we’re looking for this weird mix between the ability to think creatively, to have a unique insight, or a different perspective on something that people assume to be true. So that’s a creative vision piece with the ability to really get shit done. And to employ both sides of the brain is really hard. I’m excited for the businesses that use technology to make an existing workflow more efficient and that’s going to differentiate them in the long term.

AN: We see a new wave of people, of entrepreneurs, trying to create these companies that would connect better with, have a more authentic relationship with their customers. And from our end, we actually wouldn’t focus on the top line metrics looking at the business, but actually we would focus on something quite authentic being built in the relationship with the customer. It is not so much about the topic but about the interaction. It’s about how engaged the customers are and how engaged you are as an entrepreneur with your audience and your customers.

SA: At our stage, it’s really all about the team, it’s a little bit about the products, a little bit about the market but ultimately we’re backing a group of people as individuals to get through the next five years and overcome the many hurdles that stand in the way from where they are now to building a really big business.


#FashMash: Do you have any advice for start-ups on working with established retailers?

SA: As a start-up working with a big organisation, the one competitive advantage that you have as a small business, is speed and that’s the one reason why sometimes you have the opportunity to win against the big guys. Finding the person that’s going to really champion you within a retailer and help you navigate the maze of hierarchy and different workflows and different divisions is also so important.

TD: Two words of warning on working with really big clients: First, don’t end up doing work that is not core to your business. It’s very easy to want to work with X brand name and actually what they want you to produce is way off your product roadmap. If you think it’s going to be a massive distraction, that isn’t going to help you in your medium term vision, it’s tough to walk away and say no. The second thing is pricing. We often see start-ups working with larger brands offering heavily discounted products and it can be really hard to renegotiate that once you move from a pilot phase through to a longer-term relationship. So have that tough discussion about pricing up front.

This discussion has been edited and condensed.

Categories
business digital snippets mobile social media Startups technology

What you missed: endangered fashion unicorns, Dior’s YouTube moves, Facebook marketplace

fashion unicorns
Fashion ‘unicorns’ have become an endangered species

This week’s round-up of relevant fashion business, digital comms and tech news neatly sums up a series of things to be tracking at present: the evolution of social media businesses into greater advertising and commercial retail opportunities, the role customer service and messaging apps play together, the explosion of all things virtual and augmented reality, and an ongoing bevy of start-ups to know about.

Meanwhile, also worth reading this week is detail on David Lauren’s promotion to the role of chief innovation officer over at Ralph Lauren, Dior’s catch up strategy on YouTube, and the growth of physical stores by online players including Warby Parker and Bonobos.


TOP STORIES
  • Fashion ‘unicorns’ have become an endangered species [BoF]
  • Dior’s borrowing Chanel’s strategies to catch up on YouTube [Glossy]
  • Mastercard launches ‘selfie pay’ [FT]

BUSINESS
  • LVMH to buy majority stake in Germany’s Rimowa for $716 million [BoF]
  • Swarovski, maker of all things bejewelled, refashions itself as a tech company [NY Times]
  • As their incomes rise, Chinese consumers are trading up and going beyond necessities [McKinsey]
  • Ralph Lauren promotes founder’s son to chief innovation officer [Bloomberg]

SOCIAL MEDIA
  • Facebook launches Marketplace for local buying and selling [Reuters]
  • For young brands, is the Instagram opportunity shrinking? [BoF]
  • Pinterest Promoted Video lands in the UK with Hunter on board as a partner [The Drum]
  • Snapchat users are spending 78 seconds on average playing Under Armour’s Cam Newton game [AdWeek]
  • An inside look at Snapchat’s new advertising API technology [AdAge]

ADVERTISING
  • Reebok adds Gigi Hadid to #PerfectNever campaign [MediaPost]
  • Farfetch inspires consumers to find the perfect product in new #TheOne campaign [Luxury Daily]
  • Google, Facebook become focus of holiday digital campaigns [MediaPost]

RETAIL
  • Warby Parker, Bonobos have big plans for physical stores [WSJ]
  • Shopify adds Facebook Messenger direct sales channel [Retail Dive]
  • Salesforce launches LiveMessage to provide customer service across messaging apps [VentureBeat]
  • Cocktails, cinemas and concierges: Malls weave a web of their own to entice customers [Financial Post]
  • Now you can sign up for a “.shopping” domain name [Apparel]
  • The Outnet launches first android app [Fashion United]

TECHNOLOGY
  • Japanese brand Anrealage hosts augmented reality fashion show [Glossy]
  • Mark Zuckerberg’s VR selfie is a bigger deal than you realise [Wired]
  • Will Google’s ‘soft and cozy’ approach to VR headsets make the space more mainstream? [AdWeek]
  • The mainstreaming of augmented reality: a brief history [HBR]

START-UPS
  • Venture capitalists invest $56 billion in start-ups so far in 2016 [Reuters]
  • New app co-created by Elon Musk’s estranged wife could be a game-changer for retail [BGR]
  • Online fashion retailer Grana raises $10M led by Alibaba’s entrepreneurship fund [TechCrunch]
Categories
data digital snippets e-commerce social media Startups technology

Digital snippets: Iris van Herpen on designing the future, TAG Heuer’s luxury smart watch, Alibaba’s Singles Day smashes records

Here’s a round-up of the latest stories to know about surrounding all things fashion and tech…

irisvanherpen_ss16

  • Iris van Herpen’s astonishing designs don’t look like ‘clothes.’ They look like the future (as pictured) [The Washington Post]
  • TAG Heuer Connected: the first ‘legitimate’ smart watch? [Wired]
  • How Alibaba turned an obscure, made-up Chinese holiday into a $14.3 billion shopping extravaganza that’s bigger than Black Friday [Business Insider]
  • Dior breaks its e-commerce ban [WWD]
  • REI’s Reddit experience shows brands need to be ready to take the tough questions [AdWeek]
  • Canada Goose debuts first global campaign [AdAge]
  • High-tech Sephora flash boutique in Paris has a robot greeter [Brandchannel]
  • Farfetch tries to reach a little further [Bloomberg]
  • The Minkoffs want to disrupt the dictatorship in fashion with digital innovation [Fast Company]
  • Fashion platform Zalando wants to be Europe’s top tech company [Wired]
  • Macy’s CEO defends role of stores in e-commerce era [Fortune]
  • Apple’s Angela Ahrendts on where the company is taking retail next [Fast Company]
  • Natalie Massenet’s Imaginary Ventures proves she’s ready for next venture after exit from Net-a-Porter [Independent]
  • How Revolve Clothing uses data to create a global brand [Digiday]
  • Adam Selman, Rihanna’s favourite designer, enters the wearables war with Mastercard [NY Times]
  • As luxury brands embrace data, will they use it like a butler or a stalker [AdWeek]
  • Retail’s best Snapchat campaigns [L2]
  • Tel Aviv’s booming tech start-up community is expanding its focus to fashion [Fashionista]
  • Singapore’s postal service provider is developing a futuristic shopping mall to house online retailers [TechCrunch]
  • “People don’t buy stuff in actual stores” – the future of retail, as explained by Gen Z [Quartz]
  • Wary of the next ‘Warby Parker’ [TechCrunch]
  • Refinery29, Dazed and i-D battle for millennials [BoF]
  • Essena O’Neill quits Instagram, rewrites her self-promoting history [The Guardian]
Categories
Blocks e-commerce Startups technology

Top tips for retail start-ups from VCs at #SXSW

retailVC_SXSW

In two years’ time, retail innovation will be led by start-ups more than by corporations, a panel comprised of venture capital firms stated on the closing day of SXSW Interactive.

Eurie Kim of Forerunner Ventures, Janie Yu of Fung Capital and Stephanie Palmeri from SoftTech VC, each have a foot heavily placed in the retail space thanks to investments with companies including Warby Parker, Birchbox, Wanelo, Bonobos, Poshmark, Fitbit, Fab, Olapic and more.

They took to the SXSW stage to discuss how, why and where they’re investing in retail innovation. Mobile payments, disruptive shipping models and opportunities around predictive analytics were the core areas they said they were looking to. They advised the start-ups in the audience as to how to bring those ideas to their attention.

Here’s a recap:

Build your brand first

“We try and see 80% to 90% of things that are out there. As a result, all the ideas that come through we’ve probably seen before. If not, then it’s probably too early for them,” warned Kim. She called for start-ups to approach VCs once they have their team in place and a great brand they can prove they’re building. “The best move is to do a friends and family round [of funding] first, and demonstrate that you can stick around.”

Develop customer relations

The VCs are looking for founders who are extensively in tune with who their consumer is, and is focused on relationship building with that consumer. “It’s not enough to just have a good product as someone else will also be doing that,” Kim added. She’s looking for a management philosophy that tracks this closely and develops accordingly.

Ensure renewal rates

Evidence of customer acquisition is one thing, but in growth phase what VCs are really looking for is not just the fact there are those prepared to pay for your solution but also renew it, said Yu. “We want to see that something meets the criteria on product side so you have customers willing to pay for it, and then importantly pay for it again.”

Know the retailers

Numerous start-ups come in and assume retailers don’t realise what problems they’re facing. The truth is they’re very aware of the issues, but they can’t just make flip decisions to try something new as it affects so much, panellists agreed. “We look at how much someone knows retail and really understands it,” said Kim. A company that is already piloting with retailers and can prove they know them is always going to be more appealing.

Demonstrate connections

In terms of making connections with VCs, the panellists advised to go through people you know. “We look to thousands of opportunities a year and meet with hundreds. We then do one or two deals a month, or about five a quarter. The chance of standing out with a cold email just doesn’t happen,” said Palmeri. It’s good to demonstrate you’re connected in the market, she added.

Prove why you

It’s worth remembering that VCs have a great overview on the industry; they know where the pain points are and what needs solving, said Yu. When they’ve found the right product therefore, the decision as to whether to invest or not often comes down to whether it’s the right person to do so with. Kim emphasised the fact what she really asks is “why this founder” and not just why this problem or this solution.

This post first appeared on WGSN.com/blogs

Categories
digital snippets e-commerce social media technology

Digital snippets: Burberry, L’Oréal, Macy’s, Adidas, Uniqlo, Google Glass

A round-up of the latest stories to know about surrounding all things fashion and tech:

Burberry_tmall

  • How Burberry has fared in its first days on Tmall [Jing Daily]
  • L’Oréal launches virtual try-on make-up app [NY Times]
  • Macy’s is the first retailer to run Facebook’s auto-play video ads [Adweek]
  • Adidas app to print Instagram snaps on your shoes [CNET]
  • Google’s new fashion-savvy exec can’t fix Glass’ biggest flaw [Wired]
  • Burberry cites integrated marketing activity for revenue growth as EasyJet CEO joins the board [The Drum]
  • Op-ed: Why fashion is the next big thing in venture capital [BoF]
  • Why are fashion brands shying away from Tumblr? [Tumblr]