Where investors in fashion technology invest their money

Banner State of Fashion Technology

This article first appeared in The State of Fashion: Technology, a detailed report co-published by BoF and McKinsey & Company.

In addition to the various tools that take place in fashion technology, investors emphasize technologies that make the store more agile, sustainable and attractive to customers, whether they buy new or used goods, in stores or online. Many also make irreplaceable tokens (NFTs) and metaverse-related moves, but are slowly starting out in these areas and doing their own research to determine what opportunities are beyond NFTs as collectibles.

In 2021, the value of the 50 best investments in fashion-related technology increased 66 percent compared to 2019, reaching $ 16.2 billion, according to McKinsey data analysis Crunchbase, a business information platform. The investments considered in this analysis went either to fashion retailers or to companies that sell products and services to fashion firms rather than fashion brands. E-commerce, which has benefited from an increase in online shopping caused by the pandemic, has received roughly 55 percent of the investment. The rest consisted mainly of payment technology, including buy now pay later, social commerce and resale, followed by the supply chain and logistics companies and those working in NFTs or virtual reality technologies.

Investors say e-commerce has room for further growth and innovation. For example, new market models that are “easier to stock” and help individual creators and retailers have been one area of ​​focus for Forerunner Ventures, a San Francisco-based fund.

“On the back – on the trade-enabled side, where we spend a lot of our time investing – there have been tons of innovations in tools and technologies that allow anyone to be a salesperson, whether you’re a current brand or creator or someone just starting out,” she said. Nicole Johnson, partner at Forerunner. As an example, Johnson cited Canal, a distributed commercial platform that aims to allow individuals and companies of any size to sell products on the same channels where customers first encounter them, such as YouTube or Substack. Forerunner was one of the leading bearers of the Bay Area launch, which began operations in 2021.

Frederic Court, founder of London’s Felix Capital, also highlighted markets as an area of ​​interest, such as those that have their own strong point of view and emphasize a curated shopping experience. “In a world where there are so many choices, the curator herself is a very important topic,” he said.

Consumer-oriented fashion technology has attracted most of the investment in recent years, and this is still the case. Social trade, for example, experienced a jump in funding in 2021, largely due to a $ 500 million increase by China’s Xiaohongshu.

In the Swedish fast fashion giant H&M, executives are looking for e-commerce innovations that make it possible to blur the line between online and shopping experience and offer customers the same level of personalization on all channels. Alan Ting, head of mergers and acquisitions, described one potential idea where customers could record their purchases in a “digitized wardrobe” and then the H&M app, when they visit the store, would direct them to products they might like on basis of past purchases. The company is also continuing its investments in analytics and artificial intelligence to leverage its vast amount of customer data, he noted.

In 2021, the value of the 50 largest investments in fashion-related technology increased by 66 percent compared to 2019.

Supply chains and logistics continue to attract investor interest. In late 2020, Singapore-based Lyra Ventures participated in a funding round for Material Exchange, a centralized material database company. Reina Nakamura, general partner at Lyra, said the database could help individual designers, as well as brands competing with fast-paced fashion juggernaut Shein, become more adept at production.

Due to its digitalized supply chain, Shein has insight into the availability of materials that can be inserted into orders, which makes it more agile than brands that rely on the traditional model of attending trade fairs, exchanging physical samples and producing custom fabrics, Nakamura said. .

“This has always been a bottleneck for any agile upstream supply chain that needs to be built, and I think Shein has really changed the game here,” she said.

Similarly, in 2021, Forerunner jointly led a funding round for Swyft, which connects carriers with suppliers to enable them to offer same-day delivery and compete with Amazon’s logistics machine, Johnson said.

Resale also offers investors a game of sustainability and a growing market for buyers, especially younger ones. In recent consumer surveys from BoF Insights, 65 percent of respondents aged 18 to 24 said they had bought second-hand fashion before.

Web3 and the metaverse are unavoidable topics, and while capital is pouring into metaverse-related companies, investing in fashion and retail is just beginning.

H&M has announced that it will double its investments in 2022, focusing on areas such as technology and supply chain, renewable energy and sustainable materials. H&M’s most significant investments in fashion technology, for example, are focused on Sellpy, a second-hand site it bought in 2019, Ting said. In 2021, he launched Sellpy in an additional 20 countries, bringing the total number of markets to 24, and told Reuters he had invested more than 20 million euros ($ 24.4 million) in the business.

In addition to H&M, resale companies, including Vestiaire Collective, Grailed and Tradesy, have held funding rounds in 2021. Etsy has bought a used Depop market focused on Gen-Z, and several brands are now offering to resell their own goods.

Pierre Denis, former CEO of Jimmy Choo and now an investor in London-based fashion technology, highlighted the resale economy as one of several key investment goals, along with data analysis and social commerce. He has joined a $ 2.7 million funding round for Reflaunt, a technology company “resale as a service” that supplies back-end infrastructure enabling brands and retailers to join a network of used markets and start their own resale businesses.

Meanwhile, Lyra’s Nakamura pointed to resale logistics companies, such as Lizee, a French start-up founded in 2019, focusing on logistics solutions for rental and resale brands – something she said traditional warehouse management systems are not. designed. Lisee raised $ 1.3 million ($ 1.55 million) in the first round of 2021.

While many of these investments are aimed at solving current problems in the industry, investors are also looking to the future. Web3 and the metaverse are unavoidable topics, and while capital is pouring into metaverse-related companies, investing in fashion and retail is just beginning. Johnson, for example, said Forerunner “walks before we escape and think about where consumer utility is and the greatest opportunities for mass consumer adoption in those spaces.”

But money is starting to flow. Denis and Nakamura have separately supported Threedium, whose technology allows brands and retailers to create 3D and augmented reality tools for use in e-commerce and a range of gaming environments. Nakamura described the company as “the backbone of all 3D”.

H&M launched its first virtual fashion collection in early 2022. The company is working to figure out what competencies it needs to develop – or acquire – in space, according to Ting. “Certainly, we will have to offer our products digitally,” he said.

Banner State of Fashion Technology

Leave a Reply

Your email address will not be published.