Fashtech + London: a perfect fit.

With London Fashion Week 2020 just around the corner, it’s a good chance to reflect on the growing convergence of fashion and technology, and London’s position at the epicentre of innovation in this field. And with more tech VC investment flowing into the UK in 2019 than ever before, what do venture capitalists look for in fashtech startups?

Firstly, it’s worth noting that a broad spectrum of business models sit within fashtech. These include online fashion marketplaces, wearables and B2B solutions within the fashion space, addressing problems from supply chain visibility to customer acquisition.

London has become a fashtech hotspot over recent years for a variety of interrelated reasons. Firstly, London has the fairly unique characteristic of being known for both fashion and technology. It’s the driving force behind European technology innovation but also plays host to one of the ‘big four’ fashion weeks. In contrast, when you think of Silicon Valley, you think technology, and when you think of Paris, you think fashion.

Having this unique balance creates a potent mix, as fashion experts, who bring an intimate knowledge of the industry’s pain points, interact with technology experts, who bring a fresh perspective to the industry. The multi-nationalism of London’s startup ecosystem, supported by the likes of London & Partners, has also played a key role in bringing a diversity of ideas to London’s fashion scene. This concoction was the catalyst for the early London fashtech startups that have gone on to enjoy great success.

On the B2C side, there are startups like Depop, the peer-to-peer social shopping platform, and Thread, the AI-driven styling service. There’s also Farfetch, which was built in London and Portugal. In terms of B2B, there is Unmade, a platform which offers on-demand apparel manufacturing, as well as Metail, which offers retailers a virtual fitting room service.

And success breeds success. As you see in the US with Facebook and Amazon employees going on to start their own ventures, the same networks are materialising in the fashtech space in London. Entrepreneurs are schooled at the likes of Farfetch and Unmade, and then begin to apply their knowledge elsewhere.

These London-based networks are hugely powerful in other ways too. They have encouraged a proliferation of institutional and angel investors, accelerators and advisors, all looking to play their part in the burgeoning London fashtech ecosystem. Farfetch must again be given an honourable mention here. Its Dream Assembly programme for fashtech startups attracts applicants from across the globe.

As a retail and consumer sector investor, fashtech is an integral segment for True. We keep a close eye on, and look to invest in, emerging fashion industry trends. Through our corporate partnerships, with the likes of John Lewis, Marks & Spencer and Abercrombie & Fitch, we also look to identify B2B startups which are tackling the industry’s big issues.

Consumers want greater personalisation and greater accessibility (particularly in terms of the purchasing process). The goal for fashion brands and retailers is to increase revenue whilst reducing the cost of creating revenue, both of which are reliant upon satisfying consumer demands. Therefore, these brands and retailers must optimise both their customer acquisition and retention processes.

Customer retention, in particular, is receiving more and more attention from brands and retailers for a couple of reasons. Firstly, retaining a customer can be much cheaper than acquiring a new one. Secondly, greater discoverability across the board in the fashion sector has contributed to an erosion in brand loyalty. Brands are therefore having to think of new ways to retain customers other than simply relying on the power of their brand.

Finally, startups should be contributing to improving the sustainability of the industry in some way. For far too long the fashion industry has had a disproportionately negative impact on the world. Making the industry sustainable as quickly as possible is an ethical and commercial imperative for all stakeholders. Startups addressing these key issues in innovative ways are interesting to investors.

Aside from specific themes, what we look for on True’s seed fund is simple. Fashtech startups should be problem-led, not technology-led. They should address these problems starting with a blank sheet of paper, rather than be guided by the industry norms that have gone before. Ultimately, the solution and the vision should be brutally simple.

All the successful fashtech startups mentioned above had a very simple proposition and all of them pursued the proposition in a radical way.

We believe the London fashtech ecosystem is a unique one, and fashtech entrepreneurs from around the world would do well to consider being a part of it.

Learn more about why London is a city where fashion meets technology.

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Many thanks to London & Partners for their support in writing this blog.

I’ve also recently blogged about investment and innovation opportunities in the shipping sector and in sustainable materials for retail and consumer.