Venture investor Enrico Beltramini spent more than a decade helping the world’s most successful fashion and retail brands maintain their edge, including as an executive at Gucci Group NV.
Now, as managing director of the Fashion Tech Accelerator, he teaches upstarts what it takes to become de rigueur in the field.
FTA backs and advises startups involved in the design, manufacture, sales and promotion of clothing, accessories and wearable tech via its programs in Silicon Valley, Milan and Seoul.
Its portfolio includes upstarts like Combat Gent, which designs and sells handmade menswear online; makers of custom womens’ clothing Bow & Drape, recently getting buzz for its line of 3-D printed jewelry and accessories; and Myrio, a service that helps customers find items in stores (or online) that match one item they already like.
Mr. Beltramini spoke with Venture Capital Dispatch about the biggest mistakes fashion entrepreneurs are making today, why a celebrity’s answer to “who are you wearing” will change in the very near future, and what VCs aren’t funding–but should.
An edited version of that interview follows.
1. What are you seeing out there as far as the fashion tech startup scene?
There are about 2,000 fashion-tech startups operating around the world today, according to a good study from GP Bullhound from June this year. And Fashion Tech Accelerator has done research to confirm that only about 300 of these have attained [institutional] venture investment so far.
Over the past year, we have seen the most VC interest in fashion-tech companies come from the U.S., China and Europe, with online retailers absorbing over half of these funds, and some studies say as much as 70% of their fashion-tech money is going into e-commerce plays.
2. Are fashion tech startups unique from other tech ventures?
Absolutely yes. Fashion brands can achieve high operating margins and reach critical mass relatively quickly. You can move from zero to $1 million in revenue in a few months, when your brand catches on, and up to $5 million in six months in fashion tech.
If you don’t have a team with managerial experience–specifically in fashion or retail–that kind of growth can actually be very difficult to harness and maintain.
But often times, showing meaningful traction to investors is more straightforward with fashion tech, because you have something to sell. Units shipped, sales numbers, orders received–these are the kinds of metrics investors want to see.
It is easier to impress with 100,000 units sold than it is with a million downloads of an app.
3. Which categories within fashion are most overlooked by VCs today?
Retail technology like in-store marketing, and wearable technology are only just starting to attract VC interest. There are a variety of reasons, but for most VC firms, in-store marketing tech sounds too pioneering. [Same] with wearable tech. Mass consumer adoption is still fuzzy. This makes it a bit too early for professional investors.
Our Redwood City [Calif.] accelerator–we’re also now in Seoul and Milan–has seen double the number of wearable technology startups applying to participate in the past six months.
We are cautious about adding these companies to our portfolio as well–we need to see a strong business model, a clear customer need and a promising form factor that will win over consumers.
4. What’s the market potential for wearables in your view?
A 2012 report from GigaOM Pro predicted there will be 170 million units of clothing and accessories with embedded health-monitoring gadgets in the market by 2017. Embedded health-monitoring is a fairly specific market, so this number is only scratching the surface of the potential for wearable tech.
Soon enough, when a red carpet reporter asks “Who are you wearing?” celebrities will name a designer, and which technology they have [embedded].
5. Where do you think large fashion companies will seek to make acquisitions in the next few years?
Large fashion brands are curious about what is happening [in tech]. They know they need to modernize how they sell to customers online, but their revenue stream is too dependent on traditional offline shopping to focus there.
Excitement around fashion brands must be extended to the digital realm for a new generation of buyers.
I think the next few years will see large fashion brands snatching up brand-centric e-commerce and manufacturing upstarts, and eventually design-focused marketplace startups that strengthen their online infrastructure.
6. What are common mistakes made by fashion-tech entrepreneurs?
Without historical fashion experience, fashion-tech entrepreneurs inflate their perception of the potential impact of technology on the industry. Fashion tech is more than combining a skirt and a digital device. There needs to be an understanding of how the end product will dramatically improve a customer’s life.[We] advise companies to balance focus on customer experience, revenues, products and margins rather than hypothetical disrupting effects of technologies.
7. Why did you expand Fashion Tech Accelerator to Milan and Seoul?
Seoul is a high-tech megacity with an old tradition in textiles, making it a perfect hub for fashion tech. Seoul is also a location where Chinese retail chains often test-pilot their new stores.
Milan is one of the four international capitals of fashion. With hundreds of fashion leaders and famous schools of design, Milan is the home of some of the most celebrated fashion and luxury brands in the world: Armani, Versace, Dolce & Gabbana, to name a few.
The fashion-tech startup community in this city is thriving and big fashion brands are rethinking how they connect with customers based on this trend. Our startups in Milan are working in to bring the high-quality Italian fabric and manufacturing process online to make it accessible for companies and consumers around the world.
Interview via Lora Kolodny of The Wall Street Journal. Find original version here