Consumer VC Investments in Fashion
In the world of consumer venture capital investing, there is a subset of apparel, accessories, and footwear companies. Investments in this sector often align with three key focus areas: sustainability, direct-to-consumer (DTC), and celebrity-founded brands.
Why would investors be interested in sustainable brands?
Impact investors are interested in addressing the issue of fashion waste and supporting innovative solutions. Here are some key facts:
92M tonnes of textile waste is produced every year.
It takes 20,000 liters of water to produce one kilogram of cotton.
The fashion industry is responsible for 20% of global wastewater.
$500B is lost each year because of under-wearing and failure to recycle clothes.
American consumers have shown interest in shopping more sustainably regardless of location, age, and income. Here are some key facts:
74% of consumers care about the environmental impact of the products they buy.
Willingness to pay more for sustainable products by generation:
77% of Gen Z
72% of Millennials
67% of Gen X
62% of Baby Boomers
Willingness to pay more for sustainable products by household income:
66% under $50K
67% between $50K and $100K
73% over $100K
Willingness to pay more for sustainable products by geography:
57% rural
67% suburban
76% urban
Case Study - Reformation
Product Type(s): Apparel, accessories, and footwear
Quick Facts:
Founded: 2009
Operating Status: Active - Acquired by Permira
Key People: Yael Aflalo
Total Raised: $37M
Valuation: Unknown
Revenue: $350M in 2023
Notable Investors: Stripes, 14W, Imaginary Ventures, and Karlie Kloss
Company Background: Reformation started as a side project of founder Yael Aflalo with the mission of "wanting to avoid waste". Afalo previously ran a brand called Ya-Ya and after closing shop, she was left with ten years' of textile waste. She began making garments out of vintage fabrics, which became Reformation. In 2019, the company launched its first shoe collection. In 2023, the company launched handbags. The company's sustainability practices include using renewable, plant-based, or existing fabrics, recycling 75% of waste, and maintaining carbon neutrality since 2015. The company has 49 stores across the U.S., Canada, and the U.K. and ships to 191 countries.
Funding History: Reformation has raised $37M across two funding rounds. In 2015, the company raised a $12M Series A round led by Stripes and 14W to build additional brick-and-mortar stores in the U.S. and expand its manufacturing capabilities and technology platform. In 2017, the company raised a $25M Series B round, also led by Stripes and 14W, to further brick-and-mortar store expansion and invest in manufacturing and sustainability programs. In 2019, private equity firm Permira purchased a majority stake in the company for an undisclosed amount. Reformation has been profitable since 2016.
Why would investors be interested in DTC brands?
According to BuiltIn, DTC brands selling products online, rather than selling to physical retailers at reduced wholesale prices can allow companies to save money. These savings can be used to enhance customer experience or to acquire new customers. By selling directly to customers, DTC companies gain access to customer data such as email addresses and shopping preferences. This allows companies to identify shopping trends, improve marketing strategies, and make informed product decisions.
DTC investing began gaining momentum in the 2010s and peaked in 2021 with investments in the U.S. sector hitting over $5B. By late 2023, the U.S. sector investments had dropped to $130M. A CNBC analysis of 22 publicly traded DTC companies, more than half have seen a decline of 50% or more in their stock price since they went public. One possible reason for this drop is the increasing cost of customer acquisition through social media advertising on platforms such as Instagram and TikTok.
Case Study - Warby Parker
Product Type(s): Accessories - Glasses
Quick Facts:
Founded: 2010
Operating Status: Active - Public
Key People: Andrew Hunt, Dave Gilboa, Jeffrey Raider, and Neil Blumenthal
Total Raised: $655.5M
Valuation: $3.24B (as of Jan 29, 2025)
Revenue: $669.8M in 2023
Notable Investors: First Round Capital, General Catalyst, Thrive Capital, and Lerer Hippeau
Company Background: Warby Parker was founded by four friends in business school to solve the problem of glasses being too expensive. The founders discovered that a single company, EssilorLuxottica, owns several notable eyewear brands, including Ray-Ban, Oakley, and Vogue Eyewear. Additionally, they have a vast network of over 18,000 retail stores, which include LensCrafters, Sunglass Hut, and Pearle Vision. EssilorLuxottica also licenses luxury brands such as Chanel, Prada, and Tiffany & Co. The company decided to design glasses in-house and sell them directly to consumers allowing them to sell products at a lower price point. In 2011, the company expanded from prescription sunglasses and launched sunglasses. In 2019, they launched daily contact lenses. Customers can shop in person at 287 locations across the U.S., or they can create a home try-on kit with five pairs that will be shipped directly to them. They have five days to decide and then return the kit using the preprinted return label included. The company ships to the U.S. and Canada.
Funding History: Warby Parker has raised $655.5M across ten funding rounds. Earlier rounds were used to expand the company's e-commerce functionality and open brick-and-mortar locations. In 2018, the same year they raised a $75M Series E round, the company achieved profitability.In 2020, the company raised a total of $245M in Series F and G funding rounds to expand its operations and business reach, valuing the company at $3B. In September 2021, Warby Parker went public through a direct listing at $54.49 per share. At the time of writing, Warby Parker has not released its Q4 2024 results. However, since going public, the company has not achieved profitability.
Why would investors be interested in celebrity-founded brands?
Celebrities bring a built-in audience to their brands. This association with a celebrity can lead to a personality transfer in which the brand inherits the personality of the celebrity. The recommendation of products can be seen as a trusted recommendation. The first celebrity endorsement of a brand is believed to have happened in 1765 when Queen Charlotte of Great Britain and Ireland endorsed Josiah Wedgwood's pottery by making him "Potter to Her Majesty", leading to Wedgwood's pottery being called "Queensware". Wedgwood used this influence to brand his products as "pieces of aristocratic fashion and quality" instead of everyday items. Here are some key facts:
Celebrity co-founded startups have over $10B+ in combined enterprise value.
Around 44% of consumers purchasing celebrity/influencer-launched brands are Gen Z & Millennials. With 21% of these consumers being early adopters or innovators of shopping trends.
By age group, the percentage of consumers who follow celebrities on social media:
68% in the 16-24 age group
64% 25-34 in the age group
52% 35-44 in the age group
41% 45-54 in the age group
31% 55-64 in the age group
Case Study - Skims:
Product Type(s): Apparel
Quick Facts:
Founded: 2019
Operating Status: Active
Key People: Emma Grede, Jens Grede, and Kim Kardashian
Total Raised: $701M
Valuation: $4B (as of July 2023)
Revenue: $750M as of 2023
Notable Investors: Imaginary Ventures, D1 Capital Partners, and Thrive Capital
Company Background: The idea for Skims came from co-founder Kim Kardashian, who was unable to find shapewear that matched her skin tone. She wanted to produce the shapewear designs she was making when customizing the garments to fit her. Kardashian wanted to provide options for different body types, skin tones, and ages. Skims has since expanded from shapewear to loungewear, lingerie, tees and tanks, and pajamas. In 2023, Skims launched a men's line. Also in 2023, Skims became the official underwear of the NBA, WNBA, and USA Basketball. The company has six brick-and-mortar stores in the U.S.. Skims is available in 72 stores worldwide, including Nordstrom, Harrods, and David Jones, along with international shipping across the globe.
Funding History: Skims has raised $701M across five rounds. The company raised a combined $394M in Series A and B rounds to expand product categories and its retail presence. In 2023, Skims chief executive, Jens Grede, shared that the company had achieved profitability. Also in 2023, Skims raised a $270M Series C round to continue product innovation and expansion, along with retail expansion.