fashion sustainability- investing and financing

the number one barrier for innovating start-ups to scale up is lack of funding?

Brands and retailers are increasingly commiting to radically improving their environmental footprint. However, if we continue to focus only on incremental improvements in efficiency, the required reductions in key metrics such as carbon, freshwater, and chemicals are not likely to be met. So, in order to meet and exceed these ambitious commitments, the industry needs to introduce new technologies and innovative solutions. But where are we going to find these solutions? 

Innovation platforms, such as Fashion for Good, have seen a wave of textile innovations that will drive transformation. In 2 years, Fashion for Good has identified nearly 2,000 innovators, of which over 80 have been selected for our programmes. The key technology areas of disruptive change can be grouped and mapped as displayed  No need to dive into this level of detail now, but it shows that these innovations cover both upstream, that means production and processing of raw materials, and downstream activities - such as retail and distribution innovations.

 This kind of innovation is science-based, as these innovators are trying to invent new technology or new ways of doing business. That is different from innovators who are starting new labels and brands, which we won't focus on today. Science based innovators typically go through similar steps to commercialization. They typically go from research phase, to experimentation and prototyping,  to piloting and market validation, to commercialization. Many solutions unfortunately never can make it to the commercialization phase.  For the ones that do make it through, it may be a very long process. It is therefore crucial that these innovators have the capital to survive these difficult first years. And that they receive the funding they need for prototyping and pilots with brands and manufacturers, which can be very slow. 

This type of innovation often starts in research settings such as universities. Typical funders at this stage include governments, universities or foundations. At the next stage, angel and seed investors can play a crucial role. These are often private investors who seek to invest relatively small amounts of capital. Institutional capital, such as venture capital funds, typically become available at a later stage, when there is revenue or a clear path to revenue. So what are the key differences between these investor types, apart from the timing of their investment? 

angel and seed capital are early-stage, and therefore have a much higher risk appetite. What is more, they typically invest in the pre-revenue stage, often with just a proof of concept. These early investors can accept a high level of risk associated with their investment. That is different for venture capital and impact investors, who typically invest greater amounts of capital in more mature companies; It's important to note that investments into textile innovators have historically been limited. This may be due to fashion innovation being a relatively new segment that has yet to gain traction with investors. Additionally, what may play a role is that brands and retailers are not vertically integrated. That means they don't own the manufacturing supply chain steps, of the supply chain in which this type of innovation is to be implemented.

At Fashion For Good, there have seen many innovators experience the lack of available funding as their number 1 barrier to growth, stalling progress on many promising technologies. And that's unfortunate. The industry and the opportunities are significant and these innovators could have a great impact if scaled.