Investment Practices In The Fashion Tech Industry – Infographic
FashionTech is one of the most exciting industries today, but how much is really known about investment practices? This infographic based on Helium Magazine’s FashionTech 2012 Industry Report crunches the data on what FashionTech companies got funding last year.
Over the course of 12 months, we tracked 121 investments in 117 FashionTech companies.
The total capital invested was $1.62B. 53 seed investments were made totaling $62.3M in capital meaning the average seed investment for a FashionTech startup is $1.16M.
68 companies raised Series A or later Venture Capital rounds totaling $1.56B making the average VC investment round $22.9M.
E-Commerce took a lions share of the investment where 78 companies (67%) raised $1.5B (92%) of capital. When also looking at announced revenue, the general rule of thumb is that e-commerce companies will raise as much venture capital in a round as they expect to earn in revenue (not profit) that year. This means that 78 companies who raised $1.5B in venture capital also probably sold $1.5B of apparel last year.
When we analyzed the types of companies, we found about 33 were true technology companies where the core value offering was based on coding as opposed to a static ecommerce website. These companies raised $114.6M.
Under a more critical eye, 23 of these companies were producing true technological innovation specific for fashion’s needs. These companies raised $85.1M.
When we broke the database down by location, we found that New York was what we would have to call the “Fashion Technology Capital of the World” where 32 companies raised a whopping $452.5M. Germany technically came in second place with $300M of raised capital, but as this was only from two companies it is heavily skewed.
We will have a specific post analyzing the company later in the report, but an exclusive website called BestSecret.com sold a majority of its ownership to a private equity firm for $248M. This is a different type of capital and transaction than the rest of the venture capital tracked in this report. It is almost more similar to an acquisition than an investment.
Nevertheless, 16 companies in Los Angeles/SoCal area raised $198M. Just two companies in Brazil raised $172M which is only surprising in that more companies didn’t raise capital as Brazil’s fashion industry has been booming.
15 companies in San Francisco raised $87.7M and 6 companies in the Bay Area outside of the city raised $65.6M totaling $153.3M for the region. Boston surprisingly raised $77M through 5 companies, India $38.2M with 4 companies, France $36.9M with 8 companies, and Great Britain $36.2 with 8 companies.
In all, companies that took investment in 2012 have raised a total of $2.33B in venture capital including rounds from prior years.
UPDATE: I included The Fancy but forgot Pinterest who raised $100M from San Francisco last year. This raises total funding to $1.72B in 2012 and moves the Bay Area to the third largest FashionTech location with $253.3M of raised capital. But as Pinterest is not specifically a FashionTech company and The Fancy’s modest $26M round in New York does not have a large impact on the results, I am leaving the infographic and report unchanged. Please comment if you feel otherwise.
As e-commerce isn’t very exciting and doesn’t get much press coverage, we found many of the companies on the list to be both surprising and new to us. In the upcoming parts of this report, we will look closer at these companies to discover what trends are most successful and why.
As Sarah Lacy of PandoDaily likes to point out, Zappos was the only billion dollar exit in the last ten years. In a recent post on ecommerce 2.0, Michael Carney suggests that the success of shoes online is due to the fact that they are shipped in boxes which makes them just as convenient to ship as any other tech device which consumers are already accustomed to receiving in the mail. As there are many startups that do monthly box subscriptions, we are enclinced to agree with boxes being fantastic.
What is most encouraging about the data is that the number of startup companies receiving seed investment is almost equal to the number of companies that received venture capital rounds. This is a huge contrast to the tech industry at large where a boom of seed investments has produced too many companies for Venture Capitalists to invest in. It’s called the Series A Crunch and it will leave many companies stranded or going out of business who couldn’t scale fast enough.
This can be explained by most of the venture backed companies being ecommerce which don’t require startup funding to scale to the VC level. But I suspect that as excited as investors have become in fashiontech companies, they are still skeptical and uninformed which has capped any excessive hype. As there is only a small list of companies that have been acquired and an almost non-existant amount of information on how much those companies have been acquired for, this is a good thing.
Stay tuned for more analysis and please share this awesome-sauce infographic on our report!