Fashion startups and venture capital don’t always see eye-to-eye, or wallet-to-wallet. Our series, Ask a VC, seeks to get inside the minds of the partners who are doling out investment dollars in an attempt to find out what fashion and retail companies catch their attention.

Scott Friend, managing director at Bain Capital Ventures, sees retail as an industry riddled with problems waiting to be solved.

“Fashion retailers 15 years ago viewed digital commerce as something small and complicated. So they outsourced tools and systems,” said Friend. “They woke up 10 years later and realized how big of a business it actually is and that they needed to bring things in house.”

Most recently, Friend and Bain Capital Ventures invested $13 million of Series A funding in Flow, a company based in Hoboken, New Jersey, which operates a back-end platform that simplifies cross-border e-commerce by taking care of duties and tariffs, overseas shipping, customs, local vendors and the associated costs.

“International sales have become a much bigger deal for brands, and that trend is driving a need logistically,” said Friend. “We haven’t seen anyone else solving that problem to the extent that Flow is.”

Friend, who has invested in other retailers and retailer solutions like Rent the Runway, and marketing platform Persado, explains what he looks for when it comes to investing in fashion and retail startups.

What are you looking for when deciding whether or not to invest in a company?
To us, it starts with a disruptive consumer value proposition. Are they offering something different? Even if they are, that’s not enough. The second point is defensibility: Do they have an unfair advantage in offering a solution or product that will allow them to be the only game in town? The last leg, which is probably the biggest one, is the team. There’s no replacement for a super talented entrepreneurial team, not even a great business idea.

Give an example.
Rent the Runway is a good example. Rent the Runway not only made a great value proposition, but their vendor relationships are hard to match, and their business operations are hard to replicate. There’s no competition seven years in.

What makes a great entrepreneur?
We tend to back the ones that haven’t done whatever they’re doing before. If they can take something that you have no business believing in and get you to believe in it, that’s an entrepreneur. I believe that naivety is super valuable as an entrepreneur. If someone tells you how hard it is to do certain things, you won’t walk through walls. [Rent the Runway founder] Jennifer Hyman didn’t know not to cold-call DVF, but that’s what she did.

Are you skeptical about retail startups?
I am skeptical about startup brands raising a bunch of money. I don’t believe product businesses should. We haven’t seen many successful exits in the brand world, just successful financing. There’s a lesson there, and it’s that a handful of these startups will get bought for high prices, but the majority will not.

Why are we seeing this happen?
Over the last five years, there’s been a level of euphoria for next-gen brands after looking at early results of companies like Dollar Shave Club and Warby Parker, which grew very quickly. With every one of these types of cases, you have terrific brands that run $100 million in sales and  then just totally flatten. They raised so much VC, they now have nowhere to go. If they hadn’t raised that $200 million, they would be considered a home run, but investors need to make a return on their success.

So that’s a problem for new brands?
[Startup] brands, for the most part, aren’t defensible. There are alternatives for almost everything. If you’re building a business in a commodity category, you can’t expect billions in sales. [Established brands] that have been around forever, and will be around for thousands more years, didn’t raise tons of venture money. It was a slow build.

What in the industry does get you excited?
The marketplace model is really interesting. Marketplaces matter. Jet proved that dramatically, Farfetch did, as well. I’m also very bullish on conversational artificial intelligence. The use of the technology in natural language processing will increasingly become a reality.

What aren’t you buying?
I’m not a big believer in virtual reality as it relates to retail. Maybe it has a place in an industry like gaming, but I’ve seen the best retail VR experience out there, and I walked away from it thinking, “Why would I ever do this?”