Fashion apparel is a $300 billion global industry, but Nineteenth Amendment founders Amanda Curtis and Gemma Sole still spend a lot of time explaining to venture capitalists why there’s money to be made in fashion tech.
Three years ago, the two women found themselves defending the most basic concepts when pitching their startup, which serves as an online marketplace for young fashion designers looking to get established.
“One investor, a man in his 60s, waited until we got through our entire pitch, and then said ‘I don’t believe women will shop online, and they won’t be shopping for designer clothes at these prices online,’” Curtis said. “That shut down the conversation with the entire team.”
‘You have to work harder’
Fashion, beauty, jewelry and other female-focused categories can feel particularly foreign to partners at venture capital firms, 92 percent of whom are men. Founders have long shared their struggle: Heidi Zak, founder of bra startup ThirdLove, called the VC world a “boys club.” At a panel at this year’s Advertising Week, designer Misha Nonoo spoke to being tasked with the obstacle of convincing male backers women were in need of a new type of wardrobe. Soraya Darabi, founder of Zady, has said that one investor she met with to discuss her business thought they were on a date.
“You have to work a little bit harder, typically, as a woman with a fashion startup because there is some bias that still exists,” said Susan Naci, a partner at VC firm 32 Laight Street. “I’m seeing that change so quickly, but what I advise these women who are leading fashion companies is to keep it completely factual, and make what you’re selling a non-factor. It could be shoes, or it could be hardware.”
Fashion companies, particularly those founded by women, are tasked with a greater burden when it comes to convincing venture backers that their companies are worth investing in. Retail startups are a notoriously risky category for VC firms, regardless of whether they’re founded by men or women, as it’s a category dominated by long-established players and dependent on the retail climate, unlike categories like healthcare and software. And after a number of high-profile exits, the market is markedly more guarded.
Still, there’s a clear disconnect between the fashion startups and the men who control the majority of investment funds. While investments in the consumer products and services sector were up 57 percent in 2015 over 2014, the category doesn’t rank among the top five most-funded, according to the National Venture Capital Association’s annual report, during a year when $58.8 billion in venture capital was raised.
There’s no lack of fashion and beauty startups in the space, either. Harvard Business School, often touted as the epicenter for emerging founders, spawned 18 such startups in the past eight years, tackling everything from on-demand makeup stylists to hair extensions to design-it-yourself clothing platforms. The consumer is there, too: Women drive 70 percent of all consumer purchasing, according to professional services firm EY.
But when founders of startups that cater to women go in front of male venture capitalists, they’re tasked with not only pitching their companies, but educating them on the market and what the consumer is looking for.
“The process of getting funding took a long time because I had to both prove out my model and educate them,” said Ivka Adam, CEO and founder of Iconery, an online end-to-end marketplace for fine jewelry. “I got questions like, ‘Do women really buy jewelry?’ I eventually built a data set that could answer every question they had. As women, we already know all this, so it felt like extra work.”
‘Oh, that’s cute’
Venture capitalists who don’t “get” the women’s market will oftentimes openly defer to their wives’ and girlfriends’ opinions on certain products and industries when working with such companies. To Adam, this wasn’t a surprise: People are drawn to what they know, she said, and there aren’t enough female partners at venture companies to provide personal knowledge. According to the Crunchbase Women in Venture report, only 7 percent of partners at the top 100 venture firms in the U.S. are women. Sixty-two of those firms didn’t have any female partners.
“We would be passed on to talk to the female VC, who would then say, ‘I’m being sent all of these jewelry and fashion companies,” said Adam. “They want to be seen as experts outside of that as well, in other industries, not just companies for women. So then no one really wants to touch the female consumer products.”
Curtis has learned to pitch her company as a technology, not fashion, company, and to print out fact sheets that explain the very basics of the industry so as to not have to explain them. She said that starting from a disadvantage in the world of venture capital means you have to be extra prepared.
“It’s a struggle. It’s investors not having a sense of the industry, but also being a female founder in fashion — when you go into the room and you’re a female founder under the age of 30 they say ‘oh, that’s cute.’ And when you’re doing something in fashion at that point, it’s even cuter.”
Fashion startup founders eventually drift toward firms that have a history of backing fashion companies, even if that narrows the pool. Adam said that she has had a good experience with VCs who are willing to learn. She also added a male advisor to her predominantly female team, and said that has helped sell the company to other men.
“I find that when he’s in the meetings that I have with potential investors, it almost legitimizes us to other men, if a guy has decided that this is a good company,” said Adam. “It is what it is. I’m out to build the best company possible, so until we have more female VCs, I’m fine with that if that’s what it takes.”
Until more women are in the meetings, the market will reflect that gender gap.
“The single biggest obstacle is that the majority of investment capital is controlled by men,” said Cindy Whitehead, founder of The Pink Ceiling, an investment and consulting firm for female-centered startups. “That means the audience you’re first looking to for buy-in cannot personally relate. To get more products that women want to the market, we need more women sitting at that first investment table.”