After two years of investing primarily in technology startups, H&M’s venture capital arm is now setting its sights on innovative e-commerce companies. The move is part of an effort to diversify the brand beyond fast fashion.

The Swedish retailer announced last week that it will help fund a $2 million investment for Aday, an online womenswear retailer that specializes in technical apparel. The investment — which also included contributions from businesses including consumer technology company ADG and venture capital firm SoGal Ventures — will be funded by H&M Co:Lab, the venture capital arm of the company. It was formed in 2015 and is dedicated to fundraising for early-stage companies with a sustainability bent. Aday is the second e-commerce venture for H&M Co:Lab, following its 2016 investment in Swedish retailer Ivyrevel.

“As we’ve watched with other mass brands, sometimes the easiest way to make [sustainable] advancements is to acquire a stake in a business like Aday, which is converging simplicity with luxury,” said Jessica Navas, brand and communications strategist at Smartstones. As a result of having to shop less, “there’s a focus on giving time back to the consumer because they’re not thinking so much about their closet. It goes right against fast fashion.”

Aday, launched by Nina Faulhaber and Meg He in June 2015, was founded on the principle of selling simple clothing made from recycled materials that can be worn year-round. Aday began selling leggings and has since expanded to a full collection of clothing including intimate apparel and office wear, thanks to earlier rounds of funding. With the latest investment, it will continue to expand its styles, including building upon its recently launched Multiplicity, a collection of multi-faceted separates that can be worn in a several ways for a number of different occasions. Similar to sustainability stalwarts like Patagonia, Aday encourages consumers to purchase less clothing by focusing instead on high-quality, multi-purpose apparel.

Faulhaber said Aday’s dedication to improving its production processes and supply chain was a major draw for H&M Co:Lab. During preliminary conversations with H&M a year and a half ago, Faulhaber said the retailer expressed particular interest in Aday’s sustainable model and use of recycled fabrics, an effort H&M has been integrating into its own businesses. (In 2015, the H&M brand launched its Conscious Collection, which has since included garments like a dress made from plastic bottles.) 

“H&M specifically is a company that has a ton of research and development on the sustainability side of things. As a company that’s still privately owned, they can define the future as they would like to see it,” she said.

However, for one of the largest fast-fashion retailers in the world, the “less is more” mantra is in many ways counter to the way the H&M brand operates. In an email from a spokesperson, H&M said Aday was selected because it fits the profile of the type of company Co:Lab is looking to foster. “The H&M Group wants to support entrepreneurs who work in our industry and develop innovative ideas within fashion and sustainability,” the spokesperson wrote.

The timing of the announcement is particularly significant, Navas said, as it came shortly before news that H&M is donating overstock clothing to a Swedish power plant to burn for fuel as a substitute for coal to reduce fossil fuels. Though Aday is in many ways the “antidote of fast fashion,” teaming with the brand appeals to H&M as it looks to expand its customer base through a more robust product roster, which currently includes more upscale brands like Cos and & Other Stories.   

When you maybe cycle out of fashion and you graduate from that, [H&M is saying we] have something else for you now,” she said. “You can spend a bit more and go to & Other Stories or, if you want to streamline your closet, you come to Aday. They’re owning the entire lifecycle.”

While Faulhaber said Aday plans to tap into H&M’s vast reservoir of resources and expertise, particularly around marketing and fabric technology, she mostly plans to evolve the business independent of the investor relationship. In addition to new collections, Aday will use the funding to improve its e-commerce site and expand its brick-and-mortar studio presence, she said. (Currently Aday has three spaces in New York, and it’s looking to expand overseas, likely to London.) While the funding will be a helpful boost, Aday will also need to be cautious about accepting too much investor help as the ability to meet expectations in a saturated market grows particularly challenging.

Regardless, Navas predicts that, moving forward, H&M will continue to invest in companies similar to Aday.

“H&M is trying to take measures to leave the stigma of fast fashion behind, while seeking out brands that feel modern,” she said.