Lilac has been at Venrex Investment Management for just over two years and focusses on looking for fashion investments for the Fund.
Venrex is a UK-based Venture Capital firm, established in 2022, that backs creative Founders to launch and build innovative businesses where consumer industries are impacted by technology.
Venrex recently launched a fund with the British Fashion Council in February 2022. The Fund marries the BFC’s network, unique convening power and ability to engage with leading creative talent with Venrex’s long-standing track record in identifying winning businesses. We are lucky enough to have a partner in the BFC who can convene not only people from UK fashion but people across the globe.
There are different types of fashion businesses in the UK – from emerging talent to digital disruptors and highly creative businesses. Not all follow the same business model or have the same growth strategy. At Venrex, our experience as investors in brands such as Orlebar Brown, ME + EM and Charlotte Tilbury, and technology/marketplace business such as Lyst and Knitregen have shown us that the UK creative sectors and their entrepreneurs are world class. While not all fashion start-ups will suit Venture Capital’s high growth business models. There are many opportunities to develop businesses who are at the intersection of creativity, innovation, and commerce. Highly creative businesses should not necessarily be pushed to high growth but can benefit from talent identification schemes and programmes.
Me+Em is a luxury womenswear business primary operating online and example of a great fashion business that we have invested in. We first invested in Me+Em in August 2015 and have known the founder, and watched the business develop, from before 2010. Since we invested, the business has enjoyed a period of exceptional growth as the management team deepened, and the product lines and economics become stronger and stronger. In line with our investment strategy of following our winners, we have made further investment in the business alongside one of Europe’s top tier growth stage venture funds. To date we have been active investors and Board observers. Other examples of very successful venture-backed fashion businesses might be Tory Burch or Matches.
As a Venture Fund we need to look at each investment through a lens that evaluates whether the business can get big enough to be worth hundreds of millions of pounds (that is the VC model). Angels and others, and later stage funds, have very different criteria. As such, we tend to look for, and back, businesses that have what we call a ‘trick’ or some kind of ‘edge’. A competitive advantage that no one can replicate, irrespective of how much investment they’ve raised. The trick is usually either on the supply side (access to a fabric, manufacturing process or design that no one else can get) or on the demand side (a way of acquiring customers cheaper than competitors and retaining them more effectively).
Often this is something such as proprietary technology (materials science for example), or an existing prospect base to sell to or provide more mass ‘cut through’ (i.e. large social following in the hundreds of thousands or millions). We think it's increasingly difficult to build a new brand into a large company without this kind of leg up. Of course, there is no ‘right or wrong’ business! Always remember that money is a commodity, but creative talent is unique – value yourself at least as highly as cash! A Founder might choose a VC institution over taking (more) money from angel investors as the VC ecosystem provides businesses with many advantages and support, more than other just from a financial standpoint. This includes strategic insight, mentorship, business advice, networking opportunities, and team building. VCs work across a range of industries so are well equipped to support new businesses with funding and guidance. Try to avoid taking venture money when your business is small – once you are on the capital/business sale hamster wheel it is impossible to get off until the ride is finished (and it can often spin too fast!). Our job is to back the entrepreneur – if we find ourselves trying to decide how the money should be spent, then we will have backed the wrong person. Some brands will be huge, and others may close – they will nearly all meet our expectations; a Founder working hard to fulfil a dream and not being afraid to take the risk.
About the author: Lilac Watt
Analyst at Venrex Investment Management
Venrex is a UK-based Venture Capital firm, established in 2022, that backs creative Founders to launch and build innovative businesses where consumer industries are impacted by technology.
If you are interested in learning how Venrex can help scale your brand, email lilac@venrex.com
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