This is an episode of the Glossy Fashion Podcast, which features candid conversations about how today’s trends are shaping the future of the fashion industry. More from the series →
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As a partner at XRC Labs, a New York-based venture fund and startup accelerator, Diana Melencio is actively working to help underrepresented founders get the funding they need to run successful companies. The fund primarily focuses on retail technology and consumer goods. To date, the company has invested in some of the buzziest names in these industries, including The Lobby, Billie, Caraa and Wear.
“It’s a business imperative to invest in underrepresented founders only because … so much of the untapped opportunity is in those areas,” Melencio said on the latest episode of the Glossy Podcast. “It’s not a marketing ploy or something that we’re actively trying to skew our demographics for, but rather one that is grounded in the fact that there is a huge opportunity in investing in these types of founders.”
Melencio has only been with XRC Labs for one year, but her past experience on Wall Street prepared her for this role, she said. For 10 years, Melencio focused on investing in consumer retail and healthcare. She then founded two companies, one of which received an XRC Labs investment. Right before joining XRC Labs, Melencio ran WISE Ventures, an investment fund.
With over a decade’s worth of experience in funding and retail technology, Melencio is excited about the future of retail and the new brands and founders that will arise as a result.
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“Consumers [want to] purchase a product anywhere and everywhere,” Melencio said. “To me, the future store [is] everywhere, like a truly omnichannel experience.”
Below are additional highlights from the conversation, which have been lightly edited for clarity.
Emerging trends in beauty and fashion
“Consumers are demanding sustainability and clean [from companies]. That is no longer something that is considered innovative but rather table stakes. If you look at the beauty companies coming out these days, it’s almost necessary that it starts with that clean-first value proposition. Similarly, on the apparel side, that sustainability thread [must] run across the company. Those are two emerging trends both on the fashion and the beauty side that we’re seeing in every company we’re looking at.”
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What makes a founder stand out
“Founders are extremely important, especially for early-stage investments, largely because what the company is today is very likely not what the company is in a month, two months or three months down the line. I like founders with domain expertise. For example, if you are tackling a science-based beauty company or if you are tackling an athleisure or apparel company with a specific demographic in mind, it is helpful to have an innate understanding of the nuances of what that consumer demands. Secondly, it’s [about] tenacity, passion. It is really hard to be an entrepreneur, especially these days when funding takes so much longer, it is so much harder [to secure] and the dollars go to fewer companies. To be able to live through the lows, you have to be really passionate about what you’re doing.”
Shifting to address consumer demand
“There has been a shift away from consumer products to SaaS companies, largely because the exit multiples are so much larger on enterprise software versus direct-to-consumer products. That said, I do think there is still a lot of white space left because there are a lot of people that are not being served by the current products being sold at Target and Sephora. I remain very excited about the beauty space. I remain very excited about products targeting a demographic that’s been underserved, whether that’s fashion or at-home fitness or home care. There are lots of areas within consumer [goods] that I still remain very excited about.”
