Frederic Court, managing partner and founder of VC fund Felix Capital has a good track record when it comes to sniffing out the next big lifestyle brands.
In 2010, he became the first investor in luxury fashion marketplace Farfetch, which went public on Friday, with an $8 billion valuation. In 2015, prior to the company’s print magazine and branded products, he invested in Gwyneth Paltrow’s Goop, now a $250 million wellness empire.
His other ventures include a 2013 investment in website Business of Fashion, and earlier this year, timed with the industry boom, Felix Capital injected $8.5 million in streetwear publication Highsnobiety.
“We build relationships with entrepreneurs early on, so we can see how they behave and get a sense of who they are,” Court said of his investment style. One of Felix Capital’s most recent investments, a $5 million Series A round in Canadian jewelry brand Mejuri early this month, was two years in the making.
Recently, his investment decisions have also been driven by brands’ Instagram engagement — regular heart-eyes emojis in their comments make him take notice — and he’s been bullish on the beauty and wellness space. This summer, Felix Capital became a late-stage investor in Peloton.
Below, he shares what he’s learned while building his portfolio and where he sees fashion going in the years ahead.
Farfetch, Net-a-Porter, Ssense, MatchesFashion. Is there room for all the multibrand luxury sites?
The market is growing, and they are fighting between themselves, but the biggest impact [on retail] is really the state of boutiques and department stores, We’ll probably see fewer of both, which is an excellent opportunity. These online fashion retailers are not very visible now; if you look at their market share, you see a fraction of the industry. Luxury is a $200 billion to $300 billion industry, so there’s plenty of room to grow. We use the Christmas analogy: Every Christmas for the foreseeable future, online sales will be bigger — maybe growth rate will come down, or maybe there will be a recession at some point, but they’re going to keep growing.
Will Amazon ever take over some of the luxury market share?
Maybe, maybe not. People often compare Amazon to Walmart, and it’s not like Yves Saint Laurent and Givenchy are selling at Walmart. Amazon might do something in the space, but probably on a different platform. Most companies focus on what Amazon does really bad, but what it does really well is being a platform. I think it’s an inspiration for Farfetch, because Farfetch is really a platform that has a wide variety of offerings but a very different product set.
So how is Amazon is changing the industry?
Amazon is the new high street. We see it as a platform certain brands should be on, because the customer is there. And it’s hard to invest in a company that competes head to head with Amazon. But in terms of brands, Amazon isn’t strong. They’re becoming better at creating space for brands, and we may buy brands that are partly building their business on Amazon. Some of them are doing that well. Amazon is just helping to grow the e-commerce market, and they are taking a significant share of the market. Amazon can’t do everything, and they don’t do everything right — but they’re raising the bar and making moves to make their business defensible.
Where are you looking to invest now?
We are also big fans of marketplaces; we’ve invested in a number of them. We’ve even invested in a company [called Mirakl] that is a solution for brands to become marketplaces. If you stand back and look at the top retail businesses in the world, they’re all marketplaces.
And we are very invested in beauty; we are actively looking for partners. We saw the early success of Glossier and that trajectory — it is so inspired and inspiring. That’s very much the kind of brand and community we like to find to be associated with. We spend a lot of time on Instagram, and we are looking for those brands. And we think about beauty as part of wellness. We just announced a Series A round for a vegan food business in the U.K. called Allplants. When you hear wellness and beauty, it’s not just about your beauty routine, it’s about what you’re putting your body through, what you’re putting inside your body, mindfulness, fitness … it’s quite broad.
What are you looking for when you’re scouring Instagram?
What we love to see are the customer comments, the “love” emoticons. Especially a girl tagging her girlfriend, telling her, “I just bought this,” or “Look at this.” It happens a lot in beauty. We measure that, we analyze that — and that’s one of the reasons we invested in Mejuri. It’s not well-known, and it doesn’t have a big community — around 250,000 followers on Instagram. But if you look at the comments under every picture, there’s so much love.
Are luxury brands evolving as fast as they need to be?
We’ve seen a transformation: With Farfetch, it was going from where brands did not really understand what we were doing to brands going out of their way to partner with us. But there are still a small few brands that don’t get that the customer is online and that have this mindset of: We need to control our communication. Look at the fashion weeks — it’s the fashion industry getting together and looking at itself, really. So much of that could be done remotely. The fashion industry still talks too much to the inner circle, and the inner circle is becoming less and less relevant. Fashion is less “I do my show, and some editor will tell me if it’s good or bad, and it will dictate the success of my collection.” The format is still there, but it’s not necessary.
Do you see streetwear’s popularity in the space as long term?
Since we invested in Highsnobiety, Virgil Abloh became head of menswear at Louis Vuitton, and Burberry brought on Riccardo Tisci, and the sneaker market has just been exploding — it will remain a big category and a great category for luxury. This is here to stay. Younger people are growing up wearing jeans and sneakers and sweatshirts and T-shirts, so there’s a trend toward comfort, and it will evolve with streetwear. And brands we used to love — or maybe loved to hate — are coming back. It’s amazing to see them connect with a young generation, without a lot of context. They just love the product. My daughter is 14, and she only wears Vans.
How do you envision the store of the future?
Technology will add to the experience. I have a small personal investment in Reformation — the way customers can select items for fitting rooms and place orders is really interesting. We get a lot of companies coming to us and talking too long about technology. A lot of times, the question is: Why would a retailer or consumer want to use it? I like technology that eliminates any friction in the shopping experience — it’s why I use Uber instead of taxis; I don’t like to pay at the end. Or it should allow the consumer to get better product somewhere else or get better service in-store because it tells the associate more about them.
Speaking of Uber, do you cringe when entrepreneurs call their business idea “the Uber of” something?
Or the Warby Parker. We love a company to be itself. If you use someone else’s brand to define what you do, you probably need to rework it. Most large brands don’t think this way. They couldn’t care less what Warby Parker is doing, unless they need new glasses.