Cheryl Cheng, a partner at the San Francisco-based venture capital firm Blue Run Ventures, is always looking for ways that data can help advance the fashion industry.
“What we look for is opportunities where mobile software and services, specifically the use of data, can disrupt an industry,” she said. “If there’s a place where mobile and data can disrupt fashion, we’re interested in that.”
It hasn’t been easy, as the two don’t always overlap. Cheng joined us on the Glossy Podcast to discuss fashion’s relationship with venture capital, where the industry is going and the hurdles founders face when raising investment rounds.
Edited highlights are below.
Fashion can’t be “fixed” with data.
Cheng said that while Blue Run doesn’t rule out fashion startups, it’s rare that the team comes across a company that has a viable data solution for retail and commerce.
“Data is very unemotional, and when you think about it, fashion is purely emotional,” she said. “You can’t capture the emotion around fashion with data.”
She added that luxury isn’t a need, and that branding and an appeal to emotions is what’s really behind a $3,000 handbag purchase. Aspiration isn’t something that can be broken down into ones and zeroes, she said.
Where data does help, it’s not fashion-specific.
“When you talk about fashion startups, you think of consumer-facing startups,” said Cheng. “But there’s a lot of back-end, data-driven applications that the fashion industry will find very useful.”
From an investor standpoint, however, that’s not very exciting. Software isn’t fashion-specific, and solutions like artificial intelligence can apply to industries across the board. When Cheng looks for venture-returnable businesses in fashion, technology solutions don’t make the cut because she sees them as offerings any brand will eventually adopt down the line.
“Just like anyone has a website or Facebook page now, something like AI will become part of the CRM fabric in the future.”
Fashion and VCs don’t always get along.
Cheng said that, by nature, fashion is not an industry venture capitalists know very well.
“The challenge for fashion startups, particularly the ones that are now struggling, is that they’ve leaned over their skis. Venture has been frothy, but some companies haven’t worked out,” said Cheng.
What’s more, fashion is particularly vulnerable to macroeconomic trends, she said. In an economic downturn, spend on shopping is the first to be cut, which doesn’t bode well for startups.
And it doesn’t help that venture capital is a male dominated industry.
“There’s definitely explanation that needs to happen. If you’re not the consumer, it’s difficult for you to relate and understand how big this problem or sector is. A lot of men may not understand why women have 20 pairs of shoes, so they don’t understand how Zappos could scale.”