Fabrica Fund, an evergreen venture capital fund launched last December by business incubator The Mills Fabrica, is placing its bets on what it calls the ‘techstyle’ sector marked by disruptive trends in the space of textiles, wearables, fashion and e-commerce models.
It made its first investment last month by putting $1 million in Hong Kong-based fashion discovery platform Goxip’s $5-million Series A round.
The first investment underscores Fabrica’s focus on “techstyle”, an intersection of technology and style. “The investment platform would continue to source and invest in leading techstyle startups such as Goxip with the aim of pushing “techstyle” as a new model and accelerating the growth of techstyle innovations globally,” Vanessa Cheung, founder, The Mills, and Managing Director of Nan Fung, told DEALSTREETASIA in an interaction.
Cheung revealed that the past few years have seen the industry on the edge of disruption with trends of new e-commerce models, advanced textile manufacturing and IoT innovations helping to reshape the sector.
“That said, The Mills Fabrica sought to create and define a new space that we call ‘techstyle’. Over the past year, Fabrica’s incubator has worked side-by-side with eight leading techstyle startups guiding and watching them take techstyle forward as a model,” she said.
The fund is structured as an evergreen VC fund with financial backing from the Nan Fung Group and will target early-stage investments from seed to Series B, with the investment size ranging from $100,000 to $2 million.
Cheung tells DEALSTREETASIA about the fund’s current setup, how it chooses startups to invest in, and its short-term and long-term visions.
What makes Fabrica Fund different from other VC funds?
We have recognized that within the techstyle space, many leading startups like our incubatees have reached a stage where they would benefit from venture capital to further accelerate their growth. To that end, Fabrica Fund was established as an evergreen investment platform in December 2017 (as part of The Mills Fabrica) to give us an additional platform to help support and accelerate the growth of techstyle by investing in leading global techstyle startups and driving new innovations in their businesses.
In general, we see three issues that our techstyle startups face today when they are fundraising. First, there are very few dedicated techstyle-specialized funds out in the landscape. Second, relatively few traditional VCs can provide dedicated and extensive support beyond simply providing capital. Third, corporate VCs in the industry tend to consider investments more from an M&A perspective and might at times have the risk of appearing to be captive to startups.
With that frame in mind, Fabrica Fund is set up to be a dedicated fund focused on techstyle startups where we believe we can value-add from the industry expertise in our team and the wider community (including advisors, mentors, partners and many other startups).
More importantly, our fund is set up as an evergreen investment platform backed by Nan Fung Group that gives us added strength and flexibility in making investments for the future. At the same time, The Mills Fabrica’s unique position (as an incubator/ fund/ community platform) gives us the independence to operate and also the ability to collaborate with a wider range of industry partners including many of the leading brands and manufacturers.
You made your first completed investment in Goxip recently, what was behind the decision?
We are delighted to close our first investment in Goxip, whom we believe has the potential to a new retail model of the future. Their app effectively combines image recognition technology with a platform allowing users to easily follow and purchase fashion related products used by fashion personalities and celebrities that they admire.
We believe that Goxip has a strong leadership and founding team with deep e-commerce experience. Founder Juliette, in particular, has run and worked in three different hugely successful e-commerce companies. All the companies she had worked for/ founded (uBuyiBuy, LivingSocial, Cdiscount) had achieved 10-plus times sales growth in less than a year – in particular, she was involved in Cdiscount Thailand’s (part of CNova) $2.3Bn USD IPO (Nasdaq CNV) in November 2014.
Can you tell us other potential investment deals that Fabrica Fund is currently evaluating? How many deals do you intend to complete this year?
Fabrica Fund’s mission is to help invest in and accelerate the growth of techstyle as a new model globally. In that regard, our hope is to make as many top investments as we can find them.
That said, we are also extremely selective in the deals we make- all potential investments would undergo a rigorous due diligence process and we may pass on a deal if the team identifies any potential concerns with the business model or the founding team.
Since setting up the fund last month, we have received about 40 different inquiries and we are currently evaluating 2-3 of the deals in depth. On average, our team meets with 5-10 new startups each week and participates often in a range of global startup/ industry events to enable us to best understand and assess the trends in the industry.
In addition, as mentioned we are fully aware that startups and investments are not a solo path but a joint-journey with other partners and we are always actively seeking out partnership and co-investment opportunities with other VCs or industry partners.
What are your top criteria in selecting a startup to invest in? What should startups possess to catch your attention?
The top three things we look at in a deal are differentiating factor, scalability and leadership team. We want startups to have a very clear differentiation and positioning be it in terms of their business model, technology or network. These startups must also have a clear plan to scale and expand to other markets or applications from day one.
Most importantly, we always look deeply at the leadership team including their previous experience, their passion and knowledge and also how well the leadership teamwork/ interact with each other.
In terms of specific themes or thesis, it is important to note that the nature of industries experiencing disruption is that trends move quickly and evolve continuously. But if we were to pinpoint specific themes, three stand out for us. The first is what we term as those enabling or creating a new retail model.
The second are those improving production/ supply chains -breakthroughs in materials used in the manufacturing process or in the production approach that result in greater sustainability, cost savings or other efficiencies in the supply chain.
The third are creators of wearable products merging technology with design. Typically these are innovations merged with good design in apparel/ hardware products for lifestyle and health applications. No doubt the landscape will change rapidly in the future, but in the immediate term, we see these areas to be the core ones that we would like to invest in and support.
Aside from focusing on Hong Kong startups, are you also considering startups in other Southeast Asian countries?
While our fund is based in Hong Kong, our mandate is global and we look for startups globally be it in China, Southeast Asia, US, or Europe.
What are your short-term and long-term visions for Fabrica Fund?
Ultimately, we hope that through investing in leading techstyle startups like Goxip will help to further accelerate the global growth of techstyle as a new model of innovation and also deliver greater returns for Fabrica Fund in the process, which could then be reinvested to continue to support the wider work of Fabrica and The Mills.
More importantly, we hope that the techstyle entrepreneurs who we are backing up would become “role models” for next generation. For a city like Hong Kong with an early but rapidly growing startup system, we would benefit from having more global “role models” and success stories that can help inspire the next generation of entrepreneurs that they too can dare to do something different.