LONDON, United Kingdom — New York and London are both home to vibrant start-up ecosystems that have produced a wide range of fashion-tech businesses at various stages of development, from Rent The Runway and Bonobos in New York to Farfetch and Lyst in London.
Indeed, key elements needed to grow a strong fashion-tech scene are present in both cities. Both are certified fashion capitals, hosting two of the world’s main four fashion weeks. New York and London are also home to some of the world’s top fashion schools, from Central Saint Martins to Parsons, which produce the creative talent needed to build successful fashion businesses.
The presence of major tech-driven companies is also critical to cementing a city’s reputation as a tech hub and provides a magnet for the technology talent needed to foster fashion-tech businesses. E-commerce giants Net-a-Porter and Asos were both born and bred in London and have helped to build up a large workforce of tech talent in the city. What’s more, Facebook, Google and Intel are among the companies that have invested in a significant London presence. Across the pond, fashion-tech businesses Rent The Runway, Bonobos, Moda Operandi and Refinery29 are building growing technology teams out of their headquarters in New York, where the world’s largest tech firms, including several Silicon Valley giants, have offices.
Many fashion-tech businesses have benefited from New York and London’s own investor communities. London-based firms with fashion-tech investments include Balderton Capital, Index Ventures, Vitruvian Partners and Advent Venture Partners. And, at the start of the month, former Advent Ventures partner Frédéric Court launched Felix Capital, a $120 million London venture capital fund focused on backing Europe-based tech start-ups in the fashion and lifestyle space. In New York, venture capital firms RRE Ventures, Stripes Group and 14W — as well as companies including Condé Nast and individual investors like Andrew Rosen, CEO of Theory — have taken stakes in fashion-tech start-ups.
Governments have also got behind New York and London’s tech scenes. In 2010, London mayor Boris Johnson and the UK government launched Tech City, a support programme for tech entrepreneurs clustered in “Tech City” in Central and East London, which aims to be the Silicon Valley of Europe. London’s Technology Strategy Board also hands out public money to start-ups. Meanwhile, New York-based fashion-tech start-ups can score accommodation and mentorship from New York Fashion Tech Lab, a private/public partnership. New York City also gives tech companies tax breaks. And, in October, another public/private partnership launched Digital.nyc, an online ecosystem to promote the city’s start-up and technology scene.
But which is the world’s true capital for fashion-tech? BoF spoke to a handful of leading entrepreneurs and investors to find out.
Natalie Massenet, Founder and Executive Chairman, Net-a-Porter
“The proximity and collaboration between the big brands, tech experts, top fashion colleges and an active start-up ecosystem makes London the fashion-tech capital of the world.
Brands are continually more experimental and innovative with tech in London. Both Asos and the Net-a-Porter group pioneered multi-brand fashion-tech out of London, starting in 1999, and Burberry is widely credited for pioneering the use of tech within their business on and offline. Similarly, Topshop and Hunter proactively find exciting ways to integrate technology into their fashion shows every season to reach a global audience and create more immersive experiences.
London has always been a fertile breeding ground for avant garde thinkers and its fashion colleges famously produce the most progressive designers and cutting-edge talent, all of whom are starting to innovate with digital at the heart of what they do.
European venture capitalists seem more willing to fund fashion-tech in London than New York. Balderton Capital, the London-based venture fund, has invested around $690 million in fashion start-ups in the past decade. Funds like Index came out of London to be involved in almost every single important fashion-tech venture (Asos, Nasty Gal, Farfetch, Net-a-Porter, Navabi) and we have at least two new funds focusing on fashion-tech coming out of London now, with Frédéric Court's Felix and Tracy Doree's Spring Partners.”
Frédéric Court, Founder, Felix Capital
“London is at the heart of our investment strategy and is extremely well placed to benefit from the fashion heritage of Europe and to be a platform forwards the biggest fashion markets in the US and Asia. It's increasingly the place to be for fashion and for technology. So anything at the intersection will benefit greatly and I think that we will see more big winners emerge from London-based creative industries. Go London!”
José Neves, Founder and CEO, Farfetch
“I think London wins the title of fashion-tech capital. If you look at the successful business models in fashion-tech, they almost invariably originated in Europe, many in London, and were then adapted elsewhere. Asos was the first brand built purely online, without a physical store network — New York start-ups have since replicated this with fantastic execution, but are yet to reach the same scale.
Net-a-Porter was the original luxury e-tailer, and remains unchallenged as the largest pure online player in the high-end segment. Of course, we’re biased here, but we think Farfetch also contributed to the list of innovations, as we created the first global omnichannel platform for luxury fashion. All these companies are worth billions of dollars, with undeniable traction at a global level. I can’t think of truly innovative (as in, the first of its kind) business models to have come out of New York that have reached this scale.
New York has built large fashion-tech businesses based on models sometimes conceived by European pioneers (Gilt Groupe and Vente-Privée come to mind). And New York has a new generation of great innovators with creative strategies — for example, Bonobos and Warby Parker are phenomenal businesses. But I feel that London’s great creative industry (not just in fashion but in graphic design, media, street culture), proximity to Paris, fashion’s largest capital, and vibrant venture capital ecosystem has the right mix to sustain its title as the world’s fashion-tech capital for the foreseeable future.”
Chris Morton, Founder and CEO, Lyst
“When we started Lyst in 2010, my co-founder and I thought hard about where to found the business. After weighing up the options, we felt the scales tilted in favour of London. We simply asked ourselves where the biggest fashion-tech businesses were being built. London boasted billion-dollar companies like Net-a-Porter and Asos, with Europe adding Yoox and Vente Privée, while New York had none — the closest being Gilt, which itself is often thought of as being modelled on Vente Privée. Ecosystems are driven by momentum and the foundations that the first fashion-tech pioneers laid down in London have been built on by the next generation of businesses, helping cement London’s leading position.
Despite the fact many of the fashion-tech leaders are headquartered in London, many do significant business in the US — for Lyst, it makes up over $100 million in sales — but as we internationalise further into the Middle East and Asia, we see London as a great place to address the global opportunity, not only because of time zones and distances, but also because of its multinational make-up.”
Carmen Busquets, Investor
“For start-ups, I prefer London. It has a more patient spirit with private equity and venture capital investments. In my experience, investors allow you more time to perfect your idea. Boards are also more involved with the founders and meetings tend to be more frequent. You see more board members and investors becoming true partners to their founders and management teams in the London start-up arena. I also find that founders have a more entrepreneurial attitude, choosing rewards in shares and taking smaller salaries until their businesses show profits.
I find America to have a better mentality for Series B and C investors, as they think "go big or go home.” The downside to this is that there is so much money coming into companies — because they are trying to grow so aggressively — that often the spending generates growth but also masks issues with the business and the maturity of the management teams. Many times, founders get greedy when their companies that are barely a few years old are now worth hundreds of millions of dollars. And if the board is not so involved, the mistakes tend to be very costly. You tend to see a lot of boards getting rid of founders and blaming them for mistakes that any start-up is likely to make, that could have been worked through if the Board had been more patient and nurturing. I’ve seen more start-ups fail in the US than in England by having too much growth too soon, or too expensive a management team too soon.
Also, there is an advantage for start-ups to be located in London because they have a much easier entrance into European markets. It is not as easy for US-based start-ups to succeed with European customers.”
Team New York
“I believe the fashion-tech capital of the world is now New York City. It started as London, but the American venture capital ecosystem has flowered here on all fronts and that has really bolstered fashion-tech in New York. In the eight years since we started Bonobos, we have seen a radical transformation in the quality of the technology team you can assemble in New York. That, combined with access to capital, has led to the proliferation of a number of great brands.
And it’s not just Bonobos: Gilt Groupe; Warby Parker; Rent the Runway; Birchbox; Harry's; Etsy; Jet. Not all strike as traditional ‘fashion’ companies, but they all play a role in where style meets commerce and there are dozens of up-and-coming companies whose names we don't yet know but soon will. B2B companies in New York like OrderGroove and Spring are also helping to power this ecosystem.”
Lawrence Lenihan, Managing Director, FirstMark Capital
“If tech were the goal, neither New York nor London would be the centre — Silicon Valley would be. But fashion is the goal so the global fashion centre that embraces technology as a tool and has the knowledge and capabilities to deliver incredible creators, knowledgeable operators and talented technologists, wins. I believe the answer is New York: more fashion companies, more creators, more production capability, more technology and a greater addressable local market. But the truth is, everywhere will win because any creator anywhere can connect to any customer anywhere, to create a connection that builds the brand and the business.”
Dave Gilboa, Co-Founder and Co-CEO, Warby Parker
"New York City is unique globally in that it sits at the cross-section of so many industries — fashion, design, business, technology, media — making it a deeply creative community with a collaborative spirit that spans trades. We’ve watched these communities inspire one another and break molds in an effort to create better consumer and brand experiences. It’s this collaborative drive toward accessibility, design and innovation that drew us to the city initially and is one of the reasons we continue to call it home."
Where would you start your fashion-tech business? Tell us in the comments section below.
Disclosure: Index Ventures, Felix Capital, Carmen Busquets and Lawrence Lenihan are all part of a consortium of investors which has a minority stake in The Business of Fashion.