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Inside the French fashion-tech bubble

Laure Guilbault

Mar 29, 2021

French investment in digital innovation is on a roll. Everyone’s involved, from the big luxury groups to VC firms and the French government. What’s going on?

Station F, in the 13th arrondissement of Paris, bills itself as the world’s biggest startup campus. But it’s been very quiet of late following new government measures to curb a third wave of Covid-19 sweeping the country. Station F’s usually busy Italian restaurant La Felicità has been closed for months, while most workstations are unoccupied.

However, it would be wrong to judge by appearances. The French fashion tech scene is on fire, notwithstanding the restrictions of a pandemic. There’s a cultural shift in progress, according to Sebastien Fabre, founder of upcoming platform and former CEO and chairman of Vestiaire Collective, which he co-founded. “Funds are seeking the next nugget,” he says. “Startups are no longer struggling to pitch.” Before, investments at the seed stage were between €500,000 and €1.5 million. Now, they’re in the €2.5 million to €4 million range, he says.

Fundraising is moving at pace. One startup catching the eye is Replika Software, operating both in New York and Paris. Within the Station F campus, it’s housed at LVMH incubator La Maison des Startups. Replika Software enables brands to activate a network of social sellers to sell online: the sellers can download the Replika app and receive commission for their online sales. In January, the company completed a Series A financing round with LVMH Luxury Ventures and L'Oréal Bold, both investment arms of their parent companies.

In March last year, LVMH stores were abruptly forced to close and its sales people were sitting around at home, recalls Laetitia Roche-Grenet, LVMH Open Innovation director. “Replika resonated in this context as it is able to turn any sales person into an influencer on social media without damaging brand equity because they are provided with brand content.” The startup works with LVMH’s beauty retailer Sephora. Dior is using the platform for its beauty advisors to sell online. L'Oréal has activated its network of hair stylists to sell products.

Also of interest is Tekyn, a startup focusing on production automation to combat overproduction, which has raised €5.5 million from French investment bank Bpifrance and Otium Capital. And then there’s Arianee, a Paris-based tech project that uses blockchain as a tool to fight counterfeiting, raising €8 million from a host of investors including Bpifrance and Isai. Meanwhile, Stockly, which connects e-commerce websites with a global inventory so that they won’t run out of stock, raised €5.1 million on 24 March in a financing round led by French funds Idinvest Partners and Daphni. The current surge in activity has been boosted by a variety of factors. The two most important are the race by luxury groups to step up digital innovation and the support of the French government for tech startups via Bpifrance as part of an initiative boosted by President Emmanuel Macron. Valuations tend to be lower in France than in the US because the market is smaller, notes Fabrice Jonas, founder of Myfashiontech, a French consulting firm that creates bridges between fashion brands and startups. “For a French startup, targeting clients in other European countries requires effort and investment,” Jonas says. “In the US , you have access to 50 states from the beginning.” He cites the examples of Watsize, Fitle and Fitizzy, French startups that tackle the perennial issue of e-commerce returns. They have all struggled to scale up, he says, and Watsize has ceased activity.

Also, until recently Silicon Valley was considered a rather more innovative location by investors. “Innovation in Silicon Valley is embracing the fact that you only achieve amazing results if you have an opportunity to partner with your customers and test and learn together,” says Zornitza Stefanova, founder of BSPK, a startup in Silicon Valley and Paris that focuses on clienteling to connect sales advisors and their clients. BSPK raised a Series A round of funding in California in October 2020. “For the startup in Silicon Valley, this is an agile way to develop. From the customer side, there is much stronger openness to embrace a new player that solves a real business problem.”

However, the dynamic is improving in France. “In French culture, customers [brands] expect to have a perfect product from the start rather than make it evolve together with the startup,” says Sebastien Fabre. “But this is changing. This philosophy to enter the market, called minimum viable product, is now common in France too and certainly embraced by investors.”

The pandemic crisis appears to be speeding up the process, driven by investment from French luxury fashion houses seeking to beef up their e-commerce capabilities and digital knowhow. “Covid-19 has had an accelerating effect,” acknowledges Delphine Le Mintier, senior investment director for fashion and luxury at Bpifrance.

For Tekyn, the Covid-19 crisis has led to explosive growth. Store closures highlighted the issue of overstocking, according to its co-founder Donatien Mourmant. “In crisis time, CFOs look back on the expenses, and realize the impact of unsold products on their balance sheet,” he says.

Sales at Le New Black, an online fashion showroom, are expected to grow 50 per cent year-on-year in its current fiscal year ending in June. Benefiting from a pandemic-induced shift to digital, it signed more than 100 new clients in 2020, including French fashion governing body Fédération de la Haute Couture et de la Mode as well as Seoul Fashion Week and Lagos Fashion Week. “We bring solutions during a time of crisis,” says Romain Blanco, Le New Black managing director.

“All these startup companies have scaled up tremendously,” says Fabre. “Funds have never been richer and never has there been so much money to pour into startups. It’s the virtuous mechanics of the maturity of an ecosystem.”

Vestiaire Collective, the luxury resale platform co-founded by Fabre in 2008 and now valued at more than €1 billion, is one major French success story, highlighted by the sale of a 5 per cent stake to luxury conglomerate Kering in early March. Besides Kering, US investment firm Tiger Global Management also participated in Vestiaire Collective’s latest €178 million financing round.

LVMH is now in what it terms “Season 5” of its La Maison des Startups incubator, which nurtures around 25 startups a season, or 50 a year. A typical example is Cleed, which provides tailored white label chatbots using AI. A total of 160 deals have been signed since the opening of La Maison des Startups in 2018, including 60 between May and August 2020. And what differentiates Paris? “The proximity to luxury houses,” says Roche-Grenet.

Partnerships are happening at impressive speed. Kering plans to partner with La Caserne, an upcoming incubator dedicated to sustainable fashion. Richemont is a corporate partner of the Plug and Play brand and retail incubator in Paris.

Since early 2020, French investment bank Bpifrance (created in 2012) has had a fund of €100 million to invest in tech creative industries including fashion tech, including Bpifrance investments in Tekyn and Arianee. This commitment to invest was part of a package of measures promised during Emmanuel Macron’s presidential campaign in 2017. “There’s a global ambition of Bpifrance to inject more means in creative industries, what we call the French Touch plan,” says Le Mintier. “At stake is France’s economy, competitiveness and influence. Paris has a real legitimacy in terms of creativity.”

Overall, Bpifrance has injected some €1.45 billion into the cultural and creative industries, including €492 million in fashion in 2020. The corresponding figures for the year before were €1.23 billion overall and €340 million for fashion. Bpifrance has supported fashion brands such as Ami and Officine Générale as well as Vestiaire Collective and Launchmetrics.

Global ecosystem

The investment drive has come at the right time. “France was lagging behind,” says Celine Lippi, an early enthusiast for fashion tech who co-founded Fashion Capital Partners in 2013.

“For a long time, I received projects mainly from the US, UK, Germany, Great Asia... Events like Luxury Forward, Paris fashion-tech incubators and the digital transformation of fashion industrials have really contributed to the emergence of a startup ecosystem. The current pandemic and drastic changes in consumption behaviors [helped] to create massive opportunities for emerging startups to disrupt traditional business models.” Among Lippi’s funds: Luxury Tech Fund, Cuir Invest for materials, and Provoke Ventures, a new fund dedicated to beauty, wellness and innovation.
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