Key takeaways:
- Data is not a blocker to creativity, Alexis Ohanian argues, as designers are already getting inputs all of the time. New software can provide insights they never had.
- Access to real-time data also allows smaller brands to tap customers who want to feed their Instagram and Snapchat channels with new looks, while limited drops mean smaller players don’t have to hold extra inventory, which also allows them to be more sustainable.
- There’s an opportunity for a radical rethink around sizing, eschewing the male-female binary model for gender-neutral profiling based on body types.
Alexis Ohanian is best known as the co-founder of Reddit and the husband of Serena Williams. But he’s also the financial powerhouse behind a raft of tech startups seeking to bring data-driven creativity and efficiency to the fashion industry.
Last year, Ohanian left day-to-day operations at Reddit, where he remains a board member, to focus on Initialized Capital, an early-stage venture capital firm with a $500 million war chest that he co-founded in 2011. (Advance Publications, which owns Vogue Business, is the majority shareholder in Reddit.) He also remains a partner in Silicon Valley startup incubator Y Combinator.
Many of Ohanian’s bets at Initialized, which specialises in software startups, have at least one foot in the fashion world. In June, he led in a $1.8 million seed round in data analytics firm Spate, which uses online search data to identify consumer sentiment in categories like food, beauty and fashion. He has also backed sneaker marketplace Goat, shipping and fulfilment platform Easypost and e-commerce site builder Shogun.
Here, Ohanian reveals how he invests and the opportunities he sees for fashion-tech startups to respond to changing consumer behaviour. This interview has been condensed and edited for clarity.
Spate was started by the team that created Trendspotting at Google. Why invest in a fashion and beauty-focused startup?
Every industry needs to be informed when they're making decisions about what products to create, and fashion happens to be one of the earliest adopters of this because it is such a quickly evolving industry. In the last few years, the trends have shifted so much more to rapid iteration.
In that way, fashion is a lot like software because if we come out with a new feature, we know that our competitors can copy it pretty quickly. Once something hits the runway, it's being interpreted and remixed and then repurposed and reimagined instantly. Once you put that brilliant, genius idea out there, you automatically have to start thinking of the next brilliant, genius idea.
Does data compete with creativity?
[Steve] Jobs was very famous in saying that you couldn't ask people what they want because they wouldn't necessarily know. When you're getting data from search trends, you're getting a different type of signal because you're getting what people actually feel or think about. And while that may not translate clearly into what you need to create, it still informs it. If you really want to push boundaries, by definition you have to create stuff that people don't know they want — but you can still get signals.
For example, there is this glut of CBD products. Once you surface the bigger trend of giving people an outlet for their anxiety, you start getting into the space of making something people really want. Data and creativity are not mutually exclusive, and the idea that you can only create in a total vacuum is a farce. These are people who are still consuming content; they're still walking down the street observing their world. We're getting data inputs all the time. In no way is it replacing human decision-making; it's just giving insights that we historically have never had.
How will access to real-time data influence the fashion cycle?
There's a new opportunity that caters to smaller brands because these limited drops are valuable from an inventory standpoint: you sell out, declare victory and create a scarcity that makes the products more coveted, but you're keeping costs low because you don’t hold extra inventory.
With Instagram and Snap[chat], there's a new pressure culturally to have a different look in every photo, and that plays into this idea of wanting to establish an identity that is unique and that brings pieces together from different designers. It supports a large swathe of smaller brands because they can make smaller runs, they can sell out of them and what they're giving customers is a broader range of looks.
Digital 3D design is another technology that is speeding up production cycles.
We invested in a company called Avametric years ago, which got purchased by Gerber Technology, and they really were ahead of the game with the quality of 3D-rendered fabrics and materials. 3D rendering tools have got so much better, and there are so many libraries available that if I need a texture to look like 100 per cent cotton, I have options — someone else has already made a texture that would have taken me hours to perfect. That's going to have a huge impact on photo shoots because that cost is not trivial.
There's all this innovation happening among upstart brands who don't have budgets but have tremendous reach thanks to social. And so what are the biggest cost centres? There are still shoots, and there is still manufacturing, so those are the areas that are going to get cheaper and more efficient.
This plays right into the sustainability conversation in fashion. Are you investing in circularity?
To call [circularity] a trend feels like it's doing it a disservice — there is a culture shift that is going to continue to grow around fashion and how we think about the environment.
It’s nice when the demand from the market aligns with the needs of the business, and the market continues to demand more efficient practices. There are going to be some big winners here, especially because upstarts get to invent the business model as they go. It’s a huge advantage for them to be able to say, “We're doing this through limited runs and scarce drops. We're coming up with different models for quote unquote ownership.”
A lot of the infrastructure is pretty well built out. The software build is pretty trivial, but there are still some operational things you have to figure out. There's enough data that shows for millennials and Gen Z, owning is not important. It's more about, “Where do I get the photo for the ‘Gram?”, and then moving on. No one has really built those solutions yet. The marketplaces for selling are good, but there's still a lot of friction there.
Any other white spaces for fashion?
In streetwear, in particular — which is where everyone takes their cues from — there is this fascinating blur between menswear and womenswear. Part of this is no doubt, like, gender as a spectrum. There are plenty of clothes that work for men or women, and that's an interesting dynamic that has not really been tapped into yet.
I'm not saying throw out sizes or fit, but if I were a Martian coming from space and had no preconceived notions for how apparel or fashion would work, and I were handed a streetwear brand, and I saw that men and women all loved our hoodies, I would probably devise a sizing scheme or a fit scheme that was based more on body type than gender. We're stuck with the vestiges of fashion. Feet, for example, aren't that different. Atoms has a totally different sizing system. It wanted to just say, “Look, anyone can wear the shoe. We're going to find your quarter size that's right for you.”
Do you think augmented reality has potential in fit solutions, or in fashion in general?
There have been some cool demos around fashion. They still all feel like bells and whistles, and not quite indispensable yet. That's mostly because of hardware. We are backers in an AR glasses technology called Focals. It projects on your retina which is pretty badass, but you're still limited with what you can project.
When we are the first investors in a company, we have to be thinking 10 years ahead, but it has to be grounded in something that is going to work today and be saleable today. And so I can't get too hyped about what it could be. I just need to see a clear path from what it is right now to what it would likely be in 10 years.
The low-hanging fruit is, what are the bigger issues? Keeping up with rapidly changing trends and changing consumer behaviour around getting the photo, and then moving on, and thinking of the environmental repercussions of fashion.
Any other recent fashion investments?
There's one that I've been incubating for a while that's finally got an answer for social e-commerce. Everyone's tried to come up with some different version of “shop with your friends” and right now the best thing we have is pop-ups on Instagram. It's a great channel, but it's not what I think a lot of the hype was around the idea of social and e-commerce five years ago.
This company I really think has the best product for how to bring conversations that are normally on other social channels to tie that into the commerce experience. An awful lot of it rests on the fact that now, everyone has a brand. People are used to interacting with these brands, and there is a certain expectation – that's the big “why now?” that has changed that has made this way more viable... I’m such a tease.
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