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When cousins Galahad and Asher Clark co-founded B Corp certified footwear brand Vivobarefoot in 2012, they almost went bankrupt. “We didn’t quite get it right in the beginning,” says Galahad, who is CEO. “We overestimated how popular the shoes would be.”
To save the fledgling business, the pair turned to Stella Investment Overseas, an investor affiliated with Stella International Holdings, a leading manufacturer of footwear in China and Southeast Asia. Vivobarefoot secured £5 million in funding, in exchange for 15 per cent equity, enough capital to rejig the business model and start again. A few years later, the co-founders ran an equity crowdfunding campaign, raising an additional £1.3 million. In total, Clark says the company has raised around £6 million through these routes, and the cousins still own 75 per cent of the company. Since 2016, the company has self-financed its growth, with the help of trade facility loans from the bank at specific points; these are short-term loans to buy stock, and must be paid back within three months.
Vivobarefoot’s commitment to raising small amounts of capital in unconventional ways has raised eyebrows in certain circles: Clark says a banker once told him it was “interesting, but weird” to try and “build a company the old-fashioned way through profit” rather than a big fundraise. In recent years, fashion brands such as Vuori, Outdoor Voices, Allbirds and Everlane, among others, have raised capital well into the tens, if not hundreds of millions of dollars. But the less-is-more approach is gaining popularity among sustainability-focused brands, who aren’t convinced that massive fundraises align with their ethos.
“Some fashion brands are becoming overcapitalised from the get-go,” says Clark. “When you have that kind of money, you also have the temptation to spend it. But you’ve pinned yourself to massive results. I’m not sure if that’s always for the better.”
Chasing big sums of capital can make it harder to maintain a sustainability-centric mission, says Veronica Chou, a London-based angel investor in fashion and climate tech. With massive raises comes a tendency to overspend. “You have to keep it in control. Otherwise, it becomes so easy to spend more on marketing, particularly in today’s era of influencer marketing where you don’t even know if that’s going to bring a return, or hiring lots of people to do very specific things, rather than having a leaner approach of one person juggling multiple hats. It can quickly add up, and it’s not necessarily helping you build a more sustainable brand.”
There may be another reason brands are going for smaller fundraises. Female founders of fashion brands and startups have long struggled to secure significant investment from VCs, but now, it seems interest generally is waning. According to Dealroom, an Amsterdam-based firm tracking venture capital activity, over $724 million was allocated to sustainable fashion companies in 2022 — from alternative material manufacturers and resale platforms to ethical activewear labels and digital fashion houses. The year before, investment in the sector hit $2 billion.
Chou explains that the first generation of DTC-brands that had a sustainability component — such as eyewear brand Warby Parker and footwear B Corp Allbirds — had exits and IPOs, but they were “not as explosive as expected, especially for the second or subsequent round of investors”. That’s part of the reason why VCs have backed off, she says. “Also, the costs of those businesses have increased with digital marketing becoming far more expensive today than a decade ago.”
Short-term thinking
Francois Souchet, who is mentor at the British Fashion Council, has consulted brands on how to scale. He says that two years ago, when more capital was available in the market, he saw brands being encouraged to ask for larger sums of money, more than what was needed.
“That can be problematic because you have to scale on the correct foundation. Scaling up, itself, is not the problem, but rather, the challenge is can you scale without cutting corners? And, if you don’t cut corners, it’s probably going to take longer. That can be in conflict with investors who want to make money fast.”
Vivobarefoot’s Clark agrees that investors often have very different priorities. “The minute you take money, as a short-term focus, then you’ve effectively sold your business,” he says. “The capital is just there to return it. As a result, you start acting in a short-term way to maximise short-term returns. We’re looking at longer than five-year horizons on many of the things we do.” Vivobarefoot invests in materials innovation, has an impact fund for the development of research and innovation programmes, including community engagement projects, and has flattened its internal structure with a focus on regenerative leadership. “A private equity firm would definitely have us trim some of these less profitable endeavours,” says Clark.
Samuel Bail, co-founder of London-based accessories brand Troubadour Goods, agrees. The company launched its first fully circular bag collection earlier this year, a project that took several years to realise. “We could only consider that because our investors understand this is better for us, and for the industry. We wanted to put something out there that the bigger brands would notice, that would hopefully move the needle on circularity. That’s a long-term game.”
When Bail and co-founder Abel Samet started the company in 2011, they turned to Pembroke Investors, along with friends and family. “We had a long discussion about what we wanted to build. And, thankfully, they were on board. Our governing documents state that the object of the company is to have a ‘material positive impact on society and the environment’ and that the company operates in the interest of all stakeholders.”
They, too, have refrained from taking on too much cash too fast. “I’m not sure that a lot of money upfront would have been great, because then you’re just forced to spend it,” adds Bail. Troubadour has raised low single-digit millions, he explains, and the company is profitable. According to Pembroke’s site, the firm has put about £2.5 million into Troubadour.
Bail notes that more money doesn’t always equal more returns. “Some of those brands have funnelled all that capital to Facebook and Meta [for digital marketing], and they haven’t seen positive results from it.”
Building sustainable growth
Venture capital is not the only option, particularly in this market, says Souchet. “I’ve seen brands go down different routes, pursuing grants and family offices instead. Whatever you decide, I think it’s really important for investors to align with the vision of a brand and agree on how to scale without cutting corners. That’s critical.”
Nashville-based Patrick Woodyard, who co-founded US footwear label Nisolo, says brands that have raised less capital have taken a slower, more methodical approach to growth. For Nisolo, growth sits in the neighbourhood of 30 to 80 per cent year-over-year. In 2023, they’re at 65 per cent, he says. “Yet, we have had conversations with blue chip VCs who haven’t been interested in Nisolo because they’ve shared that they look for top-line growth in the 300 per cent year-on-year range. Instead, we’re more focused on steady, material growth rather than aggressive growth at all costs, tied to a specific top-line target.”
Nisolo, Woodyard adds, is better set up for long-term success because it has a “more stable supply chain, stronger internal culture, and a leadership who remain deeply engaged rather than facing borderline burnout”.
Taking on less capital shouldn’t preclude businesses from booming. The sustainable fashion space has several high-profile examples of slow-but-steady growth. Patagonia, now a $3 billion company, was bootstrapped by Yvon Chouinard. Eileen Fisher reportedly started her namesake brand with just $350 in 1985, and hit sales of $240 million in 2021. In 2004, Paris-based Veja was founded by François-Ghislain Morillion and Sébastien Kopp with around €10,000 of their own money – its annual sales reached $120 million in 2020. All three are profitable brands that have remained independent as they scaled — but that success has taken decades.
“It takes time. And that doesn’t work with a model built on quick growth and maximising profitability,” says Vivobarefoot’s Clark. “If you really want to do sustainability, and not pay lip service, it’s a long, and sometimes bumpy journey.”
Tom Kay, founder of outdoor apparel brand Finisterre, knows this first hand. He has been building the UK-based company slowly over the last two decades. He spent most of the first decade bootstrapping the business and getting pockets of funding from family and friends (totalling around £25,000). In 2012, he took on investment from Active Partners, a firm that’s also backed popular brands such as Rapha and Soho House.
“We could have done it faster, but each round of capital felt right to me at the time, based on what I needed,” he explains. “We focused on getting our economics right. That was more important to me than just getting flooded with capital.”
In the last five years, Kay has raised approximately £8 million for the brand. In the process, he’s become a bit jaded by the idea of impact investors or purpose-driven financiers, he says. “While there’s definitely more activity in the impact sector than when I started the company, there are still investors who are looking for immediate growth and returns. Let’s be real: that conversation is still happening despite [the supposed interest in sustainability and impact].”
If the aim is to ultimately shift the fashion industry down a more sustainable, or even regenerative path, including how companies are financed, Vivobarefoot’s Clark argues that the movement is still in its early days.
“The world needs thousands of businesses to scale like this, not a few. Right now, there are [nearly] 7,000 B Corps. We need thousands more companies in the future, building truly regenerative models that are profitable. We hope that we can kind of set the example for them. We’re far from being perfect. But we’re trying to put forward a new model of how businesses can be built.”
Correction: A previous version of the article misstated Tom Kay s role at Finisterre as CEO (03/07/23)
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