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Investors Are Pouring Millions (And Millions) Of Dollars Into Streetwear Startups

From a financial standpoint, this hype-driven sector of the market shows no sign of slowing down.

In what has felt like the blink of an eye, “streetwear” — a term that itself has become less and less tethered to one concrete definition — has gone from a niche, underground category of clothing and footwear to a mainstream industry that has shaken up the fashion business as we know it. It’s also spurred an ecosystem of exciting, blue-chip companies that are creating, reselling, “dropping” and/or writing about limited-edition T-shirts and sneakers that in the past may have only interested small groups of teenagers.

Over just the past couple of years, investors have poured a collective $179.8 million into streetwear’s leading online marketplaces Goat, Grailed, StockX and Stadium Goods (which has a brick-and-mortar component) and media platform Highsnobiety. But there were two events that may have really turned the financial world onto this space: After its infinitely hyped Louis Vuitton collaboration, Supreme was given a reported $1 billion valuation upon selling a minority stake to private equity firm Carlyle Group last fall, and digital media and e-commerce platform Hypebeast filed for a groundbreaking IPO back in 2016. (Louis Vuitton later hired Off-White’s Virgil Abloh as its men’s artistic director, doubling down on the French house’s commitment to the hype model.)

There are a few different business models at play here, but the fact that they are all staples of any sneakerhead or streetwear aficionado’s world has no doubt contributed to why investors have flocked to them. But can what some consider to be a fleeting fashion trend — meaning, something that could cycle out as quickly as it cycled in — really be a sound investment? As it goes mainstream, will streetwear still be considered “cool” and inspire the hype and obsession that has made it so successful? And as investors continue to pour millions upon millions into startups that occupy this space, will that create a bubble that will inevitably burst? By simply asking that (at least, at this point in the game), we might be underestimating the potential of some of the companies involved.

Let’s start with streetwear’s massive secondary market. Over the past several years, many startups outside of the streetwear space have launched with the intention of taking on Ebay by facilitating the buying and selling of secondhand apparel and accessories. Online consignment sites for women’s fashion have been an especially hot area for investors: The RealReal, which focuses on selling authentic luxury goods, has raised $288 million to date; Poshmark, a social selling platform, has raised $160 million, and there are several others all with subtle differences raising millions as well.

In menswear — which may be conflated with streetwear to a degree — there has been a similar boom. Leaders included Grailed, which launched in 2013 and has raised $19.1 million to date; StockX, which launched in 2016 and raised $50 million; Goat, which launched in 2015, merged with industry pioneer Flight Club this year and raised $97.6 million; and Stadium Goods, which launched in 2015 and has raised $4.6 million in addition to taking on an investment from LVMH earlier this year, the amount of which remains undisclosed.

They all have their own niches and differing business models. For instance, Grailed is a peer-to-peer marketplace for previously owned shoes and clothes — often hard-to-find items by cult brands including Raf Simons, Supreme, Comme des Garçons and Rick Owens — that has cultivated a sense of community. Index Ventures, which has taken stakes in Net-a-Porter, Farfetch, ASOS and Goat, led its latest funding round.

While Grailed allows users to sell directly to each other, the others do not. Stadium Goods has a brick-and-mortar store in New York and holds all of its own inventory. Goat, which counts Alexis Ohanian and Ashton Kutcher among its investors and only operates via mobile app, acts as a middleman between buyers and sellers in order to vigorously authenticate and ensure the mint condition of each product. StockX, which boasts Mark Wahlberg and Eminem as investors, does the same, but also has a desktop site and does not sell things at a fixed price. Operating as a so-called “stock market of things,” items on StockX fluctuate in price based on their perceived value. With sneakers, especially, regularly selling for much more than their retail value due to being released in limited quantities, it pushes the increasingly valid idea that, by shopping, you’re not just building a wardrobe, you’re making an investment.

“We’re two-and-a-half years old and we will very closely be at a billion dollar run rate,” says StockX CEO and co-founder Josh Luber. “That, on its own, is unique. We’ve been trying to figure out where do we fall in terms of the fastest-growing companies in the world or fastest-growing marketplaces ever. We’ve got to be in the conversation. That alone is certainly reason for investments.” He adds that StockX has “been approached by almost every major investment fund in the United States or maybe the world.”

 

Originally posted on Fashionista

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