Navigating Fashion Tech Fundraising:Differences Between Early Stage and Growth Stage
Welcome back, fashion tech enthusiasts!
This article accompanies our podcast ‘VC Series’, 4 episodes in conversation with Rohan Bansal on the venture capital space. This is part 2 where we delve deeper into the differences between a startup in the early-stage and a scale up in the growth stage, and what this means for fundraising.
The transition from early-stage to growth-stage represents a critical inflection point for fashion tech startups. Growth-stage companies have established product-market fit, developed robust revenue streams, and are ready to scale operations across new markets or expand their customer base substantially. The funding requirements naturally increase at this stage, with Series A and beyond focusing more on business development rather than product innovation. As Rohan noted, growth-stage companies are hiring more experienced personnel with established networks who command higher salaries, requiring more substantial funding rounds.
Listen to the full conversation:
Early-Stage Startups: Testing, Learning, and Validating
Early-stage fashion tech startups often occupy the space between concept and initial traction. This is the space that we occupy at Beyond Form and with our startups we are typically working towards:
“Finalising MVPs or beta versions of products.”
“Securing initial customers or pilot partnerships.”
“Refining their market positioning and tech infrastructure.”
The fashion tech investment landscape has undergone a significant transformation in recent years. With approximately $10.1 billion invested in pre-seed to Series A companies globally during the first two months of 2024, opportunities for startups in this sector remain abundant despite challenging market conditions. In regions like France and Germany, seed-stage startups tend to be slightly more advanced in revenue generation—often between €150K to €200K ARR—compared to the U.S., where validation might lean more on user engagement metrics or brand collaborations. While fashion innovation is often design-led, successful early-stage companies are blending creative insight with deep tech expertise, particularly in AI, machine learning, and data analytics. Companies like Save Your Wardrobe, which started as a clothing care app and expanded into a circular fashion platform, exemplify this dual-pronged approach.
In this phase, investors typically assess:
“Founding team experience and adaptability.”
“Size and urgency of the problem being solved.”
“Early customer traction (even if limited).”
“Feedback from pilot programs or B2B partnerships.”
The Inflection Point: Transitioning to Growth-Stage
Once product-market fit is established, startups must prove scalability. This transition—from experimentation to execution—is where the stakes, and capital requirements, increase significantly.
Growth-stage fashion tech companies are expected to:
“Deliver consistent revenue growth.”
“Expand internationally or into new customer segments.”
“Invest in talent, especially commercial and tech leadership.”
“Build out the supply chain and operational infrastructure.”
Early-stage startups in the fashion tech space are characterized by their developmental nature. These companies are typically still fine-tuning their product, conducting pilot programs, and establishing initial market validation. As Rohan explained, "At this early stage, you're still pivoting, you're still figuring out what's going to work or what's not going to work, because you're still in the trial and tested method of things." Early-stage funding rounds, such as pre-seed and seed, are primarily focused on product development and initial client acquisition.
Growth-stage success metrics include:
Annual recurring revenue (ARR) exceeding $1M
Gross margins improving toward 50%+
Customer acquisition cost (CAC) efficiency
Strong retention or re-purchase rates (especially in DTC tech)
The Shift Towards Profitability
Perhaps the most striking shift in the VC landscape is the renewed focus on profitability. "We've gone from growth, growth, growth at all costs to growth, but with profitable costs," Rohan emphasized. While early-stage startups aren't typically expected to be profitable, investors now demand clear pathways to profitability or evidence of strong unit economics. This represents a significant departure from the funding environment of the past decade, particularly in the DTC e-commerce boom, where growth often overshadowed sustainability considerations.
"Growth with profitable costs" is the new mantra.
“Strong unit economics (e.g., contribution margin, LTV:CAC ratio).”
“Break-even paths within 24–36 months.”
“Clear operating leverage in the business model.”
Founder Strategy: Fundraising with Stage-Specific Precision
To successfully raise at each stage, founders must align messaging with investor expectations:
Early-stage founders should focus on:
“Product-market fit signals (pilots, traction, engagement).”
“A clearly articulated market opportunity.”
“The strength and agility of their founding team.”
“Unique IP or defensible tech architecture.”
Growth-stage founders need to highlight:
“Financial metrics (MRR/ARR, CAC, LTV, gross margin).”
“Scaling strategy (internationalization, new verticals).”
“Capital efficiency and hiring roadmap.”
“Competitive positioning and defensibility.”
Ultimately, precision in messaging, tailored to stage-specific investor expectations—is what separates compelling pitches from forgettable ones. Founders who master this alignment dramatically increase their chances of securing the right capital at the right time.
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