IPO Returns Show that fashion startups weren’t ready for the runway

Venture capitalists are not known for their fashion sense. It seems they have not been doing thoroughly with fashion IPOs these days.

A Crunchbase survey of six venture-backed apparel and accessories firms that went public last yr shows that the average post-IPO decline was 74%.

Worst Performer – Subscription and Rental Equipment Provider Rent a runway— since its market debut in October last yr, its valuation has fallen by 93%. Shares tanked a few weeks ago, after the company lowered its revenue forecasts and announced a 24% job reduction.

The New York fashion industry disruptor is not the only venture-backed company that’s been struggling these days. For perspective, here are six that went public last yr and how they’re doing now:

Of course, the major market indexes have seen sharp declines since last yr, with technology leading the decline. So the recent players in public fashion are not the only ones who have moved lower.

Still, a few people on our list had problems of their very own that went beyond the general market malaise. Examples include:

• ThredUp, which sells used clothing online, has failed to fulfill earnings expectations for the past three quarters, and the company’s shares are currently trading near all-time lows. This summer, the Oakland-based company reportedly released 15% of its corporate staff and announced the closure of its processing plant.
• Eyewear supplier Warby Parker lay off 15% of corporate staff this summer and reduced its sales prospects in the face of expected weakening consumer demand.
• All the birdsmanufacturer of comfortable footwear manufactured from merino wool and sustainable materials cutting earnings forecast this summer, pushing shares lower even after a better-than-expected quarter.

What’s more, one of last yr’s most famous fashion debuts is now private. Second-hand clothing and accessories market Poshmarkannounced earlier this month that it had agreed to a $1.2 billion takeover by South Korea Naver.

Yes, VCs are still in fashion, but to not this extent

Meanwhile, in startup land, fashion founders are still managing to boost some funds. However, investment has declined, especially in the last few months.

This yr, investors have poured about $1.5 billion into seed-stage development rounds for fashion startups, in accordance with Crunchbase data. It is on track to attain well below the $3.4 billion invested in 2021.

However, it is price noting that the largest rounds in 2022 occurred largely at the starting of the yr. The three largest funding rounds –Skims ($240 million Series B), Harry ($140 million Series F) i Savage X Fenty ($125 million Series C) – all closed in January.

Over the past three months, fashion industry funding has totaled just $184 million, indicating a slowdown in investment activity in this space.