Venturing into Fashion Tech

VC Series: The Difference Between Early and Growth Stage Fashion Tech Startups w/ Rohan Bansal

• Beyond Form • Episode 68

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The Lifecycle of Fashion Tech Startups:

This episode with guest speaker Rohan Bansal, he discussed with Beyond Form CEO Peter Jeun Ho Tsang the differences between early stage and growth stage companies and what it takes to secure funding at each level. 

Early-stage v.s. Growth Stage Fashion Tech:

• The lifecycle: Pre-seed rounds typically fund companies with just an idea, while seed rounds support those with early traction and some revenue.

• Series A represents a critical graduation point where investor expectations significantly change and growth stage companies need to demonstrate not just revenue growth but also a path to profitability.

• Revenue expectations: European markets typically expect higher revenue thresholds (€150-200K) for seed funding compared to US markets. It's harder to get VC funding in 2025.

• The investment landscape has shifted from "growth at all costs" to "growth with profitable costs" and fashion tech startups need to build positive signals to investors before fundraising.

Connect with Rohan on LinkedIn: linkedin.com/in/rohan-bansal-50328179/

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The show is recorded from Beyond Form, a fashion tech innovation platform. We build, invest, and educate fashion tech entrepreneurs and startups. We’d love to hear your feedback, so let us know if you’d like to hear a certain topic. Email us at podcast@beyondform.io. If you’re an entrepreneur or fashion tech startup looking for studio support, check out our website: beyondform.io

Peter Jeun Ho Tsang:

Hi, I'm Peter Jeun Ho Tsang, founder and CEO of Beyond Form. We're kicking off the first mini-series of 2025, and it's all about VC investing in the fashion and retail tech space. I'm going to be joined by Rohan Bansal for four episodes where we explore what it's like going into the VC investing world, what's hot right now in terms of deal flow, technology startups to look at and everything in between. On today's episode, we talk about the differences between an early stage fashion tech company and a growth stage fashion tech company. Now, depending on who you are listening to this episode, those two stages may mean different things to you. However, if you are a fashion tech startup, regardless of the stage, you will need to prove yourself at all levels if you are looking to get on the VC fundraising train, from KPIs to metric to traction and, most importantly, what is your risk profile to any given investor.

Rohan Bansal:

W e've gone from growth, growth, growth at all costs to growth, but with profitable costs.

Rohan Bansal:

I think at series B, series C, we see there's now expectation that there is either a path to profitability or the company showing strong profitable unit economics, which is not necessarily the case at seed and pre-seed level. Because...

Peter Jeun Ho Tsang:

Let's get this conversation going with Rohan on today's episode of venturing into fashion tech. How are you today, Rohan?

Rohan Bansal:

yeah, I'm good. Good, I mean, it's a sunny day, so I can't really complain, right so exactly sun is shining on us.

Peter Jeun Ho Tsang:

Really, just get your ideas and thoughts to you what's happening in the space. But before we get stuck into the conversation all about early stage and growth stage investing, we're going to set some context for our listeners. So, according to data, the first two months of 2024, approximately $10.1 billion has been invested into pre-C to C with A companies globally. That's a huge number. Into pre-C to C with A companies globally. That's a huge number.

Peter Jeun Ho Tsang:

Although it is tough for early stage startups to raise in today's current market, especially from retail tech, companies are proving there's plenty of opportunity. For example, tress and Money AI, both from the UK, is around €1.5 million and Aircraft Based in France raised €15 million euros, all at the end of 2024. Companies using AI for operations in the fashion and retail tech space are now raising three times more money than traditional fashion startups. I like a strong investor preference appetite for tech driven solution, which is great news for the fashion tech space, and that's according to the company wave app. But let's get stuck into rohan's thoughts, your thoughts at beyond form. We, of course, are working with early stage fashion tech companies, but that but that may not make sense to everybody. Can you explain to our listeners what is considered an early-stage startup.

Rohan Bansal:

That's an excellent question. There's no fixed definition for early-stage startups. I guess the way you could define it would be in terms of traction, in terms of how many clients they have, what kind of revenue threshold that they've crossed, how much money that they raise, how far along the product cycle are they? Because if you're a series, a series p company, you already have a fully developed product. Now it's just about client acquisition. But at this early stage you're still kind of pivoting, you're still kind of 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. I guess once you've achieved that, then you start being qualified as early stage and more towards growth stage.

Peter Jeun Ho Tsang:

That's how I define it and how does that link to investing like, is there a specific fundraising round that is classed as early stage?

Rohan Bansal:

yeah, for sure. I mean generally speaking. Pre-seed is where you don't have any revenues. You just have an idea or a start of a product and you raise smaller amounts. Let's say you've done, got some traction, you've gotten tens of thousands in revenues or pilot programs going on and now you need money to build out a bigger team so that you can build out a further range of products. That's when you start to do a seed round and it really depends on geographies. Compared to the US, where pre-seed and seed can get much lower revenue thresholds, europe, we tend to have companies that are having certain milestones. Let's say, if you're a seed company, maybe you've done 150, 200k in revenues already last year and now you were looking to scale. So there's different ways to define it, but generally speaking, I guess it'd be coming down to product development, revenue thresholds and maybe client optimization.

Peter Jeun Ho Tsang:

And it obviously is not SEPTA-specific or vertical-specific. This is the lifecycle of a startup, so obviously this applies to fashion and mutual tech as well.

Rohan Bansal:

right, yeah, definitely, definitely. I mean there are some sectors where it's a little tricky, if, let's say, you're looking to defense, where you have four to six years, or a pharmaceutical or biotech, where you have a lot of time needed to develop the product, to go to all the different approvals that you need to do. But yeah, with fashion tech and retail tech especially, you can definitely kind of link it the same way as you would with traditional tech as well, because you have similar sales cycles and similar time to market.

Peter Jeun Ho Tsang:

So you mentioned there that in the early stage, you're still testing things, maybe pivoting, maybe your product is not monitored yet, maybe you have some early clients, whereas the later stage you know what your solution is and it's about finding more customers and scaling. So then, how does funding and the amounts associated with those when raising rounds for between different stages and what are the integers?

Rohan Bansal:

Yeah, so obviously the amount of money you're going to be raising at a pre-seed and seed is going to be a lot lower than if you've been raising a series B, series C, and there's multiple reasons for that. If you're raising pre-seed round, you're probably raising it to hire one or two more people. If you're looking to raise a seed round, you're hiring a few people because you still want to be lean, you don't want to kind of over-leverage yourself and have too many resources for a product that doesn't have a lot of revenues at this point. And you're generally hiring people from product at this point and tech and innovation.

Rohan Bansal:

Once you've really, let's say, reached a CWC, you're suddenly starting to hire some very strong profiles.

Rohan Bansal:

Suddenly, a sales and marketing guy which at the seed round was going to be for 50K a year, suddenly now the key account guys will be at 100K, 200k, because they have a lot of experience, they have a big network of contacts that they bring and they understand how to do sales to bigger customers or bigger clients.

Rohan Bansal:

So that's one thing. And also at CVSB, cvc are expected to have kind of built a good market share in your country or become the industry leader in your geography and now you're looking to raise money to expand to a new market and that obviously requires a lot more investment than at pre-seed or seed, where you're still kind of nailing down your existing market, and that obviously requires a lot more investment than at pre-seed or seed, where you're still kind of nailing down your existing market. So you're still kind of doing pilots. So yeah, I think it's a lot of early stages about product development, a little bit of business development as well. But late stage becomes more about business development because the product is not necessarily going to change, there's just going to be tweaks to it.

Peter Jeun Ho Tsang:

So far in your career you have been operating around the series a level fundraising round. Has that been like serendipity, by choice, like how did that come about?

Rohan Bansal:

oh yeah. So basically it came down to because at series a, the companies have good financials and there's a full income statement and they have a track record and traction, and I wanted to go somewhere where I can kind of use what I learned in business school and also use my financial skills, which is why CVZ is good, because at this point there's still innovation happening. You also have good numbers, you have good traction and KPIs that you can follow and measure. It wasn't, let's say, something I was generally focusing on very specifically that I wanted to be in Series A, but I was looking for something where there would be a bit more traction numbers at that point, because I wanted to work on Series A and later, at the start of my career.

Peter Jeun Ho Tsang:

Yeah, and obviously the whole startup is very different. As I said at the start of the episode, at Beyond Form we're dealing with the earlier stage startup. Sometimes they literally come to us with an idea. It's a very different process. Creating that startup versus. You have numbers, you have data that you're working with when you're looking at a deal flow perspective and obviously, as part of that process, risk is a major factor that needs to be considered. In general, the risk levels go up, the lower down. You are on the fundraising cycle, so tell us a bit about that. What are the risk profiles at any stage versus growth stage?

Rohan Bansal:

It's quite interesting because graduation rates differ dramatically based on different stages. The seed to series A graduation rate is the most interesting one because a lot of companies are able to raise a million or two from pre-seed and seed investors. But once you come to series A, that's when there's a big divide between the two. But at the same time you're also looking at different things when you're investing in early stage and when you're investing in growth stage. Early stage is very interesting because you're starting at a very early stage of the company, so you can see the growth, you can help define the strategy, you can work with founders in a much more holistic manner and build them up, connect them with the right, because there's a lot more value that you can bring at an early stage compared to, let's say, if you're doing a C, c, c, c, where they, yes, they might need you to open some doors, but they already kind of gain further exposure to how does that make you feel when a startup is like or not even a startup, it's a scaler.

Peter Jeun Ho Tsang:

But in that growth stage you feel like, yeah, we just want your money, we don't actually need your help.

Rohan Bansal:

Well, there's good and bad right. So the good news is that less portfolio support to be done and you can just trust that like, okay, the money is going to be used in the right way, but then at the same time, yeah, there's less value and less differentiation that VCs can bring at this point.

Peter Jeun Ho Tsang:

So you've told us a little bit about what's expected in each of those stages and you talked a little bit about data. But, regardless of what stage you are at, one of the things that we need to be keeping track of and obviously this goes from the investor side as well as the startup side as well are those metrics. What are the KPIs we're working towards to be like okay, I'm at seed stage. What do I need to prove to myself, but also to the external world, that I'm ready to move onto that next stage of growth and the lifecycle of my startup In fashion tech specifically? What are some of those key metrics you might be looking at?

Rohan Bansal:

so at seed stage successful pilots, sending great interactions with retailers, the fashion groups or whoever is your target market, establishing product market fit at this point, knowing the pitfalls of the industry. Also understanding how big the market size is as well, because if you're, if you're an industry leader in a market that's only the size of 10 million, you're a cat at this point. So it's understanding how big is your market and also how can you, let's say, increase the size of your market or your total address on market by doing different ways to innovate. That's, I think, quite important as well.

Rohan Bansal:

Also depends on if it's a recurring business model If it's a recurring business model. If it's a recurring business model, then obviously you need to look at churn how well are you able to retain your existing customers? What's your cohorts looking like? So there's a lot of different things that go into the different metrics that you track in early and growth stage. But at early stage, yeah, I think it's a lot about making sure that you're in a big enough market. In a big enough market, you are doing the right pilots with the right customers and you're able to upsell them.

Peter Jeun Ho Tsang:

And how are the growth stage? How do those differ?

Rohan Bansal:

By growth stage. What we're looking for is growth in terms of top line, so revenue, so revenue. Yeah, we're looking at a lot of revenues. Also, there's been a pivot in the industry the last two, two and a half years where profitability is the name of the game. We've gone from growth, growth, growth at all costs to growth, but with profitable costs.

Rohan Bansal:

I think at CBC we see there's now an expectation that there's either a path to profitability or the company showing strong profitable unit economics, which is not necessarily the case at seed and pre-seed level, because at this point, if you are profitable, that means you potentially are not as aggressive with your clients or you're not as aggressive in terms of growth. It just feels like you're leaving money on the table. If you're being profitable at an early stage but it also depends could allow you at seed level to extend your runway to 24 months so you can achieve a certain milestone, so that when you go to investors for a seed like when you go to invest on CSA investments they're much more likely to be okay, yeah, okay, great, you have shown that you're able to grow and you're also being profitable. So there's different. It's kind of a balance that you need to maintain. But generally speaking, it's very rare to see pre-seed and seed companies that are profitable.

Peter Jeun Ho Tsang:

You talk about their profitability. Obviously, 15 years ago, when we had that boom with fashion tech companies that were very much those DTC type of platforms, he said they're growth at all costs and we saw a lot of VCs pour in money without that profit element taken into the equation as seriously Not that they didn't take it into consideration, but it wasn't necessarily the overriding factor to invest. And then the last five years we've had lots of collapses happening Because they suddenly realized okay, this business is not sustainable and at some point if VC cash riser, if the customers start coming back, of course you're going to go bankrupt. So I think for any early stage fashion tech companies or retail tech companies listening to this, it's about okay, how are you going to make your business sustainable? Ultimately, to get those investors interested is kind of what I understood yeah, definitely, definitely, um, I mean it's.

Rohan Bansal:

It's very interesting, because I started working bc just before covid hit, so I saw the acceleration that happened in terms of funding valuations and round sizes during covid, where suddenly you know, if you had a product and you were doing 50K in revenues or whatever, these were very, very willing to give you extremely generous term sheets where they were giving you a few million with very high valuations. But what happened was that in 2022, you know, when the zero interest rate market kind of went down and we started to have higher interest rates suddenly the cost of borrowing, the cost of money, increased. What that meant was startup had to become a little bit more constrained in the way that they expanded, because they couldn't just go to market every six months and get great term sheets. Of course, if you were a phenomenal business, yes, you would never struggle to raise money, but not every business is a phenomenal business. You have 80% of the market which is still kind of trying to be efficient, and so what happened was that round size it decreased, valuations went down as well.

Rohan Bansal:

But one of the more interesting things was that European seed, perhaps, was one of the least affected. This could have been, perhaps that they were already prudent to begin with, or it could just be that seed is where investors are very willing to take bets. But at the same time, yeah, round sizes have gone down, valuations have also definitely decreased and I believe you are not expected to be a camel where you hold a lot of water, but then you're also expected to carry that water with you for longer. Previously you were expected to be a horse, where you carry water, but you only need to carry it for a short distance. But now you need to keep that water and you need to carry it for 24 to 36 months, compared to, let's say, six or 12 months. That was previously the case, three or four years ago.

Peter Jeun Ho Tsang:

Camels and horses. I didn't think we'd be talking about camels and horses in this conversation. I always talk about camels Canada force in every conversation. So and you talked about from the investors perspective and the valuations and so forth for that startup and you mentioned this earlier there is a big difference between the early stage and the growth stage. We know we should get that series a mark. You're kind of on the fence there, so let's talk about the challenges then. How do those startups make the jump from start to scale up?

Rohan Bansal:

That's. It's a question that can require hours of debate, to be honest, because many people can argue what's the definition of scale-up or what's the definition of startup? So I think maybe you can stop considering yourself a startup when maybe you're in multiple geographies. You have brand recognition, where you're just on the street and people won't recognize you as a CEO, but people will recognize your brand potentially. You have good industry positioning, you have decent market share where suddenly now incumbents are noticing you, you suddenly started to have potentially early discussions for M&A or offers from people, or you might be looking for mergers or discussing different things. It's really difficult to say, because sometimes people consider the likes of some of these big neo-banks, like Revolut and others, to still be startups, or you can argue that they're scale-ups. At this point. It's really a case of definition and geography and how you look at it.

Peter Jeun Ho Tsang:

I think for many of the fashion tech startups that we come across, I think for many of the fashion tech startups that we come across, there is an air of naivety in regards to how they should be approaching fundraising. For any listeners, fashion tech is still a burgeoning space. It's still a little bit misunderstood by many investors, which makes it harder for that story to come across, and they want to see more metrics. They want to see that you can really prove yourself as a tech company in the fashion space. So that is definitely my top tip. Is that, yes, really focus on building those positive signals to the industry, as in the investors, before you actually go to market. And if you say it's not easy, no, I agree, I agree. So then, what opportunities do you think that are in the fashion space right now? You know, we know, that the e-commerce space is extremely fragmented. There's many things going wrong in the fashion industry right now. So, in the landscape, what do you think those opportunities are for VCs at the moment?

Rohan Bansal:

I think, yeah, yeah, you kind of touched on it already. Previously, vcs were really interested in e-commerce and marketplaces and those tremendous especially during COVID as well because people had a lot of disposable income but they just didn't have avenues to buy stuff, so they were suddenly using e-commerce massively. But we've now come to a space where people are looking at different things besides just e-commerce enablers. They're looking at AI spaces, ai-powered solutions, different things that are related to, let's say, sustainability has become much more interesting. Also, there's a lot of regulations that are coming in now, where the EU is now wanting to check into inventory management, blockchain, traceability. There's a lot of new innovative products, especially towards deep tech, which is not the case previously. Previously, it was all about marketplaces or not necessarily by deep tech, but now people are trying to understand really, are you deep tech and are you really game changing and not just adding a small innovation?

Peter Jeun Ho Tsang:

where would you put your money on.

Rohan Bansal:

It's what's exciting me the most oh, what's exciting me the most right now is, um, smart retail, I think, um, retailers have been really squeezed with margins at this point, so they're looking for stuff to do demand forecasting. They're looking to understand their customers a bit better. They're also for stuff to do demand forecasting. They're looking to understand their customers a bit better. They're also looking at solutions that can help them perhaps be more efficient in their supply chains. So smart retail is definitely one inventories, which is kind of linked to a bit of retail as well, as something that's really interesting at this point. And, of course, you have to mention ai in some way, the the other, some way or the other. Yeah, yeah, yeah, yeah. What's interesting is that AI has not hit fashion in a major way, but when it does, I think there's a lot of innovation that can happen with AI, which is missing at this point in the fashion tech space.

Peter Jeun Ho Tsang:

I just want to finish up this conversation with a quick fire round of questions. So the first answer that comes to your head are lately lohan, yeah, I'm ready. What's your favorite space? Early stage or post stage?

Rohan Bansal:

I'm increasing.

Peter Jeun Ho Tsang:

Started like early stage okay you're a vc with one million dollars to invest in somebody early stage fashion app or growth stage e-commerce platform early stage fashion app.

Rohan Bansal:

Definitely true or false.

Peter Jeun Ho Tsang:

You trust in AI more than your gut feeling when deciding on early stage fashion tech investments.

Rohan Bansal:

No, no, no. I trust my gut over AI.

Peter Jeun Ho Tsang:

Yeah, you still need to do that validation.

Rohan Bansal:

Yeah, yeah, 100%.

Peter Jeun Ho Tsang:

Absolutely Number one red flag for VCs in early stage fashion tech pictures that's an excellent question.

Rohan Bansal:

This is supposed to be quick fire as well. Stage fashion tech pictures. That's an excellent question. This is supposed to be quick fire as well. I think the biggest red flag is not having traction and not understanding your market, that you're operating in your VC firm's dress code.

Peter Jeun Ho Tsang:

Finally, hoodies for early stage, mutings, suits for growth stage or vice versa.

Rohan Bansal:

Honestly, it's all about the founder story. They could be wearing a Hawaiian shirt and if they have the numbers to back them and have a good story, vcs would really not care. Our VC funds just come. I think, looking at us right now, we can tell it's really smart casual, you know? Thanks, mr Yassan. Yeah, thank you.

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