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Why Do So Many Big Fashion and Beauty Brands Want to Support Startups?

The hot new thing in brand extension is incubators and accelerators — but why?
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The newest fad among large, profitable, well-known apparel and beauty companies? Oddly, it seems to be using their piles of money to give back. Great! But what's interesting is that many of them are not just donating cash to charitable causes or having employees volunteer; rather, they have adopted very like-minded incubator or accelerator-like programs for up-and-coming entrepreneurs. Sephora, Nordstrom, Kering, ASOS and Kate Spade & Company are just a few examples, and all these programs launched within the past two years.

And as altruistic as press releases make them sound, we can't help but wonder: What's in it for the brands and retailers themselves? And why have year-long programs helping entrepreneurs — a model more commonly associated with the tech industry — become such a popular project for fashion and beauty brands since 2016?

Of course, these programs aren't all identical; well, a couple of them might be. In the case of Kering, for instance, the French luxury conglomerate partnered with global innovation platform Plug and Play on "Fashion for Good," an accelerator with the goal of bolstering its own long-term (and well-respected and publicized) sustainability efforts. Kering and Plug and Play selected 10 textile startups for a three-month mentoring program that began last month, during which they receive support in scaling up their technologies, methodologies and business models.

What Kering gets out of it is pretty straightforward. The owner of brands like Gucci, Saint Laurent and Stella McCartney was already looking for "highly innovative startups to fast track sustainable innovation in the Group" when Plug and Play approached them, says Kering's Head of Sustainability Marie-Claire Daveu. "It was the right proposal at the right time." She explains that Kering is a big believer in open sourcing and sharing best practices across its brands. "We cannot advance alone, nor can we advance by doing business as usual," she says. "This collaboration is a solution, amongst others, to reach our sustainability ambition by bringing disruptive innovations to the table." The startups are working directly with Kering's Materials Innovation Lab in Italy and the company will encourage its brands to work with them.

Kering is an example of one of the clearest reasons why a company would invest resources into an incubator or accelerator: to bring innovation and disruption at a time when it's most needed and to field modern ideas and concepts that might accelerate its own growth and that it wouldn't be able to come up with internally. "For fashion corporations, developing incubators is necessary to drive innovation these days," says Sarah Owen, Senior Editor, Digital Media & Marketing at WGSN. "Most of the time, brands are resource-poor and they can't ideate in a silo. Marry that with the fact that young startups need help scaling, and the perfect partnership is born." That this accelerator also reinforces Kering's sustainability narrative is just icing on the PR cake.

This also translates to the beauty industry. Last year, L'Oréal partnered with UK-based digital accelerator and incubator Founders Factory on a yearly incubator of its own where five startups receive a joint investments from the two companies in addition to mentorship and help with actually launching products. L'Oreal also invested in Founders Factory itself. "This strategic investment will give L'Oréal direct access to a powerful global ecosystem of exciting startups and innovative technologies at their earliest stage allowing us to invest in and nurture innovative business models based on digital platforms to better serve consumers’ aspirations," said Lubomira Rochet, L'Oréal's Chief Digital Officer and Executive Committee Member, in a statement at the time. 

These programs can also be seen as more flexible alternative to an acquisition, with less commitment. "While brands have been concentrating on acquisitions for the last few years, the interest is now switching to working with early stage startups to develop flexible upstream partnerships," says Owen.

ASOS, which prides itself on its "long history of identifying and supporting young up and coming talent" according to Global Communications Director Rachel Bremer, has launched a number of different accelerators of late. One, which launched a year ago and focused on fashion tech startups, was similar to Kering's and L'Oréal's in that it was self-serving in a practical way. But instead of sustainability, these tech entrepreneurs would provide innovative ideas for how to improve the e-commerce company's online user experience. The program launched in partnership Wayra, a business with experience in tech accelerators. It followed the launch of a near-identical tech accelerator by Topshop.

Last year, ASOS also launched two other similar programs in the UK: ASOS Fashion Discovery, a competition for designers from which two were chosen to receive a £50,000 grant, business support and an edit of their collections sold on ASOS; and ASOS Supports Talent, providing funding and mentorship to eight creatives outside of fashion, most of whose projects have some sort of underlying social cause.

The latter, says Bremer, is largely about staying up on what's cool and what ASOS's customers are into. "It helps us stay at the forefront of the trends that are happening," she says. "It's important for us to always stay ahead of the curve." Similarly, with Fashion Discovery, ASOS can snap up an emerging brand before any other retailer. Collectively, these initiative support ASOS's desire to be seen as a modern, hip company with its finger on the pulse.

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Another multibrand retailer with a fashion incubator program is Yoox, which has been collaborating with Vogue Italia on the prestigious Next Talents competition for up-and-coming designers since 2011. Yoox actually buys and sells selected designers' pieces on its site, in addition to providing them with business mentoring. "Throughout the years, we have discovered some of the most striking and visionary talents, one above all: Jeremy Scott. The Next Talents is just the most well-known initiative that we have undertaken. 

"The reason for which we have decided to promote this mission is that we strongly believe in the need to invest in the future of fashion," explains Federico Marchetti, founder of Yoox and CEO of the Yoox Net-a-Porter Group. There's also the element of exclusivity, a crucial component of luxury, in carrying those designers first. "I think it is a kind of luxury to wear a young designer not only because there is actually deep passion in what they do and a unique attention to detail in terms of manufacturing, but also because when you walk into a room, you are certain that no one will be wearing the same piece, which is what luxury is about."

Nordstrom launched a similar program this year called The Lab, spearheaded by Director of Special Projects Olivia Kim, to carry and nurture emerging design talents that may not have the infrastructure to work with a national department store chain on their own. "It allows the customers to feel that the store they're shopping in has a personality, a perspective on what's happening in fashion," Kim told us in February regarding the recent popularity of incubators launched by retailers. "It's a point of differentiation."

Another very popular route these programs have taken is to focus on supporting female-led entrepreneurs. Both Kate Spade & Company and Tory Burch, for instance, have foundations that function as separate entities dedicated to empowering underserved women in business. Last year, the Tory Burch Foundation launched a yearlong fellowship program for female entrepreneurs, which it repeated this year, that provides 10 women with networking, workshops, mentoring and the opportunity to get a $100,000 investment. 

Also this year, the Kate Spade & Company Foundation did more or less the same thing, but in partnership with 1776, a public benefit corporation that empowers startup ecosystems around the world, where the company funded the creation of 10 fellowship seats for female founders through a $89,000 grant. Last year, Sephora launched an accelerator for female-led beauty startups that is also part of the company's larger social impact agenda via its foundation, Sephora Stands. In partnership with UBS, Rent the Runway's foundation operates the five-week accelerator Project Entrepreneur for female founders.

Companies like Tory Burch, Kate Spade & Company, Sephora and Rent the Runway start foundations as a transparent way to use corporate money to do good through a separate entity from the company itself. Of course, if that good-doing happens to align with that brand's image and/or own origin story — and if the brand's reputation stands to benefit from publicity of a charitable undertaking — that transparency is especially advantageous. 

"Our Foundation has had a positive impact on the bottom line, which is not something I ever expected," explains Tory Burch. "It is important to our employees — it attracts people to want to work with us — and to our customers who care about giving back. It's a win-win. Now I tell the entrepreneurs we work with to think about social responsibility from the beginning." 

Judging by any of the aforementioned company's websites and social media accounts, these programs also offer many opportunities for content creation — and not just at a one-time event, but throughout the process of choosing participants and all that the incubators, many of which last a year, entail. And, of course, supporting female-led startups, in particular, is important. As Valerie Biberaj, director of the Kate Spade & Company Foundation pointed out, only 21 percent of NYC startups are founded by women, and women-led startups receive just 10 percent of venture capital funding.

The similarity of these programs and their feminist messaging might raise some eyebrows, particularly during a time when feminism is being used as a marketing tool with increasing frequency. But at least these companies are actually engaged in efforts that are (seemingly) empowering women rather than merely putting out feminist-leaning ad campaigns. 

From soliciting new ideas and staying ahead of the curve, to creating content and supporting women, to actually giving back in a more modern and hands-on way (oh, and tax incentives), the reasons companies are funding and devoting resources to incubators are myriad. And for young entrepreneurs struggling to scale and fund their businesses, they're creating more opportunities than ever.

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