Everywhere you look, big fashion and beauty brands are setting up incubators or promoting some startups. What was once a thing only for technology-based startups to be supported by big brands, is now becoming a norm in the fashion world as well.
L’Oréal’s Founders Factory, Sephora’s female-driven Accelerate, The Unilever Foundry, P&G’s Connect + Develop Program, and Target’s own accelerator and partnership with Beach House Group are some examples.These programs are a 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.
Flipkart-backed fashion e-tailer Myntra is also set to sign term sheets with 10 domestic brands and get them aboard on its recently launched Brand Accelerator programme. It expects the exercise to bring in $500 million in terms of valuation for the brand over the next three years. The selected brands could be a mix of those already sold on the fashion e-commerce site, besides those that come by invite.
So, what motivates these big brands with huge pockets to support these incubators or startups? One proposition is that today as startups are occupying more and more space in industry and with long growth, they are reaching higher price bands. So, it is profitable for big brands to build relations with these at an earlier stage itself and know that relationships will be maintained when the startup grows. Also, it is quite expensive to acquire or take over a competition when it grows big. So why not acquire a considerable share in startup while it’s still young.
Also, incubators and startups are all about innovation. They tend to be closer to consumer demands and needs. Hence, these startups help big brands to realize the market needs and renew their expectations and market demands. Also for fashion brands, it’s like an investment in ‘future fashion’ and these startups serve as marketing tools for the brands. It brings them closer to the consumer by acquiring totally different market which was perhaps not their customer first.
It is win-win situation for both the startups and brands as startups get funds and guidance to venture in the industry while brands get recognition too. However, there are some concerns as well like, does this support by big brands decrease the creativity of startups they are known for and just serve as extension of the already existing brands.