Deal Dive: It’s time for VCs to break up with fast fashion

Fast fashion is an industry ensnared in labor issues and copyright problems, and it has an immense environmental impact due to its wastewater and carbon emissions. It also happens to have the potential to make a lot of money, fast.

But despite all these issues, VCs won’t stop loving the sector.

On Wednesday, my colleague Manish Singh wrote a scoop about a potential Accel investment into Newme, a fast-fashion startup based in India. Newme is an app-based retailer that produces 500 new items a week with an average price tag of $10. This news comes just a week after the company closed a seed round.

Accel and Newme did not respond to requests for comment.

Newme looks very much like many other VC-backed fast-fashion startups like Shein, which has raised $4 billion, and Cider, an Andreessen Horowitz–backed startup valued at $1 billion. Cider says it’s on-demand inventory makes it a more ethical fast-fashion option. That’s up for debate, though.

Accel’s potential investment into Newme stood out to me for a few reasons, the largest of which is that I’m just not really sure why VCs back these businesses.

Fast-fashion businesses gained rapid popularity and large followings because of their ability to bring clothes from the runway to your local department store in record time. But the fact is that often, they can only churn out clothes so quickly by cutting corners. The only way to make this strategy work is by using cheap materials and cheap — and likely underpaid — labor, and in many cases, by copying designs.