Fashion for Good helps with ‘fraught’ financial landscape for start-ups
Sustainability hub Fashion for Good has teamed up with investment firm Spring Lane Capital to help start-ups understand financing routes and unlock the capital needed to scale innovation in the textile industry.
The report, “The Great Unlock: Closing the innovation commercialisation gap through project finance solutions”, reviews the different types of capital available to close the funding gap within the commercialisation stage.
It discusses the benefits, requirements and opportunities related to project finance as a funding solution in this space, and highlights the roles that various stakeholders would need to play in order to bring this to life.
In line with keeping global warming below 1.5 degrees, the fashion industry is in a race to achieve net zero by no later than 2050. While existing solutions can significantly help reduce the impact of the industry, the scaling of innovations — in particular in next-generation materials, recycling and processing — is critical to enable a transition towards a net zero industry, said Fashion for Good.
The path to scaling these innovations, however, is fraught with financial hurdles. The transition from R&D to commercial viability demands substantial capital, and innovators often face a financing challenge when they arrive at this first commercial production stage. This results in a funding gap that prevents industry-wide adoption of new products and technologies. The bulk of the funding needed will come from debt financing, with project finance serving as a key solution due to the strong focus on risk mitigation and allocation, which the structured nature of such funding provides.
Petri Alava, CEO, Infinited Fiber Company, said: “There is a lot of investor interest in new technologies, and scope for project finance as a funding mechanism - especially for proven solutions like ours where market demand is high and the positive environmental impact so clear. In the last few years, we have signed major offtake agreements with leading brands. Based on those experiences, we see this report as a valuable toolkit to help especially the new innovators prepare for the funding journey that lies ahead."
The partners are calling on stakeholders to act, as part of Fashion for Good’s Annual Summit on 19/20 October in Amsterdam, as well as Spring Lane Capital’s Developer U event on 24/25 October in New York.
They suggest:
• Innovators - Build Expertise & Plan Ahead: Align development milestones with a robust capital strategy, ensuring the presence of technical, operational, and financial expertise from the outset.
• Brands - Signal Demand: De-risk project finance by signalling demand through direct or supply chain partner offtake agreements.
• Supply Chain Partners - Multi-level Engagement and Ownership: Contribute through signalling demand, providing technical expertise, and capital allocation via joint ventures.
• Financiers - Actively Pursue Opportunities: Advance industry expertise and collaborate with brands, supply chain partners, and innovators to craft investment propositions that match risk-return profiles.
Image by Lalit Kunmar via Unsplash.
