€3mn impact investment in platform for vintage designer fashion

Dutch impact investors have spied an opportunity to take sustainable fashion to the next level. Amsterdam-based platform The Next Closet (TNC) raised €3mn in growth capital last week.

The days of sifting through piles of wrinkled garments in thrift shops for a designer label are probably over. Smart shoppers are turning to specialist online platforms like The Next Closet (TNC) for pre-loved designer items. And investors are poised to make some ‘good money’ while shaking up the industry.

The fashion industry is vastly wasteful and recognised as one of the most polluting sectors in the world, contributing to water, chemical and plastic pollution as well as greenhouse gas emissions.

What’s more, trends in fast fashion have led to more clothes being manufactured than consumers can ever possibly wear. People are buying 60% more clothing than fifteen years ago and wear those items half as long, according to TNC’s website. Up to 70% of a wardrobe remains unworn and a third of women wear clothing less than five times.

The consequences are clear. Every year, billions of unsold items are simply thrown away or discarded by their owners after a couple of wears. The average consumer casts out up to 32kg of clothing a year, according to the Pretty Planeteer, the majority of which could be resold, reused or recycled.

With natural resources scarce and the planet showing signs of reaching a tipping point, radical changes are called for. Lawmakers are stepping up to regulate bad practices and replace linear take-make-throw-away models with a closed-loop ‘circular economy’ that wastes nothing.

And on the back of growing awareness, market trends and perhaps a post-Covid epiphany, customers are demanding much more of their favourite brands. Pioneering companies are responding to that challenge.

€3mn investment for TNC

Sharing and reselling platforms like TNC have emerged to meet this demand. Their mission is to make sustainability a reflex, not a niche decision.

“If we could all share our closets, we would never have to buy something new again,” says Thalita van Ogtrop, co-founder and CEO of TNC. “This way we can end the huge accumulation of clothing that the fashion industry produces every year.”

Last week her company announced it had raised €3mn in growth capital from 4impact VC, the Borski Fund and existing investors, including PDENH.

Van Ogtrop teamed up with fellow entrepreneur Lieke Pijpers to start The Next Closet in 2013 as a sustainable alternative to buying new. It is now the leading marketplace for second-hand designer women’s fashion in the Benelux.

The company set out to ‘break the rules’ and show that circularity is not a buzzword but a viable business model even in a traditional industry like fashion, explains Suzanne Kats, TNC’s new CCO.

Connecting closets

Their brainwave was to ‘connect the closets’ of stylish women including actors, presenters, models and designers with vintage and environment-conscious customers. The idea worked. More than 1,000 closets (sellers) have been opened up and a quarter of a million items given a second and sometimes even a third life.

TNC distinguishes itself from the crowd by focusing on quality brands and building a community through seller profiling, dashboards and other ‘boutique’ features.

For example, a recently advertised pair of pre-loved Valentino sunglasses was sold for €156 by a well-known Dutch actress promoted under TNC’s ‘famous sellers’ section.

This adds a personal touch to the online shopping experience and is something TNC’s community values alongside the knowledge that they are making sustainable choices.

“Buyers get affordable, good-quality items that they can wear for a long time. It’s not throw-away fashion, so it’s a better deal for the person and the planet,” Kats points out.

Intentional and measurable impact

Positive messages like this are emphasised throughout the platform. The sale of a single item such as the sunglasses is duly celebrated: “Whoohoo! This item has been given a new life and with this we have saved +/-83 bathtubs of water.”

TNC says these numbers are not pulled from thin air. It has built a database of product types and their impacts, which feeds company marketing, reporting and public relations, but also what the platform’s users see on their personal dashboard of sales and purchases. The new investment round will help to enrich the impact and customisation sides of the TNC experience, Kats reveals.

The Next Closet’s overall impact numbers also suggest the model is working. The company offers several useful yardsticks for savings in water, emissions and waste directed away from landfills, for example.

In total, 138,779kg of designer fashion has been given a new life through the platform. In the last month, TNC’s community has saved the equivalent of 123,733kg in CO2 emissions, which is as much as flying 12 times around the world. It also recently announced a milestone total of five million kilos of CO2 saved since launching.

Investing in a frontrunner

Pauline Wink, a partner at 4impact, believes TNC is a frontrunner in the luxury apparel resale market because of its distinct platform and local approach which is enabling a “structural shift in consumer behaviour driving a circular economy around designer fashion.”

She was impressed by its impact mission, skilled team and digital technology, but also because it is an established brand with international growth potential.

As for impact, Wink is adamant “it needs to be intentional and measurable.” TNC showed that it understands this both in its effort to calculate and communicate the benefits to the planet but also “on a personal level.” Users can check the impact of the garments they are considering, and keep track of their impact via their own dashboards.

Fellow investor and partner at the Borski Fund, Simone Brummelhuis, thinks there is plenty of movement in the second-hand fashion space with bigger brands now buying into circularity, and offline players looking to increase their stake.

As a pioneer in Europe, she thinks TNC is right in the mix. Borski anticipates a European expansion and more international partnerships leveraging the experience of its new backers.

Investing in diversity

Borski looks for technology-driven businesses with a diversity and sustainability dimension on top of a pioneering streak and strong market performance. The fund invests in female entrepreneurs because it wants to give everyone a fair chance and to “build great companies with them.”

The fund is inspired by Johanna Borski who made a fortune as an early investor in De Nederlandsche Bank. She was credited with rescuing the Nederlandsche Handel-Maatschappij from bankruptcy in the 1840s and in more recent times held up as prototypical impact investor “when investing was (even far more than today) a male-dominated business.”

Research shows that diverse teams are more innovative and perform better overall than their male counterparts. But Brummelhuis points out that more than 90% of VC money still goes to start-ups with all-male management teams.

And while Wink recognises the importance of diversity in putting together effective teams, she says 4impact did not invest in TNC “just because they are women, but because they are people with outstanding skills and capabilities with a great vision to change the fashion industry.”

Brummelhuis also knows a thing or two about succeeding in that world. She set up, grew and consolidated a restaurant reservation business that was eventually sold to TripAdvisor. “Being a pioneer is always a challenge, but persistence and perseverance pay off when you build the brand and a strong following which leads to commercial success,” she says.

As an investor with a long-standing stake in TNC, she adds, “When a company is growing we need to stick with them and help them reach their full potential.” In fact, Borski is actively involved in each of its portfolio companies which include an expanding list of health, tech and fashion-based companies.