Start-ups developing new sustainable materials like plant-based or lab-grown leathers, silks and furs raised $500 million in 2023, up nearly 10 percent from a year before, according to a report by think tank Material Innovation Initiative published Tuesday.

Investors funnelled more money into the space despite a wider slump that saw venture capital funding fall 42 percent and deal count decline 30 percent, according to CB Insights.

Still, the flow of funds into next-gen materials remains well off the record high of $1.1 billion reached in 2021 and the industry has been rocked by a number of high-profile failures over the last 12 months. Buzzy start-up Bolt Threads said it would stop production of its mushroom-based leather material over the summer after struggling to raise new funds, while Swedish textile-to-textile recycler Renewcell filed for bankruptcy on Sunday.

The industry shakeout has dampened the hype around material innovation, but incoming regulation is expected to ratchet up the pressure on brands to operate more sustainably.

”There will be some bumps, potholes, and even some crash-and-burns. These are not signsof the end-of-days, but signs of a maturing industry,” Material Innovation Initiative advisor Sydney Gladman said in the report.

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Are New Materials Ready to Go Mainstream?

A wave of high-profile failures has dampened the hype around biofabricated materials and ingredients, making this year a critical one for start-ups in the space to execute on scale-up plans.

Practically from the moment AI-powered image generators like DALL-E and Midjourney blew up, their potential for fashion was clear: They could allow designers to produce photorealistic renderings of their ideas in moments with only a text prompt.

But powerful as they were, they were general-purpose tools for conjuring full scenes, not individual garments, which left them with shortcomings as design programmes. You couldn’t simply edit colours or details without regenerating an entire new image, and they weren’t set up for designers to easily infuse their stylistic DNA into the output.

A new wave of start-ups is building generative-AI tools tailored to fashion’s specific needs, hoping to make their software part of the way designers work. Among them is Raspberry, which just raised $4.5 million in a funding round led by big-name backers Khosla Ventures — the first outside investor in OpenAI, creator of ChatGPT — and Greycroft Partners, which has backed companies such as Goop and The RealReal.

Other investors that participated included Michael Mente, co-founder and co-chief executive of Revolve; Yael Aflalo, founder of Reformation and now principal at Daughters Capital; the family office of the Fisher family that founded Gap Inc.; Fernbrook Capital; Correlation Ventures; and MVP Ventures.

Investment in generative AI surged in 2023, and while most of it went from tech giants to a handful of major AI players, smaller companies building enterprise applications have also attracted funds. Dana Settle, co-founder of Greycroft, said the firm sees an opportunity in companies that improve the production process for all sorts of consumer products.

“We’re really differentiated versus Midjourney, Stable Diffusion and DALL-E,” said Cheryl Liu, Raspberry’s founder and CEO. “The outputs are much more readily manufacturable, appealing and just things that you could start selling right away.”

Raspberry already has several brand customers, according to Liu, including H&M Group and Coppel Group, the Mexican department-store giant, though she said she couldn’t publicly disclose which other brands were using the software. She did say they range from luxury sellers and small made-to-order labels to large mass-market businesses, with varying use cases depending on the segment. Luxury players tend to be more concerned with having their brand heritage come through in the output. Brands with the budget can even have Raspberry custom train AI models for them.

“Typically they ask us to train on their most recent collections, which we can find online. They don’t have to do any work,” Liu said. “Sometimes they have brands that they’re really inspired by as well, so we’ll take all the public images that are available and kind of mash them all together.”

That use of AI is likely to rankle some. Of course, fashion businesses have long copied each other without technology, too.

The companies building AI-powered fashion tools — whose ranks also include CALA, Refabric, Imki, Fashable and Six Atomic — typically use open-source AI models as their foundation but may do additional training of the AI themselves. Raspberry trained its AI on hundreds of thousands of fashion images, captioned with more than 300 fashion-specific keywords, Liu said, so it knows the difference between an O-ring and D-ring or a chambray and jacquard — and can generate images of each accordingly.

It’s part of the work required to make sure the programme can understand what the user wants. The language used on an e-commerce site to describe a product might not be the same language a designer would use. When the AI-focused agency Maison Meta recently built a custom AI tool for designer Norma Kamali, it worked closely with her to understand how she wanted to communicate with the machine.

“We had fashion designers look at every single caption and image combination that we have,” Liu said. They did a great deal of “prompt engineering under the hood,” she added, so a user need only describe the garment to create and not worry about specifying that the output should be, for example, a photorealistic image with volumetric lighting and shadows.

One way Raspberry and others are vying to differentiate themselves is through their features. Raspberry offers AI editing so a user can quickly change details on a garment like sleeve length, can turn 2D flat sketches into photorealistic renderings and vice versa and is able to blend images together while holding the silhouette of a garment stable, allowing the user to visualise it in different patterns or fabrics. It has also introduced an AI-driven trend analysis platform using real-time data from TikTok and Google search so brands know what’s popular in the marketplace.

There are others the company is working on as well. It’s a competitive area. Refabric has a print generator and a module to let brands easily train their own models. Six Atomic boasts it can automatically make production-ready patterns from a designer’s AI-generated imagery. (Researchers have found it’s possible to create sewing patterns from a single image of a garment.)

Liu imagines other possibilities as well, like VIP clients being able to co-create made-to-order products without needing to know any specialised software. Her hope is that Raspberry will help design teams work faster and eliminate rote work so they can spend more time actually being creative.

It’s a vision she shares with Settle of Greycroft.

“You can, on the one hand, say AI is scary. It’s going to replace something,” Settle said. “But if you instead flip it around, it actually can take the human creative process to the next level.”

EBay Inc. posted a strong holiday quarter, giving investors fresh hope that the company can boost profits following steep job cuts.

The company also added $2 billion to an existing stock buyback programme, increasing the total repurchase authorisation to $3.4 billion.

Fourth-quarter profit was $1.07 a share on sales of $2.56 billion, the company said Tuesday in a statement. Analysts estimated $1.03 on sales of $2.51 billion.

Once an industry pioneer, the San Jose, California-based company has been losing US market share for years to the likes of Amazon and Walmart. In an effort to be “more nimble,” eBay announced last month that it was cutting 1,000 jobs, or about 9 percent of its full-time workforce. That followed layoffs that affected about 500 employees in 2023.

Chief executive officer Jamie Iannone is trying to find niches in which the company can thrive. It sells watches, sneakers and other luxury items to appeal to collectors, and offers authentication services designed to root out counterfeits. EBay also sells refurbished appliances and car parts to appeal to cost-conscious shoppers and do-it-yourselfers.

“Our results demonstrate the strength of our strategy, and I’m proud of our accelerated pace of innovation as we work to fundamentally enhance the customer experience on eBay,” Iannone said in the statement.

Gross merchandise volume, the value of all goods sold on eBay, increased 2 percent to $18.6 billion in the holiday quarter, topping analysts’ average estimates of $18.2 billion. The company said it had 132 million active buyers in the quarter, down 2 percent from a year earlier.

Iannone also is offering more advertising and payments products for eBay merchants in an effort to offset slowing growth on the platform. Advertising revenue of $393 million topped analysts’ estimates of $375 million and helped eBay boost profits even as it lost customers.

The shares rose about 4 percent in extended trading after closing at $44.39 in New York. The stock has increased 1.8 percent this year.

The company projected earnings of $1.19 to $1.23 a share on revenue of as much as $2.54 billion in the current period ending in March. Analysts, on average, estimated profit of $1.10 per share on sales of $2.54 billion.

By Spencer Soper

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EBay Falls After Holiday Revenue Outlook Misses Estimates

EBay Inc. issued a bleak revenue outlook for the busy holiday quarter, suggesting the company continues to struggle as it loses shoppers to larger rivals such as Amazon and Walmart.

A European Union law designed to clean up corporate supply chains has been derailed by some of the bloc’s biggest member states, forcing negotiators back to the drawing board on one of the most consequential pieces of ESG legislation ever attempted.

The Corporate Sustainability Due Diligence Directive would expose companies to legal liability if they fail to address environmental or human rights abuses in their value chains. Parliament and national representatives had reached a provisional agreement in December only for key member countries to withdraw their support on Wednesday.

Lara Wolters, the lawmaker in charge of steering CSDDD through the EU Parliament, said she was “outraged at the political games being played in Council today on due diligence,” in a comment posted on X.

The development represents a “flagrant disregard for the European Parliament,” she said. “Member states need to get their act together because time is running out.”

The fate of CSDDD now hangs in the balance with time running out before EU elections in June. All laws usually need to be finalised around three months beforehand. It’s unclear, however, whether the EU Parliament would accept a substantial rewrite of the text. Wolters said she will hold a press conference later on Wednesday to address the next steps.

Belgium, which holds the EU’s rotating presidency, had been trying to get Italy on side to get CSDDD over the finish line, despite last-minute German objections. Those efforts proved unsuccessful with both Italy and Germany — along with a number of smaller EU countries — citing concerns as to how such a law would affect the competitiveness of European businesses.

France also withdrew its support after insisting CSDDD only apply to much larger businesses than the current text requires, according to a person in the room who asked not to be identified discussing private talks. It’s likely that France’s conditions will be examined closely with a view to taking its concerns into account, the person said.

The outcome of Wednesday’s decision quickly drew condemnation from climate and human-rights activists.

“We now have to consider the state of play and we will see if it’s possible to address the concerns put forward by member states in consultation with the European Parliament,” the Belgian presidency posted on X.

“EU governments’ last-minute sabotaging and postponement of this new rulebook not only disregard the lives, communities, and ecosystems affected by destructive business practices, but also deal a blow to the EU’s credibility as a legislator,” said Uku Lilleväli, sustainable finance policy officer at WWF’s European Policy Office.

“Let’s be clear: the law wouldn’t burden companies with unnecessary red tape; instead, it would secure a level playing field and help firms navigate necessary transitions in an informed and responsible manner,” Lilleväli said.

By John Ainger and Frances Schwartzkopff

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Europe’s Push to Regulate Fashion’s Supply Chains Is in Danger of Being Derailed

A landmark piece of legislation designed to make companies accountable for labour abuses and environmental damage in their supply chains has faltered, reflecting growing political opposition to more onerous climate rules.

The Business of Fashion is pleased to announce the return of The Business of Beauty Global Forum, an invitation-only gathering bringing together 140 hand-selected senior executives, entrepreneurs and creatives from the global beauty and wellness industry.

Taking place from June 3-5, 2024 at Stanly Ranch, in Napa Valley, California the forum will be inspiring and highly curated. We are planning a transformative programme of provocative talks and interactive discussions to reimagine the beauty and wellness landscape, build meaningful relationships and create new business opportunities, with sessions including:

SESSION 1: OUR PLACE IN CULTURE

The definition of beauty is becoming more expansive and inclusive, with more points of view, a wide range of lifestyles and a full spectrum of identities to consider. In this session, we will explore where beauty is today and how the industry is being shaped by changing cultural and societal forces.

SESSION 2: INSIDE THE INDUSTRY

The beauty business has never been more competitive than it is now. In order to succeed, leaders need to bring a combination of radical thinking, innovative product and breakthrough strategies to chart their own path. In this session, we take a tour around the industry to meet the creative and executive leaders we can learn from.

SESSION 3: BEAUTY FROM THE INSIDE OUT

The wellness industry is booming. But amidst the hype around topics like longevity and psychedelics, customers are increasingly looking for clear solutions that are grounded in both evidence and science, and deliver results. In this session, we will examine the biggest opportunities in the wellness space and meet the innovators that are going after them.

The Business of Beauty Global Forum is an invitation-only event. To request an invitation to attend, click here.

The Global Forum is made possible in part by our partners Front Row and Stanly Ranch.