Daydream, a new AI-based shopping platform from retail and e-commerce veteran Julie Bornstein, has raised $50 million in seed funding.

Co-leading the round were Forerunner Ventures and Index Ventures, while GV — the venture-capital arm of Google parent Alphabet Inc. — and True Ventures also participated.

Full details on Daydream, which is set to launch in beta this fall, haven’t yet been revealed, but Bornstein said it will be a search and discovery platform for fashion that’s inherently built on the capabilities of generative AI, rather than just seeking to tack AI features onto the usual e-commerce experience. It will use advancements in AI fields such as natural-language processing and computer vision to allow shoppers to search for products in different ways using text and images and narrow down results through conversation with an AI agent, which Bornstein said will be more than the standard AI chatbots that understand context and recommend products from a retailer’s catalogue.

Bornstein’s last e-commerce venture was The Yes, an app that used AI to personalise the products users saw in their feeds. In 2022, Pinterest acquired the company for $87.6 million, and Bornstein joined the social network as its chief shopping officer. She moved into an advisory role in January 2023 and left Pinterest in July of that year, starting work on Daydream that month.

“We are taking a big swing, and we think this is the right time to do it,” she said.

Daydream won’t carry inventory but will collect a commission on sales, which will still happen on the sites of its brand and retail partners. Nearly 2,000 brands spanning emerging Gen-Z labels to luxury are already part of its catalogue through partnerships with retailers and the brands themselves, including Net-a-Porter, Alo Yoga, Altuzarra, Jimmy Choo and Doen. The aim is to ultimately have every brand and retailer as a partner, according to Bornstein.

Funding has continued pouring into generative-AI projects, even as investors have grown choosier and pulled back overall. In the first quarter of 2024, total venture-capital investment in generative AI reached $3 billion globally, according to an estimate from EY.

Many start-ups in the space are either building foundational AI models or business-to-business applications, but Bornstein said they wanted to go after one of the first big consumer-facing plays based on the technology. Her co-founders in the start-up — Matt Fisher, Dan Cary, Lisa Green and Richard Kim — have backgrounds spanning technology and retail, with time spent at companies including Microsoft, Amazon, Google and The Yes.

“What’s really exciting is when you have the combination of a great team with a very relevant and justified use of AI,” said Danny Rimer, partner at Index Ventures. (Index Ventures is an investor in The Business of Fashion.)

Index Ventures reached out to Bornstein before it knew she was working on Daydream, according to Rimer. It had come up with a thesis that AI would enable big advancements in e-commerce, which it believed hadn’t fundamentally changed in two decades. It contacted Bornstein because of her long experience in retail and e-commerce, including executive roles at Stitch Fix, Sephora, Nordstrom and Urban Outfitters.

“We were absolutely convinced by Julie and by the Daydream founding team,” he said.

Augustinus Bader, the skincare label co-founded by a former BTG Pactual banker, is on track to grow by as much as 40 percent this year as the upstart brand shrugs off a slowdown in high-end cosmetics.

Despite cooling demand for premium skincare brands at bigger beauty groups such as L’Oréal SA or Estée Lauder Cos, Augustinus Bader is benefiting from its image as a “new cool kid on the block,” whose clientele in the US in particular is very loyal, co-founder Charles Rosier said in an interview.

A 1.7 ounce (50 ml) bottle of the brand’s “it” product, The Rich Cream, sells for about $300 at Sephora. The US represents its biggest market, generating about 60 percent of sales, Rosier said.

Augustinus Bader’s products, presented in blue and copper-coloured packaging, have been endorsed by Hollywood celebrities such as Melanie Griffith, who initially invested in the brand along with her former husband Don Johnson. Founded in 2018, the brand carries the name of its other co-founder, Augustinus Bader, whose research at the University of Leipzig in Germany led him to create a gel to treat burnt skin, Rosier explained.

The founders and French businessman Jacques Veyrat own a majority of the company’s capital, Rosier said. Other investors include billionaire telecoms entrepreneur Xavier Niel, Antoine Arnault, who heads image and communication at LVMH Moët Hennessy Louis Vuitton SE, and Diageo Plc Chairman Javier Ferran, Rosier said.

Veyrat is in exclusive talks to sell the renewable energy company Neoen SA, and stands to pocket €2.6 billion from the transaction.

Augustinus Bader’s net sales should range between $130 million and $140 million this year, up from about $100 million in 2023, said Rosier. The former partner at Brazil’s BTG Pactual sees the company’s Ebidta at about $15 million in 2024.

The brand doesn’t have financial constraints and the owners are in no rush to sell, Rosier said, though he didn’t rule it out in the future. “If at some point it could accelerate growth and we could use the help of a bigger group, and it’s in the interest of all shareholders to do it, then why not?” he said.

By Angelina Rascouet

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If you want to sell a Helmut Lang jacket on a resale site, you have to photograph it, write out a description and price it, which isn’t always straightforward. There are different levels of value for a Helmut Lang jacket designed by Lang himself, one designed by an anonymous studio team after his departure and one designed recently by new creative director Peter Do, even though they all carry the same label.

For resale businesses, the manual work involved, including inputting product details and research to determine the best price, can contribute to high operating costs that strain profitability. For peer-to-peer marketplaces, the effort can be a deterrent to sellers seeking easy cash from items they no longer wear.

The tech start-up Truss says it has a solution, and it’s getting the chance to prove it through a £1 million ($1.27 million) grant from the UK government’s innovation agency as well as support from Depop, Selfridges and The University of Warwick. The idea is that, using artificial intelligence, Truss can identify any garment just from a picture, provide full product details and say what it typically sells for online and how long previous listings have sat based on data scraped from resale sites.

Secondhand companies have tried to automate some of this work for years. The RealReal has invested in automating tasks like copywriting and pricing. Ebay lets users type in the title of an item and suggests listing details, including a selling price.

Truss, however, wants to build a data infrastructure for the entire secondhand market that users tap into with only a photo.

“We are providing them an opportunity to test some of this stuff in the wild,” said Alice Jacques, Depop’s director of machine learning.

The idea of being able to quickly identify any fashion item simply through a photo has become increasingly feasible with advances in the AI fields of machine learning and computer vision. They’ve figured into innovations from self-driving cars to Google Lens, which now lets users snap a picture of any fashion item and locate it, or at least something visually similar, online.

Truss effectively works on the same idea, but instead of searching the internet for a match it searches its fast-growing database of fashion items, which already totals more than 50 million products, some dating back decades, according to Woody Lello, Truss’ co-founder and chief executive. It started out using off-the-shelf AI software for the job, but those algorithms have shortcomings, like struggling to identify something as the same garment if it’s on a hanger in one picture and laid out on the floor in another. With the money from the grant, Truss is building proprietary algorithms.

Its biggest challenge, though, is building up that product database. It needs images of every item it hopes to identify as well as product details. Selfridges and Depop are providing some information, but Truss also scrapes websites and has direct plug-ins with other partners. All product images need to be tagged properly, too. The company uses a mix of AI and a worker service in Ghana that Jackson said is there to do quality assurance. The workers make sure photos identified as the same product are indeed the same item, and that the tagging is correct.

For Depop, the hope is that Truss’ technology could help its users and further some goals Depop is pursuing behind the scenes. Jacques noted that Depop sellers are frequently on Reddit asking questions about an item’s rarity to know how to price it, and many feel intimidated by the blank page they face when they have to describe a product. It wants to smooth that process, potentially even getting to the point of one-click listings, though it’s working out how it might do that without sellers losing their individual tone of voice.

Depop is also constantly working to improve its ability to surface the right items in shoppers’ searches. Its algorithms rely on behavioural data from its users and data from the listings themselves, but while it has a handle on the behavioural data, it still has work to do on the listing data, Jacques said. The way sellers label and describe their products can vary greatly, as can two images of the same item. Given that the company has about 34 million products in its catalogue, it results in a huge amount of unstructured data. Truss’ more standardised data could be a valuable complement.

Selfridges would have its own potential uses for the technology. The retailer has embarked on an ambitious plan to have 45 percent of transactions come from products made with recycled materials or from services like resale, repair or refills. (In 2022, less than one percent of transactions came from those sources.) But as its resale business scales, so does the work that comes with it. Selfridges is counting on Truss to make the process more efficient.

With high-end items, there’s also valuable additional context that doesn’t apply to mass-market items, like the season they’re from or which celebrities wore them, Lello said. Filling in the correct information and pricing it accordingly takes time, which equates to costs.

“We can provide all of that rich information instantly, meaning that someone listing the products would no longer have to do that,” said Felix Jackson, Truss’ chief operating officer and another of its co-founders. (There are four total).

Truss will have the opportunity to prove that claim to its partners, and Lello said he also hopes the company can find a place in the ecosystem of companies building digital product passports for fashion items. The project is gathering urgency as the EU looks set to mandate these digital identities amid a bigger move toward ensuring greater traceability and transparency in industries like fashion. Those efforts all focus on new products. Truss wants to extend a similar notion to millions of items already circulating in the marketplace.

When Europerfumes founder Vicken Arslanian purchased the shuttered fragrance brand Commodity in 2019, he didn’t have much of a plan on how to revive the cult line. But he did know one factor was key to unlock the brand’s future: get back on the shelves of Sephora.

“Sephora doesn’t leave success for chance,” he said. “They’re working with a brand on a consistent basis, to talk about activation, to talk about in-store visual merchandising, to talk about sampling, all of the above.”

After a brand refresh, which included a logo update and new scent profiles, Commodity made its Sephora comeback in 2022. Like countless other retailers, including department stores and discount shops, Sephora stocks fragrance scents from giants like Dior and Tom Ford, but the inclusion of Commodity — with its accessible price point, limited availability and scents that straddle the boundary between niche and mainstream — exemplifies much of what has made Sephora’s fragrance offering distinct today.

“They understood, before a lot of the competitors, that niche is going to be the mainstream of tomorrow,” said Romano Ricci, founder of Juliette Has a Gun, which has been sold at Sephora since 2016. Juliette Has a Gun was part of an early wave of fragrance brands to debut in Sephora like Kayali in 2018, Boy Smells and Phlur in 2022, and Nette in 2023.

“What the client has told us over time is they love to discover things with us,” said Alison Hahn, senior vice president of makeup and fragrance at Sephora. “What we started to do was take our knowledge and our passion about incubating brands into the fragrance world.”

Getting onto Sephora’s shelves means playing by Sephora’s rules, however.

“They are probably the most demanding client that we have in terms of timing,” Ricci added. Joining Sephora means not only having the inventory to match its sizable audience, he noted, but also the resources to participate in its robust sampling program and deliver assets months ahead of schedule.

“Your marketing team needs to have a foundation, you need to ensure that you can support the growth, with that obviously comes inventory, with inventory comes upfront investments,” said Dedcool founder Carina Chaz, who launched at Sephora in 2022. “Some brands can’t make it because they don’t have infrastructure.”

For brands that can meet those demands, the payoff can be immense. Ricci estimates that Juliette Has a Gun distributes roughly 1.7 million samples through Sephora each year. According to Arslanian, Sephora — the exclusive retailer for Commodity outside of its own ecommerce platform — accounts for around 65 percent of the brand’s $10 million in annual sales. Chaz says Sephora now drives 40 percent of overall sales for the laundry-turned-fine-fragrance line.

But the rest of the beauty world is catching onto indie fragrance’s mainstream appeal; last year, Ulta Beauty brought on DTC fragrance line Snif, and in April expanded the brand to all 1,385 of its stores across the US. Later this month, the retailer will welcome Noyz, the unisex, vegan fragrance line developed by beauty incubator Beach House Group and perfumer Jérôme Epinette. According to Ulta’s earning report for the first quarter of 2024, fragrance comprised 10 percent of the retailer’s $2.7 billion in net sales.

Sephora in turn is setting its sights on more fragrances outside the youthful, under-$100 scents that make up much of its offering. This fall, the retailer will welcome Montale, betting that its audience is willing to spend $180 on the French niche brand’s powerful oud and floral scents.

“When you talk about the Neimans and Saks of the world, they have to experiment with how low they can go [in price],” said Arslanian, whose company Europerfumes is the US distributor for Montale and Juliette Has a Gun. “With Sephora, how high is high?”

Indie Incubation

When Mona Kattan launched Kayali with Sephora in November 2018, she recalls fragrance was “a dead category” compared to the likes of skincare or color cosmetics. She had faith in the sector’s eventual growth, but her line of Middle Eastern-inspired perfumes was not an instant hit among North American consumers.

“[Sephora] told us, ‘Let’s make a fruity floral together.’ Because fruity florals do really well in the North American market, and it’s not my typical type of fragrance that I create,” Kattan said. The resulting fragrance, Eden Juicy Apple, launched in December 2021 and is now one of the brand’s top four scents in North America. The following year Kayali was given shelf space at Sephora on a trial run, precious real estate among newer brands. Currently, the line is negotiating for more space.

While Sephora is drawn to founders with a strong point of view like Kattan, the retailer also takes an active role in its brands’ success, offering advice on how to spend marketing dollars, how to price fragrances and guidance on the naming and commercial viability of a given fragrance.

By cultivating those rising indie brands, Sephora has in turn benefitted from their ability to quickly catapult on trends, like the minimal skin scents of Phlur’s Missing Person or sweet gourmands like Kayali’s viral hit Yum Pistachio Gelato.

“They are agile, they can pivot, they can really identify the trends,” said Lisa Payne, head of beauty at trend forecaster Stylus, of emerging lines. “They don’t have all of that red tape that’s holding traditional or big or heritage brands back.”

Sniffing Out the Future

Identifying trends goes beyond banking on just scent families. In 2023, Sephora launched candle brand Nette’s debut fine fragrance line, which claims to improve mindfulness and well-being; earlier this year, the retailer welcomed Charlotte Tilbury’s “mood-boosting” fragrance line. Ulta Beauty, too, is on this trend, launching Bella Hadid’s Orebella in May.

And the timing couldn’t be better: according to research from Stylus, 71 percent of fragrance consumers are looking for a scent that lifts their mood; 50 percent are interested in fragrances that they link to physical or wellness benefits.

But there is one growing sector of perfume Sephora has all but sidestepped: celebrity fragrances. While some recent celebrity launches from the likes of Harry Styles and Victoria Beckham have gone for high-end retailers like Dover Street Parfums Market and Bergdorf Goodman, many celebrity perfumes, from Hadid’s Orebella to Kylie Jenner’s debut fragrance, are camped out at Sephora’s main competitor, Ulta Beauty.

For Payne, steering clear of the celebrity category is wise for Sephora, even if it leaves potential money on the table. “If they were to open the floodgates and let through lots of different designer [scents], very ultra mainstream fragrances and lots of celebrity fragrances, then independent fragrance brands might not necessarily want [their] products aligned.”

And Payne adds that fragrance prices are upwards into the luxury sphere versus affordable celebrity scents, even amongst younger consumers.

Ricci, who is also co-owner of Parisian niche perfume retailer Nose, is skeptical however that Sephora can speak to that top echelon of the market. In 2018, Sephora brought on Estée Lauder-owned Kilian, whose $300 perfumes remain something of an outlier in its fragrance offerings. “I don’t think that Sephora is really optimized for that. I think today with Juliette, we are almost below the mainstream price, so it’s a good fit,” said Ricci.

Time — and sales — will tell if the fragrance consumer is willing to go to Sephora rather than Bergdorf for high-end scents, like Montale.

“The audience will dictate this,” said Payne. “Sephora is going to host the brands that it knows its audience likes. And predominantly, it’s going to choose the products that have a little bit more commercial value.”