Fashion startups Fashinza, Virgio to return capital to investors after failed pivots

Two prominent fashion startups, Fashinza and Virgio, have announced plans to return a significant portion of the capital they raised from investors. 

The decision comes after both companies attempted to pivot their business models away from their original plans, which failed to gain the expected traction. Despite being backed by heavyweight investors such as Accel and Alpha Wave, the startups have struggled to find a sustainable path forward in the competitive fashion industry.

Last year, Fashinza raised $30 million in funding from Mars Growth Capital and Liquidity Group.

Failed business models

Fashinza and Virgio initially raised funds to disrupt the fashion market with innovative business models. Fashinza, a B2B fashion startup, aimed to connect suppliers with brands, while Virgio, under the leadership of former Myntra CEO Amar Nagaram, sought to make a mark in the fast-fashion segment. It offers casual, partywear, loungewear, sportswear, and ethnic clothing for both Men and Women.

However, both startups faced significant challenges, with Fashinza attempting to become a manufacturing startup and Virgio pivoting to circular fashion, focusing on sustainability practices like recycling and reducing waste.

Returning capital to investors 

The decision to return investor capital is a reflection of the startups' inability to execute their original visions successfully. Fashinza, which was last valued at around $300 million, and Virgio, which raised close to $40 million in funding, have both initiated processes to return a part of the remaining capital to their investors.

The move is aimed at optimizing their capital structures and refocusing their business strategies towards more viable models.

Impact on valuations and operations

The pivot and subsequent decision to return capital will have a significant impact on the valuations of both Fashinza and Virgio. Fashinza's cofounder and CEO, Pawan Gupta, acknowledged that the company's shift towards manufacturing would necessitate a reset in valuation.

Despite the challenges, Gupta remains optimistic. He said that the company expects to retain enough cash to sustain operations for two years, with a reduced need for capital expenditures on marketing and other non-core activities.