An investor who has spent 15 years betting on the hidden machinery of the clothing business says change won't come from the big brands. It will come from shipping containers, small factories and people with large followings. When Lisa Morales-Hellebo began pitching investors on technology for the apparel supply chain more than 15 years ago, some of them laughed. Clothing, they told her, was sewn in poor countries by underpaid workers, and nothing about that was going to change. She took it as a sign that she was early. "Your ignorance is my opportunity," she said. Today her firm, Refashiond Ventures, holds stakes in 76 start-ups, and it is preparing a second fund it hopes will reach $50 million. Five of its companies are microfactories: small, heavily automated production sites that can make goods close to where they are sold, in quantities that would make a conventional factory lose money. Ms. Morales-Hellebo believes no other fund can claim as many. The bet, as she describes it on a recent episode of the Fabric of Value podcast, is less about sustainability than about survival. "The only certainty is risk," she said. A head start on demand Ms. Morales-Hellebo traces her interest in how things are made to her family. Her relatives were pig farmers and seamstresses in Puerto Rico, many of them living below the poverty line. Her grandmother sewed for a living in the South Bronx. As a girl, she made her own doll clothes and bedding because, as she put it, if she wanted something, she had to figure out how to make it herself. After Carnegie Mellon, she spent three decades in technology, including a stint during the first dot-com boom at a Procter & Gamble skunk works experimenting with personalized, made-to-order cosmetics, skin care and fragrance. That was in 1999 and 2000, long before "on-demand" became a pitch-deck staple. The experience convinced her that producing goods after a customer buys them, rather than before, changes not only a company's margins but the customer's attachment to the product. She later founded the New York Fashion Tech Lab, in 2014, and then turned to the supply chain itself after concluding that brands had little reason to fix factories they did not own. Only two forces, she decided, could push the industry to change: regulation or disruption. She chose disruption. Refashiond's first fund was designed as an education. It wrote checks of roughly $25,000, structured as a rolling fund in which each quarter's capital forms its own vehicle, and spread them across data and artificial intelligence, advanced materials, advanced manufacturing and logistics. The firm learned that it had the most influence when it invested earliest, before larger funds with board seats filled the cap table. Factories in a box The microfactories in the portfolio vary widely in what they make, but they share a premise: fewer steps and fewer outside dependencies. Guildform, in Detroit, makes fine jewelry to order. Its founder, a jewelry designer, built the facility for less than $2 million, combining 3D printing with hand finishing and writing her own software to run the floor. The company now connects to Shopify, so a creator can sketch an idea, turn it into a production-ready file with the help of AI tools and send it to the factory. Guildform is licensing its system to other jewelry makers and, according to Ms. Morales-Hellebo, already produces for some of the world's largest luxury houses. Mothership Materials starts much further upstream. Its technology, adapted from a device originally developed to treat sickle cell anemia in remote areas, uses a centrifuge to separate plant waste at the molecular level, without chemicals or heat and with little water. A single shipping container, running on roughly the power of three washing machines, can turn agricultural waste into as many as five raw materials at once, including cellulose, lignin and pectin. Simplifyber picks up where Mothership leaves off. Its machine takes liquid cellulose and molds it directly into finished soft goods such as shoe uppers, protective equipment, packaging and car interiors for Kia. The company went from idea to Series A in three years on less than $4.5 million, a fraction of what hardware-and-chemistry start-ups typically need. Put the two containers side by side, Ms. Morales-Hellebo said, and you have a complete supply chain for soft goods that can be set down almost anywhere waste exists. She described a Navy ship printing drones from a few containers of 3D printers. The question, she said, is what happens when the filament runs out. A ship always has food waste. "Everyone's assuming that the bioeconomy is about sustainability and doing the right thing," she said. "I'm like, screw that. It's about national security." The pilot trap The harder problem is not the technology but the buyers. Carl Warkentin, the podcast's host and chairman of Rodinia Generation, a network of automated sewing microfactories, said his company holds sizable offtake agreements from major brands, and that those brands are eager to invest once more factories are running. But moving from a demonstration plant to industrial scale takes time, and that gap, he said, is where much of the circular economy stalls. Ms. Morales-Hellebo was blunt about why. "You're asking a legacy industry to disrupt itself," she said, "which has never in history happened." Mr. Warkentin argued that investors are looking for demand in the wrong place. Since moving to Los Angeles, he said, he has spoken with dozens of creators and creator agencies. People with a few hundred thousand followers can earn substantial sums promoting other companies' products. With AI-generated imagery, a Shopify store and a factory that produces only what has already been sold, those same creators could launch their own labels with high margins and almost no inventory risk. From a handful of agencies alone, he said, he could fill several factories in California. Investors, though, keep asking whether the market is big enough. Ms. Morales-Hellebo answered with an analogy. Established brands believe they are doing fine, she said, "until all of a sudden, somebody came along and built Netflix and you were Blockbuster." She pointed to Shein, which she said had missed its window for an initial public offering and faced a sharply reduced valuation, as evidence that speed and low prices have a shelf life. The company she admires is Quince, which sells everything under a single storefront and stands, in her view, for one thing: quality at factory-direct prices. The lesson for brands, she said, is to decide what they mean to customers, then build the supply chain backward from there. Creativity as the scarce asset That logic shaped Refashiond's investment in Fabra, an AI design platform started by former Canva employees in Australia. Ms. Morales-Hellebo said she reviewed about 20 design-to-production platforms before choosing it. Most, she said, help big retailers design to spreadsheets and margins. Translating a sketch into a technical package and routing it to a factory will soon be commoditized, she said, probably through a common software layer. What will not be commoditized is original work. "AI is all the world's knowledge and none of its genius," she said. She expects brands to compete for creative talent the way they now compete for influencers, and noted that not every creator will want to become a brand. Banksy, she pointed out, is famous for his work, not his face. What doesn't lie Another part of the portfolio addresses a quieter problem: nobody can be sure what clothes are made of. Sortile has built a tabletop device that identifies the fiber composition of a textile in seconds, a test that otherwise costs thousands of dollars and takes weeks at a lab. Its data, she said, show that about 40 percent of textiles do not match their bills of materials. Without that kind of verification at every step, she argued, the digital product passports that European regulators are pushing are meaningless. "The only thing that doesn't lie is a physical object," she said. Small is fast If the large brands will not move first, Ms. Morales-Hellebo believes family-owned manufacturers might. Some have been in textiles since the 1800s. They have patient capital, fewer layers of approval and, often, an interest in the legacy they leave. Refashiond has seen growing interest from such families, she said, both as investors and as partners. "If you want to get a billion gray hairs, go to big brands," she said. "If you want to get shit done, you go to small businesses." Small, she added, can still mean hundreds of millions of dollars in annual revenue. She ended on what she sees as a blind spot in venture capital. The industry, she said, is fixated on AI and defense technology, and much of the most promising work is being done by founders, many of them women, who rarely get a platform. She is putting her money on the two things every person touches every day: food and clothing. A few things to check before publishing: the transcript garbles some names, so I spelled the textile scanner as Sortile (the transcript says "Swartile") and left out the Guildform and Mothership founders' names and Quince's COO, since I couldn't be sure of Contact Us This is interactive content - send us your questions to the guests and we record another session just focusing on your questions! You have suggestions for new guests or want to sponsor the show? Contact Carl via LinkedInThanks for listening and keep podcasting!
