Hong Kong-based venture capital fund and startup incubator The Mills Fabrica is looking at high potential climate tech startups in Southeast Asia (SEA)—they are ready to invest up to US$3 million to develop sustainable textile and agrifood tech innovations.

Grown out of the Nan Fung Group textile legacy in Hong Kong, the company’s mission is to make a positive impact across the value chains of the textile and apparel, and agrifood industries.

“This is because both industries are significant contributors to climate change, emitting up to 44 per cent of global greenhouse gas emissions,” explains Cintia Nunes, General Manager, Head of Asia, The Mills Fabrica, in an email interview with e27.

“Therefore, with our mission of accelerating innovations for sustainability, environmental and social impact, we strive to support sustainable and disruptive innovations in ‘techstyle’—the intersection between technology and lifestyle—and agrifood tech, in the hope of bringing planet-positive impact.”

Some examples of its portfolio companies include Circ, which pioneered a chemical recycling technology that can recycle polycotton into reusable fibres, and The Supplant Company, which turns agriculture’s most abundant renewable resources such as corn cobs, oat hulls and wheat straw into replacements for the world’s most pervasive ingredients.

The Mills Fabrica also invested in Chinese agrifood tech VC fund Bits x Bites which has since backed 16 companies to accelerate their impact toward a more sustainable food system.

Also Read: Meet the 4 SEA startups of PepsiCo’s climate tech accelerator programme

This year, in addition to investing in the climate tech scene in SEA, The Mills Fabrica also plan to expand the model that was implemented in its impact retail platform Fabrica X beyond Hong Kong and London. The platform aims to redefine retail by using physical storefronts as a tool to educate the masses on sustainability and bring techstyle innovation to more people.

“Southeast Asia is definitely on our radar for Fabrica X’s next destination, where we can provide our value in supporting a flourishing techstyle and agrifood tech ecosystem,” Nunes says.

To understand more about The Mills Fabrica and what they are about, read the edited excerpt of the interview.

Can you tell us more about your investment strategy?

In terms of investment strategy, we understand there is also no one-size-fits-all approach, so we work with each business individually to see how we can best offer value.

But generally, we base our evaluation on the nine planetary boundaries and examine how the business’s innovation has an effect on solving any one of those areas. Key metrics for measurements also evaluate whether there is water use reduction, avoidance of greenhouse gas emissions, land use, eutrophication avoided, microplastic and chemicals.

All in all, what we’re looking for is whether the innovations are:
– Accelerating circularity
– Developing novel materials, processes, and manufacturing Systems
– Advancing alternative ingredients
– Promoting conscious consumption

And of course, whether there is social impact, like better health, wellness, and increased sustainability knowledge.

Also Read: Collaboration with corporates plays a crucial role in climate tech startups’ success

Of all regions, why do you choose to expand to SEA? Is there any specific opportunity that you aim to seize?

The Mills Fabrica reached our five-year anniversary this year.

While we’re looking out for innovative startups worldwide, we are drawn to SEA as we’ve seen in the past years the region’s rising ambitions to change the world for the better in these categories. So we’re eager to partner with these players and work with them to bring their innovations to the market.

Timing is critical too. As the world fast approaches the precipice of a climate tipping point, the production of fibres, food, and other associated inputs requires natural capital which has contributed to the precarious state of our social-ecological system.

This is why accelerating innovations for social-ecological resilience is now more urgent than ever.

Upon reflection, The Mills Fabrica has been supporting hundreds of startups over the years through our various activities. And in particular, through our investment and incubation programme, we have supported more than 35 techstyle and agrifood tech innovations.

Whilst our portfolio spans across the globe, given the infrastructure, manufacturing landscape, drive for change, and entrepreneurial spirit of the region, we believe Asia has huge potential to make a positive impact across the value chains of the textile and apparel, and agrifood industries.

We don’t limit ourselves to startups either — we also invest in mission-aligned venture capital funds too, where we can combine our offerings to accelerate change.

Also Read: How climate tech companies in Asia measure the impact of their work

What are the challenges that SEA green tech startups are facing? And how can The Mills Fabrica support startups in tackling these challenges?

There are a few challenges that most of these startups face:

Lack of understanding — definitely the major challenge for green tech startups, including those in SEA. While there are genuine interests in sustainability, there are also those who are interested out of necessity given corporate or societal pressures.

Real-life application – Weaving new innovations into daily lives or the adoption into businesses requires a lot of thought, networking, logistics, and capital.

Scalability – With high costs in R&D, these industries’ technologies can be costly as well, which can hinder the scalability and deployment of these innovative technologies in the mass markets.

In terms of how we support them in tackling these challenges, at The Mills Fabrica, education is an important pillar. We want to use our platform and resources to spread science-backed knowledge and messages about sustainability so more can understand and make more informed decisions.

For example, our Impact Retail store Fabrica X in Hong Kong and innovation gallery in London serve to solve the real-life application barrier. The physical locations serve to showcase and sell products made from the latest groundbreaking technologies and materials (including those from our portfolio companies of course).

It is also an educational platform to introduce new conceptions, such as biomaterials, to the wider public. Each store includes an experiential zone where people can get hands-on learning experiences that exposes them to new ideas and habits.

In addition, we also provide support for businesses by utilising our strong system of like-minded partners — brands, manufacturers, R&D, investors, and more, to help these startups overcome the above challenges in their industries, from scaling up to brand building.

Also Read: The key to tackling climate change: Electrify shipping

What are your advantages compared to other investors?

First, our presence and connections in Hong Kong and London mean that The Mills Fabrica can add unmatched value for businesses who are looking to tap into the potential of Asia and bring Asian companies into the global arena through our capital, connections, and expertise.

Second, our strong ecosystem partnerships. Throughout our five years of operation, we’ve built great partnerships with those from every aspect of the ecosystem – who are all aligned with and are working towards our mission of accelerating innovations for sustainability, environmental and social impact.

Given our industry expertise and connections, we can also connect them to manufacturers and raw material providers that adhere to our philosophy and standards to ensure a truly sustainable approach at every step of the supply chain.

Our network also allows us to provide support for businesses by utilising our team of global industry experts and connections to like-minded retailers, investors, brands, academia, NGOs, research institutions, funds, etc.

All of them work with us to provide our portfolio companies with the knowledge and network to help them overcome challenges in their industries and understand the importance of combining artistic vision, innovative ambitions, and business understanding.

We are also happy to share that over 50 per cent of The Mills Fabrica investees receive successful subsequent fundraising.

What is your target for SEA?

We are not looking to limit ourselves to a certain number. Instead, we focus on evaluating each company’s technology and potential. Our ticket size is up to US$3 million in direct investment for startups, and we don’t have a specific number or a cap in mind.

So far, we’ve supported more than 35 techstyle and agrifood startups and invested up to US$3 million per startup through our investment and incubation programme.

Also Read: How to navigate the investment opportunity in climate tech sector

As the ecosystem is dealing with funding winter, do you see any changes in how investors are approaching green tech startups?

While the investment landscape has slowed down, interest in sustainability is soaring.

With more and more companies have now sprung up to accelerate the transition to the green economy due to the pressing challenges from climate change and population growth, investors have increased interest in green tech startups but at the same time also being more prudent in evaluating startups’ technology and potential.

As the green tech industry is still relatively new in the investment landscape, we firmly believe that more knowledge should be made available, so companies and the public can understand and make more informed decisions.

That is why The Mills Fabrica has recently launched our first-ever Impact Report, which advocates for standards and frameworks specifically for measurement and evaluation in the textile & apparel and agrifood industries. Only by having those standards and frameworks in place can we understand and measure how investments can bring in positive environmental and social impact.

It is certainly our priority to bring these standards to the wider industry so that we can all take our own steps in making a genuine difference for our planet.

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Image Credit: The Mills Fabrica

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