Katherine Homuth has raised US$200-million for her innovative textile company Sheertex Inc., which aims to replace nylon tights with an unbreakable alternative, sideline waterproof fabric heavyweight Gore-Tex and rejuvenate Montreal’s ancient garment business.
But while Sheertex, known as SRTX, counts fashion icon Chip Wilson, Swedish retail giant H&M Group, and clean technology venture capitalists, among its investors, it hasn’t raised institutional money in its home province – until now.
On Tuesday, Montreal-based SRTX announced it had secured US$50-million in financing anchored by US$25-million from the Quebec government’s investment arm, Investissement Quebec.
IQ “is proud to support a company like Sheertex that is always looking to innovate, increase productivity and develop its international potential,” the agency’s chief executive officer, Bicha Ngo, said in a statement.
IQ has financed a range of companies across many industries operating in the province. But while Montreal has long been Canada’s garment trade capital, the “textile, clothing and leather products” category has been a laggard on IQ’s books, drawing the lowest or second-lowest level of financing from the agency among all secondary manufacturing sectors in 11 of the last 12 years.
It’s the start of a key partnership with Quebec for SRTX, five years after it quietly slipped into Montreal, relocating to a former Gildan Activewear hosiery plant from Ontario’s Muskoka region. After the pandemic hit, SRTX focused on existing investor relationships and becoming economically viable.
But it “wasn’t yet at the stage where IQ could convince their investment committee they should be writing a cheque, said Murray McCaig, managing partner with investor ArcTern Ventures.
SRTX began building local relationships after hiring Montreal-based finance executive Timothy Leyne as chief financial officer in 2022: “He knows how to navigate the political ecosystem that is the funding landscape,” said Ms. Homuth, the founder and CEO. “This never would have happened without him.”
Paul Desmarais III, a key figure in Montreal’s tech sector, also helped Ms. Homuth make local connections: “She has done a lot out of very little,” said Mr. Desmarais, a senior executive with Power Corp. of Canada and board member with Endeavor Canada, which champions promising high-growth entrepreneurs such as SRTX’s CEO. “She hustles.”
Ms. Homuth said “we need to have the support from Quebec to get the power we need, the approvals we need to move faster on construction and to get the word out on employment. It means a lot to us and our employees to understand our commitment to Quebec.”
Quebec’s textile and clothing manufacturing sector is in a funk. Productivity, profitability and the number of companies – mostly small and medium enterprises – have declined since 2020, according to a new report by the Sectoral Workforce Committee of the province’s textile industry. The industry has an aging work force, higher-than-average unemployment and pays relatively low salaries. Research and development and digital transformation lag other sectors.
Against that backdrop, SRTX offers promise and renewal. It makes leggings from ultrahigh-molecular-weight polyethylene (UHMWPE), the same material used in bulletproof vests – which last longer than nylon tights, which tear easily. It has also developed an impermeable layer called Watertex it hopes to sell as an ecologically superior alternative to Gore-Tex and other waterproof materials that are made from perfluoroalkyl and polyfluoroalkyl substances and don’t break down in nature.
SRTX has developed innovative processes and software to power its manufacturing and is developing a method to recycle used products from customers to make new apparel, sparing it from landfills, where a lot of fast fashion ends up.
The company, founded in 2017, gained its initial following selling tights directly to consumers online. It is now transforming its business to supply directly to retailers. H&M, Costco, Walmart, Holt Renfrew, Macy’s and Kim Kardashian’s SKIMs banner already stock its leggings.
To succeed in wholesale, SRTX has driven down production costs, bolstered by automation and inexpensive Quebec hydro power. Costs fell to about US$10 a pair last year from US$75 in 2019, and the goal is to get to US$6 after opening a vertically integrated plant in Pointe Claire, Que., this year. SRTX is on target to extrude all of its own raw material for the first time this month, turning the polymer into spools of thread itself, and reach operating profitability in late 2025.
Ms. Homuth said she expects SRTX to triple sales to six million units next year, making up for lower revenues from wholesale clients than online shoppers pay: “The top line doesn’t matter as much as making sure the bottom line economics work.” Getting there “has been a dream for a long time and it’s so close you can taste it.”
If things go as planned, she anticipates increasing production to the facility’s annual capacity of 20 million units and opening a similar operation near Milan to serve Europe: “I just want the next year to happen faster.”
Source: Globe & Mail
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