Success in the textile manufacturing business has always depended heavily on identifying and minimizing waste. But in recent years, attention paid to the responsibility the clothing industry bears for the sustainability of the planet has made efficiency even more vital.
Enter Smartex, a small startup from Portugal, that with the help of some big investors is bringing state-of-the-art artificial intelligence technology to vastly improve what, in many places, is still done by human workers.
With its high-resolution cameras and light analysis technology capable of revealing defects even “invisible to the human eye,” Smartex’s AI circular knitting machine inspector allows apparel manufacturers to identify defects in garments—be they oil stains, holes, or compromised yarn and thread—as they pass through circular knitting machines. When these flaws are spotted early, corrections can be made and countless tons of defective clothing can be saved from the trash heap that makes the textile and fashion industry one of the world’s worst polluters.
Smartex said its product has already saved 2.7 million kilowatt hours of energy, 33 million liters of water and 300,000 kg of fabrics, resulting in a 650,000 kg reduction in carbon dioxide emissions in the mere four years since its launch.
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It’s this environmentally minded approach that prompted Paul Murphy, partner at Lightspeed Venture, to leverage his investment group’s weight behind a Series A funding push for Smartex to the tune of $24.7 million.
“Lightspeed is looking for investments that offer innovative ways to meet ever-growing global demand while also reducing environmental impact,” Murphy wrote in a blog on medium.com. “So far, Smartex’s only problem is that they can’t deploy machines fast enough to meet demand. The infusion of nearly $25 million in Series A funding should help them unlock the growth they need to scale.”
At the origin of it all is a 25-year-old who couldn’t come from much more meager roots. As a teenager, Gilberto Loureiro worked in the same textile factory in a small city in the north of Portugal where his parents still work today.
“When I was working in the factory, I was like, ‘this is really tough.’ At the inspection stage, which is the worst to be in, by the way, you see mistakes produced five hours ago and so you can’t really solve anything,” Loureiro told Sourcing Journal. “And then when I learned the gross margins of factories, it blew my mind. For every roll that was rejected you needed to produce like 20 good rolls of fabric just to cover the yarn costs of that defective roll.”
But it wasn’t until Loureiro left for university, where he met Antonio Rocha and Paulo Ribiero, who would become friends, roommates and co-founders of Smartex, that the idea of doing anything about the factory problem crossed his mind.
“When I was promoted to the inspection stage, that was the moment I realized I really don’t want to do this for the rest of my life,” Loureiro said. “I was super lucky to go to college and study physics and finance and I lived with two guys and we got along together.”
Rocha would find his niche as the ‘product guy’ and Ribiero as the ‘software guy’ and the friends continued to plot how to fix the problem of waste in textile factories even after college. Loureiro says these days the three can “read each other’s feelings.”
“We realized it wasn’t just about software, we needed to build the entire stack,” Loureiro said. “We needed like $30 million, but our parents are super poor, have no money, so we were like, ‘OK, we can’t do this by ourselves,’ but we heard about the concept of investors and receiving external investments.”
Venturing out, the trio found that, contrary to popular belief, getting venture capital support isn’t about chasing investors—it’s about getting investors to chase them. So, at the suggestion of their first investor, they did their first install in China and other investors took notice.
“Investors look at founders and the ones willing to go our of their comfort zones,” Lourerio said. “Just the fact that we went to China to create the first version of our products; when they see these kids are willing to give their lives for this, we started being chased by VCs in Silicon Valley. Then we moved to Silicon Valley.”
The investor who wound up leading the charge was Build Collective’s Tony Fadell, co-inventor of Apple’s iPod and iPhone alongside Steve Jobs, who saw something similar in what these working-class kids from Portugal were up to.
“Tony took the iPhone and the iPod and created something scalable that was super-cheap and he needed to build the entire supply chain to do that. Basically, we’re doing the same thing with textiles,” Lourerio said. “Our hardware is not off the shelf; we’re building it ourself and [deploying] it to textile factories, and that made it so special to bring Tony on. Lightspeed Ventures, we chased them because they are truly a global fund.”
Murphy said Lightspeed’s investment came as a result of the enthusiastic support of Fadell.
“Tony saw something special in Smartex and suggested we co-lead this round, something his fund rarely does,” Murphy wrote. “Everyone who sees a Smartex machine in action wants one for their factory.”
Standing out from the alphabet soup of venture capital investors in the $25 million Series A round is Swedish retailer H&M, considered to be among the chief contributors to the ‘fast fashion’ scourge and often accused of ‘greenwashing’ its image as it relates to the environment. Major fashion labels such as Calvin Klein and Tommy Hilfiger have also been part of discussions with Smartex to lessen their carbon footprints.
Loureiro said his company doesn’t care about reputations—rather, it’s looking for commitments.
“We’re not looking for logos; we’re looking for partners to put their money where their mouth is,” Lourerio said. “If you look at H&M, it’s not because they’re evil or stupid, they just don’t have the tools to properly track [the supply chain]. We don’t mind if H&M is using us for marketing [as long as] they’re walking the talk and helping us get suppliers to be cleaner. We want to be surrounded by people who are as obsessed by the problem as we are.”
That ‘obsession’ helped earn the Smartex co-founders a spot on Forbes.com’s 30 under 30 Social Entrepreneurs list, highlighting the best young business minds with an eye for sustainability and fighting climate change.
“In fashion we see waste pollution and it’s sad, but it’s very important to understand that’s not the problem; it’s a consequence of the real problem which is that this industry doesn’t have the tools to tackle,” Loureiro said. “It’s not just about inspection—that was never the goal. The goal is to do the factory of the future.”
Loureiro says one of his company’s circular knitting machine inspectors will cost about $15,000 and most customers will realize ROI within one to two years.
He says it doesn’t take any skilled labor to manage on-site, and as a former inspection line worker himself, he says none of his customers to date have eliminated a position held by a human as a result of installing the inspecting machine.
“If you create a savings on the yarn you like the ROI and you end up not firing anyone,” Loureiro said. “We have a huge amount of respect for our customers. They need to be as lean as possible. Every single minute of production counts because margins are so tight and we keep that in mind.”
Loureiro doesn’t have much time these days to think back on how far he’s come from his humble roots, but every once in a while he’s reminded. He recalls a time recently when he was on his way to close a deal with an investor in San Francisco and was on the phone with his mother back in Portugal.
“Her advice was, ‘don’t forget your jacket,'” Louriero said. “[My parents] don’t really understand all this. They’re such humble people and they keep their lives simple.”
The advice he’d give the next Gilberto Louriero is to never become the ‘smartest person in the room.’
“I try to surround myself with people who inspire me. Keeping intellectual humbleness and always seeking for more. When we are the smartest guy in the room, we are out,” Louriero said. “If you are not learning, you are in the wrong place, no matter your age. There’s always opportunity for growth and always opportunity to learn.”