Prediktia’s Story

Welcome back to ConteNIDO; the best place to learn about VC, startups and Latin America!

This week, we share the story of Prediktia, a company revolutionizing the fashion world with artificial intelligence and the ability to predict inventories. Above all, it is a company in which Nido is a proud investor.

The Spanish version of this essay can be found here.

Here, you will find opinion pieces, essays about NIDO, and profiles of entrepreneurs. Our mission is to share our vision for the world of VC and the role we want to play in it.

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-Jose Luis

Bringing back innovation to the world of fashion

??The world of clothing lives in constant tension. For its part, fashion is so close to art that it always seeks the avant-garde. Challenging standards is in its very definition. It constantly seeks innovation. But this is also an industry as old as our species and the cold that led us, for the first time, to cover our skins. As long as there has been money, some have tried to sell leather or wool as protection. Therefore, clothing has an ancestral element; a sector that, given its age, has many habits that are difficult to change.

??????These parts constantly collide: the minds that seek to innovate and the customs that have kept the business afloat. Some entrepreneurs push the sector towards the horizon; others, more seasoned, remember the value of the past. We, as users, don't put much thought into the clothes we own, but before we wear them, too many debates and discussions have gone into them.

??????At least, the above is the impression that emerges after speaking with David Ostrovsky , Preditkia’s founder. Something that we take for granted—the clothes we put on every morning—is, in reality, a source of discussion and a constant search for improvement.

??????In part, it was inevitable that David would see with different eyes, the fashion industry to which we are all so accustomed. A year before he was born in Medellín, David's parents started a clothing company with which they would support the family for years to come. Many years before, across the ocean, his great-grandfather was to arrive from Russia to start a leather tannery in the country. If clothes are everywhere—after all, you only have to go outside to see a plethora of color and fabrics—in David's mind and his very life story, they were an inescapable presence. A normal person is made of skin and a little hair to cover it; David, with his passion for fashion as a sector, seems made of fabric and felt.

??????His first jobs were in the sector: selling products or working in distribution centers. Eventually, in 2013, experiencing a Black Friday Sale at an Australian shoe distributor, he was amazed by a subtle innovation: instead of selling everything in stores, massive orders arrived online from different corners of the country.

??????Back in Colombia, where his family’s company continued with the mentality of yesteryear—buy low and sell for profit; open good stores to attract buyers—David brought with him ideas of change. Instead of just betting on traditional means, they should also try to sell their products online. After a few months of uncertainty, he decided to join the family business and, for seven years, directed its expansion into the digital realm. It was still an old-fashioned business, but innovation was slowly winning over new customers, the same tension between avant-garde and tradition.

??????In those seven years David would begin, subtly, to change the mentality with which he saw the problems of fashion. It wasn't just a matter of having the best clothes; It was also one of finding ways in which technology could help. He would participate, at that time, as an angel investor in a Colombian e-commerce startup called Handy, delving even deeper into the problem and meeting Jerónimo who, at that time, led a startup that manufactured software to sell in the US. These were moments of learning and understanding, with certainty, that there was still much to discover.

??????Partly seeking to delve even deeper into the world of clothing and, on the other hand, with the usual desire to learn, David would make one last move in his career that would define his future: he would leave Colombia to study an MBA in the US. It is then that, by spending time thinking deeply about the sector, he would try to solve problems not only for one company but for all of them. It was time to bring to the world of clothing the avant-garde that fashion had always had. This is, to be precise, the time in which Prediktia came to be.

??????The company arose from two problems tied to the same tension I mentioned. The first, and perhaps most obvious, is the issue of overproduction. In a business where margins are considerable, custom dictates ordering, as best as possible, the garments to be sold. Twice a year—or more if it is fast fashion—clothing companies gather their visionaries and, trying to predict future interests with numbers from past seasons, announce the products to be sold. Huge inefficiencies often arise, but such is the custom. In a couple of products, they will have measured, with certainty, the number of units to be sold. But in many others, knowing that high-profit margins in the industry justify all potential losses, they end up with excess clothing that, in some cases, will be sold at a discount and, in other cases, will be discarded.

??????The second problem is deeper and specific to the clothing industry. Being such a visual sector—where everything is judged by colors, materials or other appearances—it is surprising that products are cataloged with numerical codes that say little or nothing: the infamous system known as SKUs. Those fortune tellers who, for years, have tried to predict which clothes to buy every season must navigate oceans of codes and find them in catalogs that, luck permitting, will allow them to make correct orders, reducing—but never eliminating—overproduction.

??????With all this clear, David returned to the industry of his childhood with one objective: to ensure that, in the selection processes, there was the necessary information to create efficient catalogs for seasons to come and reduce, at all costs, overproduction. He returned to his time in Handy and, speaking with Jerónimo, immediately brought him into the project.

??????The idea of Prediktia is based on the greatest development that humanity has experienced in recent years: the arrival of artificial intelligence. To do this, David and Jeronimo Castro recruited Felipe Aguirre , Prediktia’s third cofounder, who had previously done a PhD on computer vision topics and artificial intelligence's potential for analyzing photographs.

??????Instead of analyzing infinite codes manually, Prediktia uses past product images and sales information to make forecasts. Once the algorithm has all the data, it can view images of items to be considered and predict, based on previous transactions of products that visually resemble each other, how many units will be sold, and how many pieces of clothing a company will likely sell. In several hours, a human could determine with some degree of certainty the sales that would come from black jackets after searching through previous catalogs and sales reports with infinite SKUs. Artificial intelligence, for its part, can do it for all possible products without fatigue.

??????In his own way, David has returned to his family's business, with new friends and a new vision. In his return also comes a desire to modernize and bring great advantages to the sector.

??????Few industries can have as large a potential as the one in fashion. Take a second to contemplate just how many items of clothing are present in our lives. Everywhere our eyes go, there are t-shirts and pants; shoes by the lot. If before they were done with enormous inefficiencies, now, as we walk through crowded streets and see an infinity of clothing, we can be certain that there is a better option for their production.

??????What is Prediktia’s mission? We must return to the initial tension that began this essay to answer this. Respecting a traditional sector, they channel the innovation so typical of fashion to improve the industry as a whole. They return to a cutting-edge world with the same desire for improvement that comes in each clothing collection. They don't want to destroy; they want to improve, so that something as close to us as clothes are to the skin will be made with the most genuine and efficient intentions.