Startup Gets VC Funding To Bring AI to the Circular Economy

A Berlin-based startup has just secured a seven-figure investment to bring its product to new heights, after it developed an AI-powered solution that can sort recyclable and reuseable garments from a pile of discarded clothes.

Reverse.fashion secured the investment from High-Tech Gründerfonds (HTGF), one of Germany’s biggest and most active seed-investor for technology startups. HTGF did not disclose the full figure.

The investment extends its pre-seed funding round, giving the startup a runway to fuel its AI ambitions about the circular economy.

The startup, founded in 2024, aims to bring an AI solution to a problem that is typically solved manually, by hand or machine: sorting through discarded clothes. Reverse.fashion uses AI to precisely categorise and digitize textiles according to condition, style, brand, size, and material composition, among other criteria.

“By significantly increasing sorting quality and throughput, our customers boost their productivity by 40 percent while simultaneously achieving a revenue increase of around 20 percent,” said Dr. Karsten Pufahl, co-founder of reverse.fashion.

The business is timely, especially given new rules in the European Union that are set to kick in on July 19, which will ban large companies from destroying unsold apparel, clothing accessories and footwear. Medium-sized companies are expected to follow suit in 2030.

“Rising regulatory requirements such as EPR and EU mandates are driving the transformation of the textile industry. Reverse.fashion addresses a central bottleneck with its AI technology and creates the foundation for greater efficiency and profitability. We are very much looking forward to accompanying this visionary team on its journey,” said Dr. Anne Umbach, senior investment manager at HTGF.

Reverse.fashion has two products powered by its AI: line.sort, an automation line that sorts feedstock to product in just one step; and co.sort, which can do quick style analysis and fraction recommendations where human sorters make the final decision.

“With the successful pilot phase and the current market entry, we are entering a new chapter for the company. We are all the more pleased to have HTGF as an experienced partner by our side,” said Mario Osterwalder, co-founder of reverse.fashion.

HTGF said the pre-seed funding will enable the company to reach its next goal: commercial market entry, after having successfully run pilot projects.

In the coming months, HTGF said the company will continue its projects that run with their software product co.sort. At the same time, it said reverse.fashion has just kicked off line.sort, with the goal of bringing the automated process across the industry at scale.