Finance for Fashion Start Ups

At our recent  packed Finance for Fashion Start Ups networking talk, the topic was alternative sources of funding including crowdfunding and Start Up Loans. As we all know, the traditional lenders are not supportive of SMEs, and fashion related ventures are considered high risk, so it’s even tougher for this sector. The good news is that there are now some credible alternatives.

The evening featured presentations from Muriel Dupas, founder of new fashion crowdfunding platform Audacity of Fashion and Fashion Angel’s Alison Lewy, followed by a panel discussion.

Muriel Dupas from Audacity of Fashion

The event was sold out, and attracted a long waiting list, so as requested we are posting a longer blog than usual to capture the key points discussed at the event for those that missed it.

The first presentation was from Muriel, whose background in finance and experience with business angel networks, led her to notice that investors are generally only interested in fashion tech businesses as they don’t understand the fashion industry and are wary of investing. Also the nature of the fashion buying cycle means designers often have to fund several collections and have the finance to support the necessary marketing and PR before they start to generate sales, thus leaving a big funding gap.

Some interesting crowdfunding facts:-
• Rewards based crowdfunding as a route to raising finance is growing rapidly, with the biggest US platform Kickstarter hosting over 4,000 projects and raising in total 400 million since it launched in 2008.
• The platform has hosted 700 fashion specific campaigns and raised around $8million with the average campaign raising between $1- 10K.
• In the UK, NESTA reports that in 2011 £100 million was raised through crowdfunding, which is expected to have doubled in 2012, and in  5 years reach £1.5 billion

One of the most recent successful campaigns on Kickstarter was run by US premium casualwear brand Flint and Tinder. They called for online backers to fund the production of the company’s “10-Year Hoodie” and through pledges and pre-orders, attracted over 6,000 participants and raised almost $700,000 – astonishing considering they were only seeking $50,000!

However, although there are successful fashion projects as this clearly demonstrates  there success rate for fashion campaigns is only around 27%, which is the lowest of the categories hosted.

Muriel came to the conclusion that a different crowdfunding model was needed that built a community of fans specifically interested in fashion and emerging design talent, and that it should  have added value and be more than a platform for raising funds.

Integral to the Audacity of Fashion platform will be the facility for its community to collaborate and connect with each other, allowing users to recommend and find support from photographers, stylists, graphic designers etc.

Designers will also be able to use it to get feedback on their designs and market test new product ideas before going in to production.

Like all such platforms, the basic principle is using the power of followers to finance a specific project by obtaining small contributions from a large groups of fans in return for a ‘reward ‘. This might be a thank you, original sketch, ticket for show or product voucher, depending on the amount of money pledged. It could even be to spend time with you in your studio – the aim is to get your followers to be active and develop an emotional connection with your brand – they are then likely to become loyal customers in the future.

In addition if you build a big following of active fans it can be a powerful tool to use as proof of concept to show potential investors if you want to attract external investment in the future. Muriel sees the non-financial benefits of the platform as important as the funding side.

Key aspects of the AoF platform:- 

• To maintain a high quality of campaigns the platform will be curated and selected by the selection panel of fashion industry experts. The panel will be looking for designers with credible businesses that have passion and drive to drive the campaigns forward.
• Pledges will typically start low at £5 - £10.00 and go up to £1000.
• Each campaign will run for a month however if it doesn’t reach the target then you don’t get any of the money and the participants get their money back.
• The cycle will be around 10 weeks from campaign launch to receiving funds
• Application is free with a 5% charge levied only on successful campaigns, plus any transaction fees.
• Audacity of Fashion will be engaging  a cohort of high profile industry ambassadors to champion the platform to the fashion community

Muriel’s tips for a successful campaign:-

• Your campaign needs to be specific -  be clear what the funding is for. 
• Produce an engaging video that tells your story – this is your main sales tool
• You’ll need good images 
• Your campaign needs to be part of an overall communications/marketing plan - if you generate positive PR around your campaign you’re more likely to reach your goals
• Be creative with your rewards - try and monitise what you’ve already got to offer 
• Your existing family, friends & followers are likely to be the first to support you so actively build your community in advance
• Important to set a realistic target  - if you don’t reach your target you don’t get anything at all and those that have pledged will get a refund.

The platform is due to launch in Spring 2013 www.Audacityoffashion.com

Next Alison gave a short presentation regarding the Start Up Loan (SUL) scheme, a government backed initiative to support young entrepreneurs aged 18-30 with an easy to access loan and business mentoring. So far over 2700 businesses have been helped with an average loan size of £3500-£6000 although it is possible to borrow up to 10K. Larger loans are available but need approval from Start Up Loan Company.

Key Benefits of a Start Up Loan:-
• Gives start ups easy access to finance
• It’s a quick process – decisions can be made within 48 hours
• You don’t give away equity in your business
• Unsecured loan with a low interest rate of 6%
• Flexible payments terms
• Added bonus of Free mentoring
• Global Partner offers including Paypal, Ebay & Intuit
• It’s the best deal on the market

Fashion Angel is the only delivery partner to focus on supporting fashion industry entrepreneurs and so far has approved loans to a wide cross section of fashion related businesses including womenswear, menswear, plus size, swimwear, online marketplaces, jewellery, footwear  and millinery. More information is on our Fashion Angel Start Up Loan page.

The  panel discussion that followed included input from two successful SUL applicants, Remy Ray who is setting up a plus size label, and Joel Adebayo from online platform Utter Couture, who both shared their experiences with the audience. Both confirmed how the SUL loan has allowed them to put their business idea in to reality and how easy they found the application process with the support of the pre-loan mentoring which helped them understand how to generate the  financial forecasts required. They both have also taken up one of the partner offers from Regis and now have a FREE virtual office for six months.

Muriel Dupas and AlisonLewy

The talk was sold out quickly but if you want to find out more about the Start Up Loans, or see if it's right for you, we’re hosting a FREE Finance for Fashion workshop on 30th April at 10.00am.

Spaces are limited and likely to sell out quickly again. For more information go to our Fashion Angel Events page, or click here to book a place.

By Alison Lewy

Crowdfunding - an alternative funding opportunity for fashion and design businesses?

Fashion labels and designer/makers have always found it difficult to raise external funding for their businesses, but in today’s challenging financial climate, it is even harder to raise money through the usual channels particularly if you are a new start up without a track record.

Which is why I find it surprising that the fashion and general design sector in this country have been slow to pick up on the crowdfunding phenomenon. Web based crowdfunding gathered momentum in 2011 and is set to grow in 2012 as businesses seek to bypass traditional lenders and find alternative ways of raising cash directly from their peers. The granddaddy of crowdfunding platforms is US based Kickstarter, which was established in 2008 and has had over  15,000 successfully funded projects. Musicians and artists were amongst the first creative disciplines to engage in crowdfunding activity.

There are now many crowdfunding sites that allow people to contribute small amounts of money, in support of an idea or project, in the creative and technology sectors. The UK has approximately 32 UK based sites, the second largest number compared to the US, which has around 185 . As they are web based, they are essentially a global platform and give businesses the opportunity to receive donations from anywhere, however some of the sites only accept pledges in certain currencies, and with Kickstarter you have to have a US bank account. Hence it can be easier to work with a UK based platform, and they also may be able to offer more support in creating a good campaign.

So what actually is it? Crowdfunding is the collective cooperation, attention and trust by people who network and pool their money and other resources together, usually via the internet, to support initiatives by other people or organizations(wikipidia)

There are two main business models – the first is the rewards system, which basically means people that pledge cash to support your campaign will receive  a ‘reward’ . Some projects offer a tiered selection of rewards, depending on how much money is being contributed towards the campaign. This model has had a huge impact to thousands of talented people with an idea, but without the financial backing to make that idea become a reality

There is also equity-based crowdfunding which is used to finance businesses in all sectors, where investors receive shares in return for their financial support. This option is facilitated by sites such as UK based Crowdcube.

This model is not going to be right for everyone and as with everything there are no guarantees that you will be successful, but overall it gives an important additional opportunity to raising finance and  is a boost for creative SMEs.

At Fashion Angel we are keen for designers to understand this method of raising finance so they can make an informed decision as to whether it is right for their business or not, and if it does seem like a good fit, we want to help you give yourself the best chance of success.

Our next business club networking event on 29^th March 2012, will be focusing  on this –  our speaker is Ben Hamilton from Pleasefund.Us. We will also be joined by designers that have had the foresight to go this route and successfully raised their targets for their projects.

For more information or to book at ticket click here.

By Alison Lewy

Follow @FashionAngel1

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