At a Glance:
Fashion and apparel have always been about breaking the mold and refusing to conform to anything but your true self. Fashion is an authentic expression of one’s personality that uplifts all who attune to it. There is no other cultural element that allows for individuality, visual storytelling, and creative freedom like the transcendent vehicle that is the fashion industry. From every fabric, stitch, or seam, fashion is a beacon of art used to inspire change while it’s worn.
From the radiant designs of Dior and Chanel to the weekend wardrobes that ignite feelings of adventure, no matter what influences your dream of starting a fashion label, you are not alone. Many eager and energized fashion entrepreneurs are motivated by their concept or design but are quickly slowed once it comes time to secure funding for their fashion startup.
For most companies, regardless of the sector, there is a natural financing stage required to make your vision a reality. Fashion brands are no exception, which is why we are here to show you 8 ways to acquire funding for your fashion startup.
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1. Your Personal Connections
The first step toward starting your fashion brand is reaching out to your personal network to acquire the capital needed to get up and running. If family, friends, and industry connections support your goals and believe in your ideas, they will be the most willing to fund your startup in exchange for shares in your company.
Family and friends may not have thousands of dollars to provide, but they can assess the risk of investing and help in many different ways. If you choose to accept a loan and pay it back with interest, be sure to create clear boundaries and have a written agreement on the individual’s contributions to the company.
Be honest and transparent when mixing family with business and be realistic about the risks involved. Tension can occur if your fashion startup is not profitable or loses money right away, but close connections can also be your greatest source of encouragement when times get tough. Communicate proactively and document your terms and conditions to avoid fracturing relationships, or worse, legal action.
2. Crowdfunding Networks
Crowdfunding is an online method used to raise capital for new businesses. There are three main types of crowdfunding: reward-based, equity, and debt crowdfunding. Reward crowdfunding ensures rewards are given to the donor, equity crowdfunding means your brand is willing to exchange the donated sum for a percentage of ownership in your fashion startup, and debt crowdfunding allows you to reimburse your donors with monthly interest. Weigh the pros and cons of each option and choose the solution that works best for your fashion startup and your business goals.
Even if your brand does not receive the necessary funds, having your fashion startup listed will attract views and garner awareness to boost the growth of your brand. You will often gain access to financial support, guidance courses, and a community of entrepreneurs or investors to teach you how to be successful in the industry. Fashion-specific programs can be competitive, but they provide plenty of opportunities to network with passionate fashion industry professionals.
3. Host a Presale
Before you launch your fashion startup, you will want to test that there’s an active market for it. Hosting a presale is an initial sale directed toward prospective buyers to gather feedback and gauge consumer demand before continuing product development. Presale products should not require lots of time or money; simply because you are not facilitating a hard launch. Your fashion brand will test the target audience and seek early investors who will help structure the product or provide a valuable assessment.
If your primary design concept intrigues potential investors and solves any lingering obstacles, they will be more likely to strike a partnership and help build your fashion brand. Pre-selling your product and garnering support will shed a light on the pricing model and ultimate market demand. You want to create products that resonate with customers and establish a good rapport. Building those early relationships adds value to the product and helps your brand evolve into a name that consumers are willing to buy into.
4. Angel Investors
The right investor can provide the funds needed to establish your fashion startup, and also introduce you to other vendors and industry connections for your brand to potentially work alongside. Simply put, investors have the power to create more opportunities for your fashion company and help navigate decisions that may impact your business.
Specifically, an angel investor is an individual or group of individuals who have excelled as entrepreneurs and want to use their knowledge to help another startup succeed. These investors are very hands-on and focus on driving growth, but they require equity for their services. They typically ask for a 20 to 25 percent stake in your fashion startup to provide funding right away. It is best to find a local angel investor and ensure your business goals align before handing over the keys to any investor.
5. Venture Capitalists
The next possible source of funding comes by way of venture capitalists. Venture funds are larger sums that come from an individual investor or a pool of investors to help finance a new startup. They invest in companies they believe will grow and provide a return on their investment. Venture capitalists often require 30 to 50 percent ownership and want a significant role in decision-making due to the high-risk nature of their investment.
Networking opportunities are essential for attracting the interest of venture capitalists. The fashion industry rapidly evolves and presents its own set of hazards, but many venture capitalists view investing in DTC fashion brands as a unique opportunity with a positive trajectory for growth. Be prepared to build steady relationships with these investors, communicate the values behind your brand, and give them a reason to say “yes” to your fashion startup.
6. Businesses and Universities
If your brand connects with other fashion startups that currently have investors, they may provide you with recommendations. These existing companies can direct you where to meet investors or share resources with you to attract funding.
If you come from a traditional fashion background, universities with top-ranking fashion programs have a vast network of alumni with successful careers in the fashion industry. The professors who teach these programs have the potential to be investors in your brand, but if not, they are still likely to have connections to fashion and retail professionals who may be interested in helping fund your fashion startup. It doesn’t hurt to speak with faculty members and introduce yourself to anyone who may be open to investing.
7. Fashion Events and Gatherings
Every month, there are new industry events your brand can attend to raise awareness for your fashion startup. Awards ceremonies, trade shows, and fashion conferences are just a few of them, and with virtual conventions becoming more prominent, you can register your company without leaving your home. From here, you can note current trends or competition, and learn from industry experts while gaining exposure for your fashion startup. You never know who you may connect with, so simply engaging in conversation with other emerging fashion brands has the potential for your brand to meet a group of investors.
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