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Wednesday, February 15, 2012

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 29th 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


1 comment:

  1. A group of entrepreneurs from the Instituto de Empresa have decided to launch a new business model based on an innovative web platform, never seen before in Spain. This website introduces the “crowdfunding” concept in the world of fashion.

    In FANSTYLERS , the users will find a selection of independent fashion designers, unfamiliar for the general public. The deployment of their designs in the website will allow them to gain awareness and know the preferences of their potential customers, who will also give them
    their assessment. This process also offers very valuable information to the designers before they actually launch their products, which is a novelty in the sector.

    Once there is a compromise between customers and designer, the funding stage or “crowdfunding”, comes into play. At this stage, the designer sets a sale price, a number of minimum customers required, and a period of time to obtain them.

    A multidirectional relation is then established, where customers are a key part of the creative process. They help to develop the products that are launched into the market and act as shareholders by committing to purchase the product. In exchange, they are rewarded with discounts, limited editions, new experiences…

    Within some weeks, FanStylers will be available for the general public. You can now request the first exclusive invitations in our webpage (http://www.fanstylers.com)


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