‘Crowdfunding’: Fashion Finds New Revenue from the Multitudes

aspecdBy Andrew Asch | Thursday, November 21, 2013 – “Crowdfunding” is in fashion. With traditional funding increasingly hard to get, many entrepreneurs are seeking to raise funds on crowdfunding platforms such as Kickstarter Inc., based in New York, and Indiegogo Inc., headquartered in San Francisco.

The crowdfunding platforms made a splash when they started more than four years ago as fundraising forums for film and music projects. But more fashion entrepreneurs have been trying their luck on them. The new funding avenue is intriguing even for veteran fashion-industry executives with successful track records such as Jeff Shafer, who sells his Agave brand at retailers such as Nordstrom. Earlier this year, he launched his new American-made denim line, Bluer, on Kickstarter.

Shafer thought crowdfunding would be the answer for fashion designers frustrated with traditional methods of funding.

“You have a great concept, [but] you don’t have an investor or an investment banker or a rich relative,” Shafer said of the situation that leads many to crowdsourcing platforms. “You get 97 percent of your money upfront, and it’s up to a handshake obligation to deliver when you say you will.”

But crowdfunding is no free ride. Many ventures are ignored and never receive a dime. If an entrepreneur does not deliver, the entrepreneur will be badmouthed online by all of the disappointed people who pledged money to the projects. It’s also a rule that entrepreneurs have to refund money donated to them.

Crowdsourcing platforms are a business. Kickstarter, for example, charges a 5 percent fee from a project’s total funding if the project proves successful. Because Kickstarter donations are processed by Amazon Payments, there is a 3 percent to 5 percent processing fee, according to the Kickstarter website. If a project is not successfully funded, Kickstarter does not collect its fees.

For new entrepreneurs Shuo Yang and Peter Kirk, Kickstarter represents more than a funding opportunity. It’s a chance to spread the word on their projects.

“I think the publicity and the interaction with customers is the key advantage,” Yang said. He started his Brooklyn, N.Y.–based line, ASPECD Apparel, this year.

There is a sense of drama and gamesmanship involved with the venture,” the Seattle-based Kirk said. His project is called Ledge. It is a chino bottom made with a technical fabric that Kirk says makes the pants more durable and stain-resistant than jeans.

Entrepreneurs have 30 days to fund. People from all over the world surf through the website to look for interesting ventures. Instead of stock, they receive product or some other incentive or reward. The guidelines prohibit project creators from simply selling preorders of finished product. Each project must include detailed progress reports on the state of the project’s development.

The benefits of a crowdsourcing campaign are not only monetary, Yang said.

“It’s an additional opportunity to do pre-sales and even get direct feedback on the products themselves in a way that engages with your customer,” Yang said.

The pledges and donations requested on crowdfunding platforms wouldn’t move most Wall Street players. Stars of Kickstarter include The 10-Year Hoodie, a New York–headquartered clothing line that received more than $1 million in funding in April. There’s also Gustin, a denim line that received $449,654 in funding in February. A statement on Gustin’s website announced that “the future of fashion will be crowdsourced” and that it will take its orders and funding only through crowdfunding.

Yang is looking for $10,000 to complete the first run of ASPECD Apparel. Kirk is looking for $24,000 to launch Ledge.

Shafer pre-sold more than $44,000 worth of Bluer goods on Kickstarter. The line will be made in America and is geared toward a demographic of college-age men and women 18 to 24.

Funding is tough for the vast majority of entrepreneurs, but it is even tougher for new businesses, said Frances Harder, founder of Fashion Business Incorporated, a Los Angeles–based nonprofit that provides the fashion industry with entrepreneurial education.

“Investors are looking for something already proven to sell,” she said. “They’re not looking for unknowns.”

Nick Hart, managing director of prominent factor Bibby Financial Services California, headquartered in Westlake Village, Calif., agreed. “We fund startups,” he said. “But they have to be at a point where they are making some sales.”

Hart did say that funding a project through a factor is relatively easy. “As long as you can show me receivables to other businesses and meet some simple criteria, we can lend you money.” Factors’ criteria are typically receivables to other businesses and no tax liens.

Hart considered crowdfunding competition for traditional factors, which typically make their money by funding a company’s receivables or product sales.

Bluer’s Shafer thought that crowdfunding can jumpstart innovation in the apparel business.” If you look at the number of new designers and businesses in the garment industry in the past five years, the number of new brands declined significantly. The cost of starting a new apparel brand is out of reach for most designers, and financing is harder than ever,” he said. But crowdsourcing offers a new avenue. “Crowdfunding is successfully starting new ventures and will continue to be a major player,” he said.
Source: http://www.apparelnews.net/news/2013/nov/21/crowdfunding-fashion-finds-new-revenue-multitudes/


How Crowdfunding Has Changed the Startup GameSingularity HubCrowdfunding has become a multi-billion-dollar industry, funneling millions of dollars into thousands of projects. Technology in particular is one of the leading categories on popular fundraising platforms like Kickstarter an [...]

The GuardianCrowdfunding: the new buzzword for academics needing research moneyThe GuardianArchaeologist Dr David Petts, from Durham University, has also used crowdfunding, raising almost £25,000 to fund a project on Lindisfarne, off the Northumberland coast. The dig, in June, led to [...]

Airbitz, BitPay, and Wefunder leverage bitcoin and new US ...Brave New CoinEquity crowdfunding platform, Wefunder, recently started accepting bitcoin. On the same day, popular bitcoin mobile wallet provider Airbitz announced the ...Wefunder Launches 10 New Regulation Crowdfunding Offe [...]

CNNMoneyDorothy's fading red slippers saved by $300000 in crowdfundingCNNMoneyThe ruby red slippers worn by Judy Garland in the beloved 1939 film "The Wizard of Oz" are set to undergo a major conservation effort following a successful crowdfunding campaign. The Smithson [...]

How The Fix Crowdfunding Act Continues To Help Improve The Success Rates Of Small BusinessesCBS LocalIn July of this year, Republican Patrick McHenry from North Carolina spearheaded two important bills. Both passed through the House in a landslide vote as part of The Fix Crowdfunding [...]

City turns to crowd funding to help replace boardwalk over Flint RiverMLive.comFLUSHING, MI -- The city of Flushing has opened a crowdfunding campaign to replace a wooden boardwalk over the Flint River. The goal is to raise $50,000 in 60 days on Patronicity, a crowdfunding website, to [...]

Kiplinger Personal FinanceRaise Money for Personal Bills on Crowdfunding SitesKiplinger Personal FinanceWhile crowdfunding is often associated with business start-ups, many people are finding it a fruitful way to raise money for personal needs. Sites such as YouCaring, GoGetFunding, G [...]

Cuba's self-proclaimed first indie game seeks crowdfundingVentureBeatJosuhe Pagliery is a multimedia artist and the founder of Empty Head Games, an independent development studio in Cuba. Now, the company is using Indigogo to try to fund Savior, which it is calling Cuba's fi [...]

BloombergCouples Desperate For Children Turn to Crowdfunding FertilityBloombergCrowdfunding has become a popular mechanism for many couples who can't afford the high costs of IVF, or adoption and surrogacy. “It's not an easy thing to share publicly,” says Crystal Barrett, 33 [...]

AZCentral.comTiny companies lure investors under Arizona crowdfunding lawAZCentral.comInvestors who make bets under the state's one-year-old crowdfunding law certainly have the potential to get in on the ground floor, but they must be patient and might not receive any returns. Th [...]

CFB Finance

Press Release

Live Crowdfunding .tv

What's Next Step in Regulation A+ JOBS ACTS Title IIII :L Interview : Steve Cinelli with Brian Korn Securities and Crowdfunding/Peer-to-Peer Lending Lawyer, Watch more video library | Conference | Interview | Campaign Showcase | Research | Education |