Is Your Fashion Business Ready for Funding?

Courtesy of Fashion-Incubator


One of the most frequent questions I get is how to find an investor to produce a clothing line. Unfortunately, it is much easier to define who won’t get money rather than who will.

In this series, I’ll be exploring the reasons people don’t get funding, followed by people who are more likely to get it.

To start, here’s an example of someone who won’t get money and why:

“I have a clothing line ready to launch, without going in to it too much. I have everything EIN, RN, wholesale interest and other clientele. I have samples in production as we speak. What I need is a resource for capital. Believe me when I say this will be HUGE!! Some items are patent pending as they are new to the market. I have innovative designs with a unique twist. Everything is copyrighted, trademarked and pending registered trademarks. For our full Executive summary and business plan please contact asap. We are looking to launch the tshirts first and move to the active wear.”

Here are some reasons why this apparel line won’t be funded - at least not by people who are in the business.

First, she says that some items are patent pending - being innovations in the marketplace- copyrighted and trademarked with samples in production and then you find out she’s launching tee shirts. There’s nothing patentable about a tee. Anybody in the business will know this designer is dramatically overplaying questionable advantages; those statements will only impress others on her same level (or lower) but not backers. That’s no way to win over an investor. You need to deal with them on their level and according to the criteria they weigh most heavily.

Let’s pretend the designer is telling the truth and has secured trademarks, patents and the like, it is most likely she paid someone else to do it for her which was a big waste of money. If she’s wasted money like this, for something of so little value, an investor has no assurances that she’ll spend money wisely in the future either, so why would anyone give her still more money? Paul Graham says investors avoid giving startups too much money and I’d imagine it’s because investors know startups waste it otherwise. I mean, startups are new, they haven’t learned priorities very well yet so of course they’ll waste money. Having full funding will only compound the problems.

Her frame of reference is skewed. Perhaps “innovative designs with a unique twist” will impress consumers but to investors, a tee shirt is a tee shirt; it’s far from innovative. Padding a product description in this way is a mistake because backers interpret this as either dishonesty or immaturity. If you can’t be honest about your product -even if only to yourself- a backer will be hesitant to believe anything else you say. They won’t know how much of what you say to believe.

If “having everything” means an EIN and a RN number, this designer has a very limited view of what it takes to produce a line which doesn’t instill a lot of confidence in an investor. While it’s great that she has those -not taking much more than 10 minutes of computer time- it’s not going to impress anyone who knows anything.

Investors are more likely to back someone who has worked at developing products, knows how to produce them or knows where or how to get them produced, even if they don’t have EIN and RN numbers (the project plan details the skeleton of this process which is then incorporated into the business plan). The reality is, investors are more likely to fund people who’ve invested their efforts in product development or sourcing product development. Investors will assume you’ve covered the basics, they aren’t interested in someone who can regurgitate a bullet pointed list found in any Business 101 magazine article.

Another item of little interest to an investor - at this stage of business gestation- is a formal business plan. Surprised? A business plan really doesn’t mean much, not when you’re talking about manufacturing businesses. Investors will want to see a project plan. You cannot -cannot- devise a business plan without a project plan so if you’ve got a business plan but no project plan, all of your money, time and effort was wasted (and I’m sorry if you paid oodles of money to a consultant who wrote you one).

It is much better to walk through the elements of a project plan, filling in all the blanks that you can (see pgs 199-200 of the guide) before developing a business plan. A business plan does not serve to define the unique parameters of manufacturing; this is not like a restaurant or a service business. For one thing, any kind of sales projections for stylized consumer products are unmitigated fiction. Sales projections are a fiction because you can’t know what or how much you’re going to sell.

Consumers are fickle. Those of us in the business can tell you endless stories of companies we’ve known who produced really cute stuff -that nobody bought! Perhaps worse, the styles that none of us liked became hot sellers. While you can occasionally get lucky, it’s just not predictable and there’s no reason to assume you’d be the exception to the rule (sorry). I really do not like telling you these things.