Should You Crowdfund Your Design?
Launching a fashion brand or having a new idea to add to your existing brand would be a lot easier if it wasn't for that pesky thing called money. You're ready to dip your toe into the pool of fashion, but first you’re going to need to find money from somewhere.
Unfortunately, money still doesn’t grow on trees, but thankfully there is now a way that you can ensure that your fashion venture not only has financial backing, but that money does not have to come out of your own purse, or scary loans from the bank. Welcome to crowdfunding.
What Is Crowdfunding?
Put simply, crowdfunding is a way of collecting funding for project or venture by raising many small sums of money from a large number of people. You create a webpage on a crowdfunding website – whether it is a new start up or an additional project – and people that want to support it can donate money. Sometimes (but rarely) people just donate the money with no strings attached. Sometimes those that donate gain early access to a film screening, first dibs on the collection or a reduced rate to purchase products. And then there are donations ... well investments actually... in exchange for equity - a portion of your business.
To break it down, there is money for goods, including:
- All or Nothing – the money is only collected from the contributors after an allotted amount of time and ONLY if the target has been met. If the goal is not met, no money is collected.
- Keep it All – Whether the project goal is met or not, all of the funds collected (minus commission) are handed over to the entrepreneur. If he or she has insufficient funds to meet the objectives, then it is up to the designer to refund the investors.
- Equity crowdfunding – Investors receive equity in the company or entrepreneur that is raising funds.
- Debt crowdfunding – The entrepreneur or company borrows money and must repay it (typically, with interest). Essentially, a loan.
And then money for business ventures, including:
#crowdfunding is a way of collecting funding by raising many small sums of money from a large number of people.
Often, crowdfunding sites have stipulations that the project needs to have a finite end. So it's not really about launching an entire business, but it can be used for rasing funds to create your first collection, to buy equipment or that kind of thing.
Can It Help Your Design Business?
There are some definite positives when it comes to using crowdfunding to financially support your fashion, product or design venture. In many ways, crowdfunding has totally altered the design industry, and new and vibrant brands are gaining access to funding that they would never have been able to before. This means that their amazing designs get noticed years before they would have done. Many different businesses have used crowdfunding campaigns to great success. It also automatically gives you loyal customers who feel they have a vested interest in your brand succeeding. This is basically free advertising.
However, there are some downsides to relying on crowdfunding as a source of income. Research has demonstrated that on the crowdfunding website Kickstarter (that I'll discuss a little further on), only 29% of the ventures have actually received enough backing to consider themselves fully funded. This means that a huge 71% of ventures never received enough money to get themselves off the ground, which is a real shame.
Some people use crowdfunding to raise hundreds of thousands of pounds and dollars! Mizzen+Main had created a new blazer, and they needed financial backing for it – so they headed to Kickstarter. Within four hours, they had hit their funding goal of $15,000, with an average pledge of $331. Read more about their sucess in this article How to Dominate Kickstarter.
This is a definite success story, but even when your backers give a little less, they can easily mount up to some big numbers. Just look at one of our fave brands Here Today, Here Tomorrow - they sucessfully raised £6000 to fund the creation of their new collection in Nepal. Find out more here.
Which Platform Should You Use?
It's definitely worth shopping around for the best crowdfunding site for your needs. Some specialise in fashion, some take a bigger cut that others - read into it and don't just go with the first site you come across. These are some of the options.
We’ve mentioned this one before, and it was one of the earliest crowdfunding websites to be created. Designed only for those with creative projects, it's great if you have a traditional campaign, but isn't typically strong on supporting fashion brands. This is an "All or nothing" platform, where you can give away items for investment, rather than equity stake. Only available to those in the US, UK, Canada, Australia, New Zealand.
Professional investors as well as individuals mix and merge on the website Crowd Cube, which means that you can find yourself with some pretty high stakes backers – but they may want more say in your venture than you are willing to give. Investors will be looking for equity in your company.
Many different independent fashion companies and brands have started on Indigogo, which is slightly less well known than Kickstarter. Like Kickstarter, you don't have to give away equity, but you will have to give away some other products or service in return. Anyone, U.S. resident or not, can receive funding, using PayPal as the payment option, go to this website to learn more about PayPals payment options. There is also a "keep it all" funding plan called ‘Flexible Funding‘; Indiegogo charges a higher fee for that.
This website is great because it enables new and vibrant fashion designs to be made, but if they don’t receive all the backing they need . . . they never get made.
This is one of our favourites for fashion and accessory brands. Creators offer their designs at a reduced price than they would normally retail for (approximately wholesale price) before they are made. Once enough punters have paid for the wholesale design, the designer can use the funds to create the garment and ship them out to the customers. The customers get a great deal, and the designers have all the money they need upfront - win win. They are having a sustainable fashion month at the moment, so head over and check them out.
How Can You Run A Successful Campaign?
If you want to do all that you can to bring success to your crowdfunding project for your fashion venture, then you need to make sure you sell yourself well!
Have An Original, Well Thought Out Idea
Crowdfunding is big these days and there are thousands of other people trying to garner attention. Make your idea standout, do something different! Don't ask for too much money either, if you don't need it. You must account for every penny you hope to raise and what you are going to do with it, don't get greedy! Make sure you spell out exactly why you need the money and how you are going to use it.
Most crowdfunding sites require you to create a video to advertise your idea - this seems like obvious advice, but make it good! This is your pitch to the world, work on the script, editing, it's worthwhile taking a long time to think this part over - or you may lose potential backers. You wouldn't go into a meeting with investors unprepared, so don't do this without it either. Have really vibrant original copy for your idea too.
Make the rewards worthwhile and well priced! People are more likely to give if they think they are getting an amazing exclusive deal. Offering items from your collection is great, but it's what lots of people do. Is there something else you could offer too? Be imaginative!
Tell Your Story
One of the reasons crowdfunding has become popular is because it adds an element of human interaction to ideas and products. It is taking away the power from big banks and investors and giving it to the general public. People want to know who you are and what you are going to do with their money. Often it's just as much about you as it is about your idea. Show you care.
Advertise and Promote
You can't just create the campaign then sit and wait for the money to come rolling in. You need to promote it in other places too. Keep updating your crowdfunding pages with your news. Show you are heavily engaged with the product. Have a strong presence on social media and send out press releases to newspapers, magazines and blogs, if you can get someone to report on your campaign you open yourself up to many more potential investors and customers. Try to build your following and get people engaged with your ideas before you even start the funding campaign. These first investors will be one of your main sources of advertising.
Don't forget about all those people who helped you when you started out, make sure you keep engaged with your backers after the campaign is done, you owe a lot to them and you never know when they'll come in handy again!
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