Starting a new business is an exciting time for any entrepreneur.
As you’re building your profitable assets, however, you may realize that to achieve your vision you need capital and a lot of it.
Finding investors for your fashion startup can be daunting, but in this post, we’re going to look into 5 tips to attract funding for your fashion startup.
With no further ado, let’s dive into it. Here are our top 5 tips to attract funding for your fashion startup.
#1 Build a community not only a product.
Remember that starting a company is not just building a product.
Actually, many marketers now believe, that the product you’re developing is almost secondary, as needs change over time, and customers quickly develop new habits.
Starting a company is much more about identifying an unserved need in the market and developing a new way to provide value to your customers.
Considering the risks of developing a business in an industry that is often subject to disruption and high competition, focusing your efforts on building a community can alleviate business risks and grow confidence in investors.
We discuss this customer-centered approach in more detail in another article from our blog, which we advise reading.
Building a community around your organization is essential, and this is why in many cases one of the first teams that your business needs to set up is the press office.
This approach reminds us that in order to succeed we need to foster a strong following of potential customers who are engaged with the vision of our organization.
Once, we’ve built a community, we can start testing our products, using the unique “sounding board” we have created around our company to make sure we’re addressing our customer’s problems effectively.
We’re going to discuss this tip in our next paragraph.
#2 Test, Test, and Test.
Companies never know what their customers are buying from them.
In fashion, customers see different types of value in the products they purchase.
For companies selling those products, it’s often not easy to understand the benefits that your customers are looking to purchase: are they functional, social, or emotional?
There’s only one way to find out and that involves testing your products or service extensively until you’ve found the perfect product-market fit.
Identifying your product-market fit is the first biggest hurdle in your start-up, and that’s what you need to focus most of your energies on. The good news is that you can use your company’s engaged community to do that.
If you are able to find convincing evidence on how your brand is able to serve its customers efficiently and profitably, then you’re setting yourself up for success.
If you’d like to learn more about the functional, social and emotional value of fashion, in this post we address the matter in full depth.
What else could you do to actually make sure that your potential customer would actually buy your product?
Is your value proposition “nice to have” but not essential in their lives? Is it a vitamin or a painkiller?
We’ll look into this question in our next paragraph.
#3 Validate Your Value Proposition - Ideally WIth Crowdfunding.
The number one mistake entrepreneurs make is wishful thinking.
What this means is that we are biased towards optimism and miss an objective stance on reality when it comes to our business.
This is why in this stage you can put your startup business to the ultimate test and verify if your value proposition - and overall business model - works as effectively as you’ve imagined.
Honing your processes and operations to meet customer expectations is a time-intensive process, but by running a crowdfunding campaign you can accelerate your learning curve. If you need some additional advice, here are 9 Tricks to Find Out If Your Business Model Works.
Don’t be mistaken, running a crowdfunding campaign is a lot of hard work, but is a great learning opportunity and a very effective way to launch your business into the market with a strong media buzz.
If you’re looking for inspiration on how to develop a crowdfunding campaign, we’ve got you covered. Here are 11 Best Practices to Crowdfund Your Fashion Brand.
With the money you’ll be collecting from your campaign you can start scaling your business, but the truth is that unless you are that lucky guy who is going to raise millions of dollars, you’ll still be needing private equity.
Hopefully, after having gone through our first 3 tips you know how you are going to make of any cash injection into your business.
#4 Meet Investors When You Have a Plan.
Investor meetings are hard. So many questions are asked and so much is at stake during the length of one conversation.
What sometimes entrepreneurs don’t emphasize sufficiently is what you are going to do with the money you are given and how you are going to make the money back for those who believe in your potential.
This is why it’s necessary to have a plan and know at least two things: on the one hand, you need to know clear figures in terms of how much money you’re asking for and what percentage of company equity you are going to give back.
On the other hand, you need to understand the intangible value that investors can bring to the table because of their expertise and knowledge. There’s a lot of value in attracting investors who can actually help you build your company by providing connections and networking opportunities, this is why in many cases in venture capital we talk about business angels or smart money.
Of course, the foundation of the conversation with your potential investors revolves around your financial statements.
It’s important to know how to discuss financial topics and provide clear and convincing answers. We’re going to look into this in more detail in the next section of our post.
If you’d like to learn more about ways in which you can find possible investors, in this article we’re exploring just that: How to Find Investors for Your Fashion Brand.
If you’re uncertain whether you want to resort to private equity as opposed to other forms of funding, in this article we’re looking into some possible options: How to Finance Your Fashion Startup.
#5 Know Your Spreadsheets.
Last but not least, you need to have a good foundation in accounting and finance.
Accounting is the language of business, and if you want to attract investors, this is the language you need to learn to speak.
Most creative entrepreneurs are often times scared by spreadsheets and balance sheets, but the truth is that with a little effort and hard work foundational accounting skills are easy to master.
If you’re interested in reading more about this topic, here’s an article that can be useful: Top 5 Accounting Skills for Fashion Entrepreneurs.
Great, now that we’ve got all bases covered it’s time to draw some conclusive remarks.
There you have it. In this article we’ve explored 5 tips to help you overcome a very important challenge, finding the necessary financial resources to develop your business ideas and turn them into a growing business.
If you’d like to read up more about the challenges of starting a business in fashion, here is an article for you to read: 5 Things I Wished I Knew Before Launching A Fashion Collection.
In the blog section of our website you’ll be able to find a wealth of information on fashion business and fashion finance, don’t hesitate to explore it to access many more helpful articles.