Do you have a bunch of plans for your fashion startup, but have no clue how to fund these ideas? If so, don’t get discouraged because I am here to tell you that you are not alone. So many entrepreneurs in the retail industry have the concept for their fashion brand all ready to go, yet struggle to gather the money to make their vision a reality.
You may be thinking that you have to start your retail business by yourself. However, this is not the case. You can look into finding an investor for your company. An investor is an individual or organization that puts money into a business with the expectation of a financial return.
Why is having an investor beneficial? An investor not only can provide you with funds for your fashion startup, but also with additional connections to other business professionals that you can learn from or vendors for you to work with. As a result, an investor has the power to create more opportunities for you. In addition, an investor will have a lot of experience and can advise you when you are navigating important decisions or steer you away from mistakes they made in the past. If your investor is well known in the fashion sector, your retail business may be deemed reputable through association as well.
Now let’s go through 8 effective ways you can find an investor for your fashion startup:
- Reach Out to Your Personal Network
- Look into Crowdfunding Platforms
- Explore Angel Investors
- Search for Venture Capitalists
- Apply to an Accelerator Program
- Ask Businesses or Educational Institutions
- Attend Events
- Leverage Social Media and Email
1. Reach Out to Your Personal Network
The initial step you should take to start your fashion company is contacting your personal network. It will most likely be the easiest option to reach out to your family and friends and see if they are interested in giving you capital. These are the individuals who want you to achieve your goals in life and succeed as an entrepreneur, so they might be the most willing to finance your startup in exchange for shares.
They know you well and ultimately will be able to determine the risks of investing. Your family and friends may not have thousands of dollars to give, but they will want to help in any way possible and small amounts can go a long way. Your loved ones can also offer you a loan that you would pay back with interest. It is important to have a legal contract created and clear boundaries about the influence they will have in your company.
Be careful when bringing members of your family or friends into your professional business practices, though. If your fashion startup is not profitable and does not make it in the retail industry, it is possible for tension to occur between you and your loved ones. They care about you, but they also care about the money they provided you and if they believe you wasted it, your personal relationship may be permanently ruined.
2. Look into Crowdfunding Platforms
Another way to find an investor is by utilizing crowdfunding platforms. Your next question might be what is crowdfunding? Crowdfunding is the method of raising capital online from a large number of people to fund your new business. We are going to take a look at three relevant types of crowdfunding: reward-based crowdfunding, equity crowdfunding, and debt crowdfunding.
Reward-based crowdfunding is when those who donate get rewards from your startup depending on the amount they contributed. The amount donated is usually small. For instance, your fashion company might offer a free garment from your new collection to each investor who donated $500. If a person donated $650 then that individual may receive a free accessory in addition to the free garment. Examples of platforms to use to engage in reward-based crowdfunding are Kickstarter, Indiegogo, and Crowdfunder UK.
Equity crowdfunding is when investors usually donate thousands into your retail company and in exchange get a percentage of ownership in your startup. They will typically get a share of your profits if you are successful. This crowdfunding method is effective if your fashion business is searching for a large amount of money. Common platforms you can utilize for equity crowdfunding include StartEngine, Wefunder, CircleUp, and SeedInvest.
Debt crowdfunding, which is also known as peer-to-peer lending, is when you fill out a form online and the website creates a profile about your retail company for possible investors. Then investors must determine if they want to provide you with funds or not. If investors find your business to be a perfect match, they will give you money and receive payments monthly from you with interest. You will want to use this form of crowdfunding if you do not wish to give out equity. Debt crowdfunding platforms to bookmark are Lending Club, Funding Circle, Upstart, and Prosper.
Although you may not receive the capital you expected through online crowdfunding platforms, by just having your startup listed on these websites, more and more people will be aware of your fashion brand.
3. Explore Angel Investors
Angel investors are individuals who have excelled previously as entrepreneurs and wish to use their experience and resources to help a startup prosper. They typically like to work with a company in an industry they know well, so look for individuals who are familiar with the operations of a fashion brand. Angel investors also focus on growth potential, therefore you should spend time crafting your business plan to share with them. Keep in mind you will need to give equity to angel investors, usually 20-25 percent of your fashion startup, since they will be investing their own funds early on.
Most angel investors enjoy taking a hands-on approach, so locating one in your area would be ideal. Get to know your possible angel investor before accepting their money because if they are going to have a lot of power in your company you want to be on the same page when making business decisions. AngelList, Angel Capital Association, the Angel Investment Network, and Gust are all examples of platforms where you can search for angel investors for your retail business.
4. Search for Venture Capitalists
The next way you can find an investor is by searching for venture capitalists. Venture capital funds are investment funds that either come from an individual or are pooled from a group of investors to finance a startup. Venture capitalists want to invest in a company they believe will grow rapidly. They typically expect 30-50 percent equity in your business, significant influence in decisions and an immense return because of the high risk they are taking.
It is important to note that networking is essential for gaining the interest of a venture capitalist. Forming a strong relationship with venture capitalists will help you bring attention to your fashion company. The world of fashion changes frequently and has a lot of risks, but more venture capitalist firms are starting to view an investment in a retail business as a new opportunity. Therefore, you need to have a remarkable presentation prepared that they cannot pass up.
You might not know where to begin when looking for a venture capitalist. First, you can research venture capitalist associations such as The National Venture Capitalist Association or top venture capitalist firms that are versatile like Accel. Then you can review online databases including CBInsights, Crunchbase, and Pitchbook.
Searching for venture capitalists will not be easy, but if you work hard and form the right connections their investment can take your fashion startup to the next level.
5. Apply to an Accelerator Program
Accelerator programs are short-term programs you can apply to that provide you with the tools to grow your startup such as financial support, mentorship, access to a community of entrepreneurs, and classes that teach you the knowledge you need to be successful. There are accelerator programs specific to the fashion industry where you are able to meet potential investors.
Examples of accelerators that focus on retail startups are the Fashion Technology Accelerator, Startupbootcamp FashionTech Milan, and Atelier. The Fashion Technology Accelerator is divided into three divisions, which are Silicon Valley, Seoul, and Milan with their programs centered around innovation in technology in the fashion sector. Startupbootcamp FashionTech Milan offers their program in Milan where entrepreneurs in retail gain insight and connections to a wide range of investors. Furthermore, Atelier is a Spanish accelerator program for fashion tech companies.
Although these accelerator programs are competitive, I strongly urge you to apply to as many as you can find because there will be tons of opportunities at your fingertips for you to network with investors that are passionate about the fashion industry and ready to help.
6. Ask Businesses or Educational Institutions
It is beneficial for you to ask other retail businesses who have investors if they can provide you with recommendations. The founders of these companies may have a better idea about where you can meet possible investors or have networking resources to share with you. It never hurts to reach out because there will be people who are willing to help you, even if you cannot find them right away.
In addition, educational institutions not only have huge alumni networks, but they also have relationships with successful individuals who work in a large variety of fields. I recommend reaching out to universities that are known for their highly rated fashion programs. The professors who work there might be potential investors. If not, they are likely to have connections to experts in the retail industry either through previous experience working with them or bringing them in as guest speakers. You should then ask faculty members if they can introduce you to any business professionals who might be open to investing in your fashion brand.
7. Attend Events
Countless events occur every month in the retail sector for you to attend. There are fashion weeks, trade shows, and conferences to name a few. With virtual platforms becoming popular and new technologies constantly being introduced, you can even experience events all over the world without leaving your house. You will be able to listen to experts, learn about any upcoming trends, analyze your competition, and raise awareness for your fashion startup.
You never know who a person may be connected with, therefore by just engaging in conversation with those around you, you have the potential to meet or be referred to an investor. Attending functions is a fun method to search for investors. And if you are concerned about events being costly, there are a bunch of free options out there for you.
8. Leverage Social Media and Email
When looking for investors, take advantage of social media platforms. You should consider making accounts on Facebook, Instagram, Twitter, and LinkedIn for your fashion business, so that people will notice your company and engage with it. You need to make sure you post often in order to attract more followers. An additional benefit of utilizing social media is that it is not expensive.
LinkedIn is a perfect way for you to reach out to possible investors. Even if you do not have any mutual connections with an individual, you can easily introduce yourself in a personalized message on LinkedIn. Plus an investor will be able to review your profile and learn more about your fashion startup and what you have accomplished so far. Remember to keep your profile updated and professional, so that you make a great first impression. On LinkedIn, there are pages of fashion companies you can follow and groups you can join as well specifically for entrepreneurs in the retail industry.
Email is another tool you can leverage. Constructing an effective email is simple and will catch the eye of potential investors. This method is low-cost, too. Don’t forget to identify yourself and keep your message clear and concise.
An investor can greatly help your retail brand. We discussed 8 effective methods to search for an investor for your fashion startup. The first way to find an investor is by reaching out to your personal network of family and friends who are likely to be the most willing to fund your business. Second, when looking for investors consider crowdfunding platforms. There are different types of crowdfunding so determining which one would be right for your fashion company is important. The third point is to explore working with an angel investor who can finance your startup and guide you. Fourth, search for venture capitalists to interact with and if you build strong relationships that result in them becoming your investors, they can have a significant impact on the growth of your startup.
Next, the fifth way to locate investors is to apply to an accelerator program. There are accelerator programs specific to the fashion industry and if you get accepted, you will be exposed to a network of potential investors. Sixth, asking founders of businesses or professors at educational institutions for recommendations of possible investors is helpful. These experts may want to invest in your fashion brand themselves or introduce you to a successful entrepreneur interested in doing so. The seventh method to find an investor is attending events in the retail industry. You will be surrounded by business professionals and by connecting with them, you might be led to your dream investor. The eighth way to search for an investor is to maximize your use of social media platforms and email. If you are looking for a simple and cost-effective process, this is for you.