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8 Ways to Secure Funding for Your Fashion Startup

At a Glance:

Your Personal Connections

Crowdfunding Networks 

Host a Presale

Angel Investors 

Venture Capitalists

Businesses and Universities 

Fashion Events and Gatherings 

Social Media Platforms  

Fashion and apparel have always been about breaking the mold and refusing to conform to anything but your true self. Fashion is an authentic expression of one’s personality that uplifts all who attune to it. There is no other cultural element that allows for individuality, visual storytelling, and creative freedom like the transcendent vehicle that is the fashion industry. From every fabric, stitch, or seam, fashion is a beacon of art used to inspire change while it’s worn. 

From the radiant designs of Dior and Chanel to the weekend wardrobes that ignite feelings of adventure, no matter what influences your dream of starting a fashion label, you are not alone. Many eager and energized fashion entrepreneurs are motivated by their concept or design but are quickly slowed once it comes time to secure funding for their fashion startup. 

For most companies, regardless of the sector, there is a natural financing stage required to make your vision a reality. Fashion brands are no exception, which is why we are here to show you 8 ways to acquire funding for your fashion startup.

Related Article: How to Choose Your First PLM System 

1. Your Personal Connections 

The first step toward starting your fashion brand is reaching out to your personal network to acquire the capital needed to get up and running. If family, friends, and industry connections support your goals and believe in your ideas, they will be the most willing to fund your startup in exchange for shares in your company. 

Family and friends may not have thousands of dollars to provide, but they can assess the risk of investing and help in many different ways. If you choose to accept a loan and pay it back with interest, be sure to create clear boundaries and have a written agreement on the individual’s contributions to the company. 

Be honest and transparent when mixing family with business and be realistic about the risks involved. Tension can occur if your fashion startup is not profitable or loses money right away, but close connections can also be your greatest source of encouragement when times get tough. Communicate proactively and document your terms and conditions to avoid fracturing relationships, or worse, legal action.

2. Crowdfunding Networks

Crowdfunding is an online method used to raise capital for new businesses. There are three main types of crowdfunding: reward-based, equity, and debt crowdfunding. Reward crowdfunding ensures rewards are given to the donor, equity crowdfunding means your brand is willing to exchange the donated sum for a percentage of ownership in your fashion startup, and debt crowdfunding allows you to reimburse your donors with monthly interest. Weigh the pros and cons of each option and choose the solution that works best for your fashion startup and your business goals.

Even if your brand does not receive the necessary funds, having your fashion startup listed will attract views and garner awareness to boost the growth of your brand. You will often gain access to financial support, guidance courses, and a community of entrepreneurs or investors to teach you how to be successful in the industry. Fashion-specific programs can be competitive, but they provide plenty of opportunities to network with passionate fashion industry professionals.

3. Host a Presale 

Before you launch your fashion startup, you will want to test that there’s an active market for it. Hosting a presale is an initial sale directed toward prospective buyers to gather feedback and gauge consumer demand before continuing product development. Presale products should not require lots of time or money; simply because you are not facilitating a hard launch. Your fashion brand will test the target audience and seek early investors who will help structure the product or provide a valuable assessment. 

If your primary design concept intrigues potential investors and solves any lingering obstacles, they will be more likely to strike a partnership and help build your fashion brand. Pre-selling your product and garnering support will shed a light on the pricing model and ultimate market demand. You want to create products that resonate with customers and establish a good rapport. Building those early relationships adds value to the product and helps your brand evolve into a name that consumers are willing to buy into. 

4. Angel Investors

The right investor can provide the funds needed to establish your fashion startup, and also introduce you to other vendors and industry connections for your brand to potentially work alongside. Simply put, investors have the power to create more opportunities for your fashion company and help navigate decisions that may impact your business. 

Specifically, an angel investor is an individual or group of individuals who have excelled as entrepreneurs and want to use their knowledge to help another startup succeed. These investors are very hands-on and focus on driving growth, but they require equity for their services. They typically ask for a 20 to 25 percent stake in your fashion startup to provide funding right away. It is best to find a local angel investor and ensure your business goals align before handing over the keys to any investor.

5. Venture Capitalists 

The next possible source of funding comes by way of venture capitalists. Venture funds are larger sums that come from an individual investor or a pool of investors to help finance a new startup. They invest in companies they believe will grow and provide a return on their investment. Venture capitalists often require 30 to 50 percent ownership and want a significant role in decision-making due to the high-risk nature of their investment. 

Networking opportunities are essential for attracting the interest of venture capitalists. The fashion industry rapidly evolves and presents its own set of hazards, but many venture capitalists view investing in DTC fashion brands as a unique opportunity with a positive trajectory for growth. Be prepared to build steady relationships with these investors, communicate the values behind your brand, and give them a reason to say “yes” to your fashion startup.   

6. Businesses and Universities

If your brand connects with other fashion startups that currently have investors, they may provide you with recommendations. These existing companies can direct you where to meet investors or share resources with you to attract funding. 

If you come from a traditional fashion background, universities with top-ranking fashion programs have a vast network of alumni with successful careers in the fashion industry. The professors who teach these programs have the potential to be investors in your brand, but if not, they are still likely to have connections to fashion and retail professionals who may be interested in helping fund your fashion startup. It doesn’t hurt to speak with faculty members and introduce yourself to anyone who may be open to investing. 

7. Fashion Events and Gatherings

Every month, there are new industry events your brand can attend to raise awareness for your fashion startup. Awards ceremonies, trade shows, and fashion conferences are just a few of them, and with virtual conventions becoming more prominent, you can register your company without leaving your home. From here, you can note current trends or competition, and learn from industry experts while gaining exposure for your fashion startup. You never know who you may connect with, so simply engaging in conversation with other emerging fashion brands has the potential for your brand to meet a group of investors.

8. Social Media Platforms

The future of fashion is digital, so make your online presence felt and take advantage of the numerous social media platforms to attract investors. Create social media accounts for your business on Facebook, Instagram, Twitter, and LinkedIn to start marketing and promoting your fashion startup. Post often and tell your brand story to draw interest and get viewers to engage with your company. 

LinkedIn is the ideal social media platform for business professionals to network even if they don’t have mutual connections. You can introduce yourself and your brand in a personal message, and potential investors can review your profile to learn all about your fashion startup and your brand’s mission. Keep your social media profiles polished and up to date so you can stand out and leave a good impression. You can even follow pages of fashion companies or join groups with other fashion startups and industry entrepreneurs to network with one another.

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What are the Pros and Cons of a Fashion Startup?

Securing funding for a fashion startup is no easy feat, and once you have investors in place, that’s where the real work truly begins. The success of your fashion startup depends on revenue, adaptability, organization, time, and product quality, among other things. There are certainly pros and cons to establishing a fashion brand from the ground up, so let’s explore these factors and unravel the true impact of fashion startups. 

Pros of Fashion Startups

1. Flexibility: When starting a fashion startup, you can focus as much time as you need on your business. When starting small, you can work from anywhere, make decisions for all business operations, and manage your brand’s product development on your own.

2. Consumer Demand: While the fashion industry evolves quickly, there will always be demand for new designs, styles, and products. Depending on your product catalog, you can set multiple pricing tiers to reach consumers of all backgrounds and budgets. 

3. Growth Potential: When starting a fashion startup, there is no limit on how much money you can earn. If you put the time and energy into your business and deliver quality products, your brand has the potential to become increasingly profitable. 

4. E-Commerce: Digital retail is taking over, and DTC e-commerce is the future of fashion. Running a successful e-commerce business provides a convenient alternative to traditional retail and better suits the shopping habits of present-day consumers, which ultimately drives sales.

5. Rewarding Work: Running a fashion startup is demanding work, but it also allows you to dedicate your time toward something you are passionate about. Your brand will help solve demand issues, meet customer needs, and hopefully progress toward a more sustainable future. 

Related Article: 4 Ways Your Fashion Brand Can Become More Sustainable 

Cons of Fashion Startups: 

1. Competition: The fashion industry is a crowded space and competition is high. When starting your clothing line, take the time to analyze trends, the marketplace, and where you see the highest demand. 

2. Finding Suppliers: Sourcing the right supplier or manufacturer is crucial for all fashion startups. Finding the right partner can be a rigid, time-consuming, and costly process if not done correctly, so due diligence is pivotal. Organizing product data and preparing tech packs in a system like Backbone PLM goes a long way when communicating with suppliers. 

3. Stability: As an emerging fashion brand, you might put all your money back into the business and not reward yourself with a consistent paycheck. There is no safety net if commission dwindles, so it is necessary to budget for slow periods throughout the year. 

4. Overhead Costs: When running your fashion startup, there will be an immense amount of overhead expenses that come with selling physical products. Have a strategic budget established to cover these fees so it doesn’t negatively impact your bottom line.

5. Taxes: As a small business owner, you will typically file self-employment taxes which can be quite costly when funding a fashion startup. Have a clear understanding of what you will pay in taxes to determine if the work is worth the investment. 

Related Article: Mitigating Supply Chain Risks 

Fashion Starts with PLM 

If your love for fashion runs deeply through every stitch, then it might be time to create your own brand. Proper funding will benefit every aspect of your fashion startup, so make sure you have a solid business strategy in place. 

The best strategy your brand can take is adopting a dynamic, cloud-based PLM solution. To learn more about the role PLM software plays on thriving fashion startups and a successful product development cycle, refer to our selection of case studies, blogs, and customer reviews.

Ready to see what Backbone PLM can do for your fashion startup?

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