Get Ahead in the Fashion Industry: Is Crowdfunding for You?
December 13, 2013
•IADT General, Fashion Design
• 0 Comments
Crowdfunding has become one of the big buzzwords in the fashion industry. But is it a good way to grow your particular business?
Crowdfunding is the practice of funding a project or venture by raising small amounts of money from a large number of people—typically via the Internet. A successful crowdfunding campaign can be a fast, high-profile and efficient way to raise money to make your ideas a reality and get ahead in the fashion industry.
Some of the top sites used by entrepreneurs include Kickstarter, Fundable, RocketHub and Crowdfunder. Each of these sites give clear instructions on how to set up a project and typically take 5 percent of revenue if you make your goal and between 7 and 9 percent if you don't, plus payment processing fees.
As those already working successfully in the fashion industry will testify, commercial success comes from thinking creatively, and crowdfunding is certainly one option.
But is crowdfunding for you? Take some time to weigh these pros and cons.
Five Reasons to Crowdfund
- Crowdfunding can provide relatively painless access to capital. It can be a good alternative to going the route of banks or venture capitalists and much faster than the traditional applications process.
- Rewards-based crowdfunding allows business owners to raise capital from people by simply giving their products—for example clothing or invitations to a private collection—in exchange, without giving away equity or control or accumulating debt.
- Crowdfunding can lessen risk. The fashion business can be very challenging and difficult to forecast. If people are willing to come on board with you for small amounts of finance, it makes sense to use this, particularly for pre-selling. It demonstrates proof of concept and that your brand has credibility and trust.
- It is a great way of getting feedback, comments and ideas and accumulating valuable market research. It makes you set goals.
- It is an effective form of viral marketing. Crowdfunding is a great way to introduce your fashion business, is relatively free and great for social marketing. You can potentially gain thousands of organic visits from unique users who could also potentially be funders. You can build a "club" of loyal customers and brand ambassadors who believe in you. These early adopters can be very valuable.
Five Reasons Not to Crowdfund
- Going through the approval process with the banks and facing investors one-on-one can be a very beneficial experience in the fashion industry and is a very useful rite of passage. You will gain very good insights and ensure that your business model is bulletproof. You will lose this experience by going for crowdfunding.
- There are a lot of risks involved with crowdfunding, and if your project does not get off the ground because of a tough marketplace, lack of experience or other reasons, you could be left with unhappy people.
- A lot of crowdfunded ideas simply do not make money. Just because you happen to get enough investors to get your project off the ground doesn't mean that your business will be a success. Also, dollar amounts donated can be very small, and it can take a lot of work to pull in the finances bit by bit.
- You could have issues with long-term strategy. Crowdfunding can be a good way to get up and running, but if you then decide to further upscale your business or move on to another project, you may have to start all over again with the banks to achieve a similar amount.
- You may have to reveal a lot about your ideas or your business a little earlier than you want to through crowdfunding. This can make it hard to remain unique among competitors in the fast-changing creative world.
Crowdfunding has altered the ecosystem for entrepreneurs and is here to stay in the fashion industry. There is no better time to weigh the pros and cons and decide whether to jump in or jump off!
Photo credit: MorgueFile