We help fashion businesses flourishing grow with everything from securing intellectual property rights to renegotiating agency agreements and commercial leases.
Today, many start-ups are looking to crowdfunding as a source of finance. Crowdfunding has helped entrepreneurs in the wearables space raise money and accelerate their businesses without having to agree to onerous terms with commercial banks. It has developed as not only a means to obtain finance, but also as a useful marketing tool to establish or grow a potential customer base.
The first question that many angel or institutional investors will ask often relates to proof of concept. A good way to gain recognition and credibility is being able to demonstrate that your venture has had a successful crowdfunding campaign.
Through investment-based crowdfunding, a company can gain not only investors, but also an army of brand ambassadors and potential customers. Encouraging those investors to take to social media to send out your message is potentially more powerful than a traditional marketing campaign.
As with wearables, crowdfunding comes in different forms. More particularly, is it right for your business? Here are some crowdfunding options for the wearable tech industry:
The risks of investment based crowdfunding for a company depend on the crowdfunding platform, and therefore the legal structure, used to raise finance. For example, Seedrs uses a nominee structure, which allows it to manage the investment for investors while still giving them an economic interest in your business. Whilst this arguably protects the investors (and means Seedrs is acting akin to a venture capital firm or angel investor), it does provide a potentially powerful voting block of investors in your business (particularly if they have a blocking minority of over 25% of your company).
On the flipside, equity crowdfunding site Crowdcube allows investors to hold shares in your business directly. Whilst this may provide you with more control over your business, you would have the administrative burden of a significant number of (potentially) geographically-dispersed shareholders, and in turn each of them would have the various obligations of legal shareholder status.
There is little downside for a fashion company in using pre-payment or rewards-based crowdfunding – it can create both a healthy order book and the cash necessary to produce those orders. It can also be done without giving up equity or accumulating debt. However, it is not suitable for raising money to expand your business, for which investment or loan based crowdfunding will be more effective.
If you are thinking of raising finance in a simple and innovative manner whilst marketing your product to a potential new customer base, crowdfunding may be your best way forward.
For more information please contact Jonathan Segal.