7 Tips for a Successful Clothing Line Fundraising

Daily, you find people saying they’ll start a clothing business, but only a few take action. While taking the courage to start is crucial, that moment marks the beginning of an uphill trip to get your brand is known and the cash flowing. 

At some point during the way, you’ll need to ask help from investors and they want to see real work and commitment to support you. Investors want to see printed samples selling, and not theory. They want the accountability that they’ll get their money back, but before going to investors, let’s talk about the fundraising steps from the very beginning. 

Talk to Your Family and Friends

Building a business doesn’t mean zoning out from your relatives. Remember that they love you and they’ll be ready to help. Asking them to invest in your business has quite a few perks. You receive the money faster since there aren’t many procedures unlike when signing deals with angel investors. However, if your business fails you’ll have to return the money to your friends and family. 

Friends and angel investors are your best option if your clothing brand it’s during its seed round, and needs somewhere between $100k-$500k. Then, after passing the seed round, you’re more likely to receive investment from VCs to get to the next phase. 

Use Pre-orders to Raise Capital

Another overlooked way to raise capital for your clothing line are pre-orders. You can use either a crowdfunding website, such as Wefunder, or Kickstarter, or your own, to offer pre-orders. Here you can test unlimited styles, colors, and materials. 

By launching preorders you get a clear idea of the most liked combination, which helps you to strategize your production when you have more traffic and focus on the best sellers. Also, it provides you with the budget to start manufacturing before the big launch. 

Negotiate With Manufacturers

Minimizing costs as much as possible is as important as attracting investments. Negotiate with manufacturers to start production in exchange for exposure. Promise to mention them in your advertising campaigns, and guarantee them about a long-term partnership.

You could offer consulting services for manufacturers or retailers. If you help them make money, this strengthens your partnership and gets your clothing line forward.

Consider Debt Financing

Getting a loan from the bank is relatively easier than getting money from investors. Another supporting factor is that there’s no loss in equity. However, unlike investors or your relatives, the bank doesn’t care if your business fails. 

You’ll risk your family assets being compromised by the bank in order to pay it back. Have a backup plan. Make sure you search for different sources of investments to prevent your campaign from failing and raise capital instead. 

Approach Angel Investors and VCs

Angel investments seem reasonable because you get cash in hand on day one. What’s more, you get to meet investors who have expertise and network. Connections will bring you other investors and help you fill the leading roles in your business. 

And in the worst-case scenario, if all fails, VCs and angel investors won’t ask for your money back. They’ve invested knowing the risk of losing money. However, take into account that these investors will ask for a seat on your company board together with a part of equity. 

Join Incubators to Raise Money

Let’s say that your clothing line is out and you’ve acquired your first customers. What’s next? How do you grow further and attract more fundraisers? Joining incubators is one way. Not only do you get more investments, but also network with experienced investors.

Incubators have a network of alumni to help you complete your marketing or other departments quickly, and take your clothing line to the next level. This comes with a price though. Incubators ask for 5-7% equity to invest between $50K-$100K. It sounds like a lot but compared to 20%-25% equity angel investors or VCs seek, is reasonable.  

Leverage Crowdfunding

Crowdfunding platforms such as Kickstarter, Indiegogo, and WeFunder are making the fundraising process easy for companies. Since your campaign starts gathering money six months or one year before the product launch you have time to work on refining the products and researching the market more in-depth.

Starting your first collection through these platforms has numerous benefits. You’ll generate buzz, and also have enough data to present angel investors. Having sold a whole collection gives your proof to present investors and show them that your product has potential.