2007
Starting your own clothing line beware of investors!
Posted by: Fashion06 in Financing |
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Getting an investor may sound like it is just what you need remember this article, but beware you could end up losing it all in the end.
Many fashion designers make looking for an investor their number one priority when starting their own clothing line. In all reality most clothing companies will not find an investor in the beginning stages no matter how creative your fashion design skills are…so don’t hold your breath.
For the most part investors want your business and not your ideas so getting an investor without a money making business or at least breaking even is not going to happen. There are some that defeat the odds, but it is usually financed by family, friends, or distant relative.
Once you do get to the point where investors are interested make sure their future interests for your clothing business at least include you in it 
, and are similar to yours interest. Many investors are interested in getting an Roi (return on their investment) over, over, and over again, plus an exit strategy. So if your business plan doesn’t show where they can make their money back and a strategic exit plan for them don’t approach them and make yourself look like a fashion business minor!
Investors will want some kind of ownership out of the deal. Whether they become a majority or a minority owner is up to you, but after all the hard work you’ve put into your business would you really want too sell out and become an employee of your investor. If you can’t come too similar terms where you remain in charge and control certain aspects of your business that are important to you…pass. Investors don’t think that a fashion designer is fit too run a large business and they will try to bring in seasoned executives that would make them more money on their investment and give them a lucrative exit strategy…but hey, who could blame them.
Do any of you have investors? Thinking about searching for an investor? How much of your company are you willing to give up in order too acquire financing? 10%,20% what?
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April 18th, 2007 at 11:35 pm
0%….if I cant do it buy loans..then id rather not do it
April 20th, 2007 at 12:51 pm
Make sure your investor is a female (if you are male). Then date her . Have your way with her. Now that you have your investor where you want her, go out and find another investor and repeat the process. All is fair in the life of Hussel.
“what ever your Hussel, keep it Premium”
-Hussel Premium
April 21st, 2007 at 12:33 pm
I wouldn’t want an investor for my company. Sure they can help you get to where you wanna go faster. But then you’re not really your own boss. They become your boss. And that’s not the reason most of us begin these companies to begin with.
Keep up the great work with the blog!!!
April 21st, 2007 at 1:30 pm
Jeffrey…what the hell are you talking about? Since when does an investor become your boss? So you mean to tell me if you borrow money from your mom, she now tells you and your company what to do? Or if you borrow money from anybody for the matter. I’ve only seen investors become acting partners when they feel the company and their investments are going down hill. I hope this reply doesn’t come off as rude, but maybe you should go down to your local community college and at least take a few business courses. Mainly it is corporations (large) that have outside investors who sit in on the Board of Directors…. I’m really concerned for you Jeffrey
MASTER YOUR CRAFT
“what ever your hussel, keep it Premium”
-Hussel Premium
April 22nd, 2007 at 12:50 pm
“How much of your company are you willing to give up in order too acquire financing? 10%,20% what?”
This question is inherently flawed, it depends entirely on how much funding you’re getting. When you give an investor a percentage of your company you are selling them shares. If you sell 10% of your company for $10k, both you and your investor are valuing your company @ $100k, whereas if you sell 40% for $10k, you’re valuing your company at a whopping $25k. On the flip, if you sell 25% (15% more than 10%) for $50k, you’re valuing your company at $200k, and you’re left holding $150k in equity. Which would you prefer, to sell 25% or 10%? (Trick question: answer: depends on the investment terms, hahaha)
This may not matter if you intend to stay a small brand, making just enough money to support yourself, but if your aspiration is to reach LRG or something like that proportions, under or overvaluing your company too early can come back and kick you in the balls.
The fact is this, almost ALL larger companies need some source of funding. Equity is generally the most “expensive” if you calculate it out, however it has its upsides, namely that you don’t have to make payments every month. Also, when you’re selling shares, its stupid to think that you’re “giving away your income.” Think of it in terms of having a smaller piece of a bigger pie, more cake far everybody, nahmean? Also, as an exit strategy, you can just buy out your investor(s) whenever the time comes.
In fact, when it comes to banks, you have to play by their rules. When it comes to investors, you play by whatever rules you’re able to negotiate, so if you’re lucky/smart enough, you can negotiate terms with your investor that are far more advantageous for your company depending on your particular needs/problems.
April 22nd, 2007 at 8:23 pm
Yes true you can negotiate your own rules…but the chances of that happening (being mostly in your favor) depends ultimately on the position your brand is in…being that most clothing lines look for financing when their in trouble or in the infant stage…negotiating is not going to be in your favor.
Great insight nevertheless…xander keep it coming.
May 17th, 2007 at 2:21 pm
Just to keep it real thats exactly what i thought,you had to get an investor or have the money yourself.You guys are deep though,i can learn alot from you.Im appreciating everything.
June 14th, 2007 at 9:43 am
[…] I’m not taking sides, because from the looks of it this could actually be?a fault on the side of the clothing company J Brand, but these are some reasons for my article on Beware of the investor. […]
September 28th, 2007 at 1:21 pm
When dealing with an investor you should take into account what kind of investor you are dealing with. Most of us would most likely go to an investor who wants his ROR and part ownership of the company. What a true entrepenuer should be looking for is a “silent investor” where he/she only has a financial interest in the company without any strings attached. Basically, letting you run your clothing line the way you see fit.
-Jiani Clothing
Seen By Many Worn By Few
April 13th, 2008 at 12:19 pm
I wanted to find a investor to bankroll my great idea. I found that I was not ready to meet with an investor because the plan was incomplete and not in practice