How to find investors for a clothing line pt.1

One of the most frequent questions I get is how to find an investor to produce a clothing line. Unfortunately, it is much easier to define who won’t get money rather than who will. In this series, I’ll be exploring the reasons people don’t get funding, followed by people who are more likely to get it. To start, here’s an example of someone who won’t get money and why:

I have a clothing line ready to launch, without going in to it too much. I have everything EIN, RN, wholesale interest and other clientele. I have samples in production as we speak. What I need is a resource for capital. Believe me when I say this will be HUGE!! Some items are patent pending as they are new to the market. I have innovative designs with a unique twist. Everything is copyrighted, trademarked and pending registered trademarks. For our full Executive summary and business plan please contact asap. We are looking to launch the tshirts first and move to the active wear.

Here are some reasons why this line won’t be funded -at least not by people who are in the business.

First, she says that some items are patent pending -being innovations in the marketplace- copyrighted and trademarked with samples in production and then you find out she’s launching tee shirts. There’s nothing patentable about a tee. Anybody in the business will know this designer is dramatically overplaying questionable advantages; those statements will only impress others on her same level (or lower) but not backers. That’s no way to win over an investor. You need to deal with them on their level and according to the criteria they weigh most heavily.

Let’s pretend the designer is telling the truth and has secured trademarks, patents and the like, it is most likely she paid someone else to do it for her which was a big waste of money. If she’s wasted money like this, for something of so little value, an investor has no assurances that she’ll spend money wisely in the future either, so why would anyone give her still more money? Paul Graham says investors avoid giving startups too much money and I’d imagine it’s because investors know startups waste it otherwise. I mean, startups are new, they haven’t learned priorities very well yet so of course they’ll waste money. Having full funding will only compound the problems.

Her frame of reference is skewed. Perhaps “innovative designs with a unique twist” will impress consumers but to investors, a tee shirt is a tee shirt; it’s far from innovative. Padding a product description in this way is a mistake because backers interpret this as either dishonesty or immaturity. If you can’t be honest about your product -even if only to yourself- a backer will be hesitant to believe anything else you say. They won’t know how much of what you say to believe.

If “having everything” means an EIN and a RN number, this designer has a very limited view of what it takes to produce a line which doesn’t instill a lot of confidence in an investor. While it’s great that she has those -not taking much more than 10 minutes of computer time- it’s not going to impress anyone who knows anything. Investors are more likely to back someone who has worked at developing products, knows how to produce them or knows where or how to get them produced, even if they don’t have EIN and RN numbers (the project plan details the skeleton of this process which is then incorporated into the business plan). The reality is, investors are more likely to fund people who’ve invested their efforts in product development or sourcing product development. Investors will assume you’ve covered the basics, they aren’t interested in someone who can regurgitate a bullet pointed list found in any Business 101 magazine article.

Another item of little interest to an investor -at this stage of business gestation- is a formal business plan. Surprised? A business plan really doesn’t mean much, not when you’re talking about manufacturing businesses. Investors will want to see a project plan. You cannot -cannot- devise a business plan without a project plan so if you’ve got a business plan but no project plan, all of your money, time and effort was wasted (and I’m sorry if you paid oodles of money to a consultant who wrote you one). It is much better to walk through the elements of a project plan, filling in all the blanks that you can (see pgs 199-200 of the guide) before developing a business plan. A business plan does not serve to define the unique parameters of manufacturing; this is not like a restaurant or a service business. For one thing, any kind of sales projections for stylized consumer products are unmitigated fiction. Sales projections are a fiction because you can’t know what or how much you’re going to sell. Consumers are fickle. Those of us in the business can tell you endless stories of companies we’ve known who produced really cute stuff -that nobody bought! Perhaps worse, the styles that none of us liked became hot sellers. While you can occasionally get lucky, it’s just not predictable and there’s no reason to assume you’d be the exception to the rule (sorry). I really do not like telling you these things.

Related entries:
Don’t borrow money to start a clothing line
How to find investors for a clothing line pt.1
Investing in a clothing line
Investing in a clothing line 2
Business plans for funding are over rated/
Stone Soup Entrepreneurs
Why contractors won’t partner with you
Factoring invoices: Financing a fashion line
ADHD dump: factoring
ADHD dump: factoring 2

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18 Comments on "How to find investors for a clothing line pt.1"

1 year 1 month ago

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sohel rana
1 year 4 months ago

We searching a reliable partner that we going to open our new Denim project ASAP.

Amani Phipps
1 year 8 months ago

I am a high school student looking to well actually into the start up phase of my own clothing line and this really has helped me figure how to contact investors. It was again a fantastic, understandable analysis of the lesson learned from a failure. One i will acknowledge to prevent a potential setback in my own work. Thank you for this blog I plan on reading many more.

Eric Gunther
1 year 10 months ago

Gary Wassner is giving good advice. We both actually work in the funding side of the apparel business. A new brand needs to invest in themselves at first, prove they can get the orders, and then borrowing becomes possible. Once you have a track record of sales at a certain level (normally over at least 3-5 million would anyone have interest in investing. The exception would be a highly seasoned team with an unusual track record for success. Truth is, you may NOT want an investor to dilute your ownership. If you can simply borrow the money to make your goods and ship then things are looking great!

Eric Gunther

3 years 6 months ago

A note to those who have read this post and email me because they’re looking for an investor.

Keep in mind that anyone you ask to help you find an investor will expect compensation for their time whether they find someone for you or not. If they do find someone, they will expect an additional finder’s fee.

Finder’s fees can be very pricey (>30%). I know people think they can pull the finder’s fee out of the funding they acquire but all the parties involved know that’s what you’re thinking so the deal is structured in such a way as to prevent it because the investor doesn’t want to pay for that.

It may not seem fair but pretend the situation is on the other foot; an individual is looking for an investment opportunity. In that case, the investor pays the finder’s fee. The company being invested in shouldn’t have to subsidize a deal they did not solicit. That company will be doing their own negotiations for tangible and intangible benefits if they welcome the deal.