The FashionStake Diaries | Part I: From Idea to Traction with $1000

Fashion Stake Screenshot | Source: Fashion Stake

FashionStake Screenshot | Source: FashionStake

Following last week’s Introduction to Crowdfunding, we are pleased to bring you The FashionStake Diaries, a new BoF series providing a behind-the-scenes look at the crucial first months of a crowdfunding fashion startup, seen through the eyes of its founders.

NEW YORK, United States — Some say a great business starts with an idea. We started with a problem: despite legions of loyal fans, internationally renowned designers like Yohji Yamamoto and Christian Lacroix were filing for bankruptcy because their businesses were failing.

Given their obvious talent and popularity, this was surprising and made us wonder: what if the internet could connect fashion designers directly with their fans? And what if those fans could directly fund designers, provide creative input and share in the rewards when the collections sold? In essence, what if we could harness the power of the web to “crowdfund” fashion the same way Wikipedia crowdsources articles?

Refining the idea

Getting this far wasn’t as easy as it sounds. From our first meeting in September 2009, as classmates at Harvard Business School, it took us four intense months to polish the idea and think through some fundamental questions. Would fans be willing to support designers, and if so, would they put in one dollar or a hundred? What would they want in return? And would this alternative fashion model appeal to designers, or would they be sceptical, preferring a more traditional route to success?

Fortunately, we were able to tap our classmates and professors for great advice during these early stages. Their feedback gave us enough material to develop a formal consumer survey and conduct focus groups. Over pizza and wine, we held four separate groups with different consumer segments, covering males and females in their twenties, thirties and forties with a diverse range of professional backgrounds, but all passionate about fashion. These sessions helped us define and better understand our ideal target customers: women between 25 – 34 years old who spend over $2,000 per year on fashion. We discovered that they are “retailer-agnostic,” meaning that they shop around for the best fashion at the best price. Furthermore, many were looking for greater choice.

These initial learnings were important. But our platform had to appeal to two different groups of users: we needed to get consumers excited about funding fashion designers, but we also needed to engage designers by giving them a brand new model to drool over. We asked designers what changes they wanted to see in the commercialization process and honed our model with them over countless whiteboard sessions. Giving designers a strong voice in product development helped us refine our insights. But it also helped us to establish solid relationships with potential partners going forward.

Our first market test

With a two-sided platform like ours, we had to decide who to sign first: designers or consumers? We needed to solve the “chicken-or-egg” problem that all internet marketplaces face. Because we had already established relationships with designers, we focused on signing them first. This was our first real market test.

Without a website to showcase, we contacted designers who we thought matched our target consumer and brand positioning. Many of these designers had helped us refine the business model earlier in the process. Word spread and, soon enough, our inbox was overflowing with applications from designers in the U.S. and beyond. But we needed to be selective: to establish the FashionStake brand, we needed designers with an established fan base, a sound business, the right level of distribution and solid press coverage. Ultimately, from a pool of over two hundred, we selected four designers for our launch.

Building a user base

The next thing to tackle was pre-launch user registration. These days, many consumer-facing internet businesses try to generate a user database prior to launch. The logic is: if people are excited about your concept, start interacting with them right away.

To do this, we launched a fashion news blog with articles on new collections, trends and reviews. We featured articles on everything from new resortwear trends and celebrity designers to fashion mobile apps. While not specifically about FashionStake, the blog was useful on two levels. First, we were able to monitor and understand what topics resonated with our users. And secondly, the blog drove visitors to our landing page, where we could sign them up for email updates about the upcoming launch. We also tried to build word of mouth using every free marketing technique we could, from getting our professors to tweet about us to sending emails to close friends. As a result of these efforts, our pre-launch user base continues to grow every day.

Earning PR

The final proof point was press, which is particularly important for a fashion business. Rather than sending press releases to every editor we could think of, we wanted to lay low until we were “discovered.” We were fortunate enough to be noticed when a friend mentioned the concept to a reporter at the international newswire Reuters. To our surprise, Reuters wrote a full feature on us and broke our story on 1 April.

The Reuters piece generated hundreds of follow-on articles including coverage in mainstream press like The Huffington Post, New York Magazine and The Washington Post; business publications like Fast Company and PC Magazine; and fashion press like Women’s Wear Daily. Soon enough, fashion blogs began to pick up our story and FashionStake was officially on the radar.

So far, so good. But with incoming revenue still months away, how much had we spent on the business up to this point?

Polishing the idea, including meetings, focus groups, surveys, business plan competitions and whiteboard sessions: $100. Signing launch designers, including travel costs and marketing materials: $300. Attracting pre-launch signups, including blog and website design costs: $600. PR with editorial placement in top publications: $0. Our total expenditure: $1000.

Our next challenge: convincing investors

These days, it’s pretty realistic to start proving various components of your business model on a shoestring budget. But to take things to the next level, you need to consider raising outside investment. In our next post, we’ll reveal how we went about financing FashionStake and how we convinced venture capitalists to invest.

Vivian Weng and Daniel Gulati are co-founders of FashionStake, a new online marketplace for fashion, launching September 1, 2010.

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17 comments

  1. Wow. I’m so happy that someone is finally stepping in to save Christian Lacroix. I have been trying to figure out ways to support him for a very long time but could never really afford his apparel in his boutique in the cinquieme. But I would love to invest in him and be invited to his couture show. This is my dream come true.

  2. This is a very interesting idea. I see a few inevitable problems that a concept like this will face. Its an effort to help designers in a very meager and granola sort of way.

    First of all catwalkgenius tried to do this but in the year (s?) that they have been up have only managed to raise 5000 pounds for their most popular young designers. They have received a lot of press and yet all the visits to their site ad blog have not translated into funding.

    On the other end of the spectrum, what respectable designer with any hope for making it big will ever want to be part of such a near sighted and consumer driven model. Christian Lacroix may have struggled but at least he fell in dignifty – designing what he wanted as a craftsman and not being told what to do by people, who quite frankly dont have the training or the right to tell him what to do or make. SO inevitably this will make fashionstake attract the fewest able designers and the most desperate ones. Not a good combo!!!

    fashiondarling from New York, NY, United States
  3. This is unlikely to work. First of all, what designer wants to have “creative input”from their micro investors who have put in very little money? Also, this reminds me f the annual songwriter competitions that have major people judging, but guess what? Not one winning song in the last 20 years has ever been a Top 10 single. This is a nice idea, but have a look at all the other crowd funding sites that have been around for a while. What is the strike rate of winners? I have a hunch it may be less than 2%.

    David Royce from United Kingdom
  4. Even the slogan, “democratize fashion” is absurd. Since when is any business, and especially fashion, a “democracy.” Smart designers — real artists — create THEIR vision for the public to buy into or not. Beyond trend analysis which is used primarily by the high street chains (and which many major designers shun) the best fashion informs and leads. It’s the antithesis of “democracy.” Can you imagine that McQueen wanting to take advice from non-fashion people who kicked in 500 quid? What a joke!

    David Royce from United Kingdom
  5. i am also rather skeptical about the project. lacroix, great couturier as he is, failed his business because the the dreams and fantasy wasn’t translated down to RTW. there exist a fundamental problem with many start ups or upcoming designers: it’s often about what they want, how to project their vision, but what the business need is often neglected.

    if the designers work with a good management team, the business would attract funding from proper investors out there as they will demonstrate sound grounding. this crowd funding appears to be a project where fans subsidise their idol’s playtime, which seems risky.

  6. I disagree that fashion is meant to be a pure art form. We’ve seen the most successful designers successfully bridge the commercial and art sides of the business – and it’s more important than ever in today’s environment to make clothes that people actually want to wear. I think Fashionstake is exactly what the industry needs right now. It’s a breath of fresh air and will serve designers well to engage their consumers in a way that no one has done before.

    jen coval from West Babylon, NY, United States
  7. great idea. having worked with some well known designers for the past few years, I can see many being excited about this company….not just from a funding perspective but more of a chance to score some great PR and connect with consumers.

    isn’t that what all big companies are trying to do these days?

    Toby from West Babylon, NY, United States
  8. Thanks for all the great comments. This is exactly the type of discussion we are hoping to promote. Just want to clarify a couple points about how we work with our designers:

    1) Shaping the creative process. Designers have full creative direction in designing their FashionStake collections. At the same time, we “open up” the creative process up by allowing consumers to vote on favorite pieces and leave comments for others to see. The data is actually quite valuable in that we can start to see which silhouettes, colors, or prints are most popular, and the designer can make a more informed production decision based on feedback directly from the customer (not a buyer!). The response from designers has been overwhelmingly positive.

    2) High-caliber designers. We haven’t released the names of our designer partners yet, but many of our designers are stocked at some of the world’s top boutiques and department stores. We have worked hard to bring designers on board whom we think fans will be excited to support. In addition to securing funding, our designers are excited about engaging their fans and reaching out to new consumers. Stay tuned!

  9. why would any designer selling at top notch boutiques need money?

    Yo need to also understand that the reason BUYERS developed was because consumers HATE making decisions and want eppel to tell them what to buy and what to wear. They want to go to a place that has already been through a rigid selection process rather than such a free for all marker place.

    Have u really conducted market research on this?

    fashiondarling from New York, NY, United States
  10. I’m all for success stories, but the article should really be titled “From Idea to Traction with $1000 and a friend that can get you mentioned in Reuters”. I agree the concept, landing page and blog approach is a great way to test the waters, but they would have been virtually useless without the PR mention. The real gem would be what you recommend for all the other entrepreneurs that want to test the waters, without having a direct connection with Reuters?

    Brian from Sacramento, CA, United States
  11. I think most people are missing the point here, which is:

    The internet is the single most important, most effective vehicle for democratization. Its applications are in its very early stages and so far, we’ve seen this democratization happen with communications. Look no further than wikipedia, youtube, facebook, blogging platforms, twitter, etc. The very people commenting on this blog are only able to do so because it is democratized. Do you think the NYTimes would let anyone here comment on an article in their newspaper 10 years ago? Influence or contribute to a “professional” article? You would have been laughed at if the topic was even brought up.

    Now fast forward to today…

    It’s only very recently that we’ve seen these democratization/collaboration concepts be applied to commerce, let alone fashion. Look at Groupon, Kickstarter, Gilt Groupe, woot.com, etc. Kickstarter.com for example, a site that does crowdsourced funding, helped 4 NYU students exceed their goal of $10k….by ~$190k. They raised a total of $200k from “crowd sourced” funding. In addition, there isn’t a single “investor” that has any equitable say over their product.

    Just as it was with communications, we are yet again in the very, very early stages of the “democratization of commerce.” All of these commerce sites are leveraging the ability for people to connect and collaborate for the purposes of advancing a commerce-based agenda. It could be group buying, group manufacturing, group designing, group funding, group investing (which is what wall street does anyway – with no transparency)..it doesn’t matter.

    Fashionstake is simply leveraging the most powerful form of collaboration the world has ever seen, and is applying it to one of society’s most social and cultural industry the world has ever known – the fashion industry.

    Game on. I’ll surely invest…

  12. A wonderful idea — I love the social networking aspect, the microfinancing aspect — you really had me, until you got to the $1000 start up costs. I’m a little unclear — are you still college students? Financed by, ____? In other words, where do you live? Do you eat cardboard? How can your start up costs be $1000? You pay yourselves nothing, in other words?

    When all new “business” is based on the children of the ultra-rich doing little projects here and there for fun, while 50 year old dinosaurs like me are starving in the gutter in front of a fancy bar on the Bowery, I have to wonder if this is really “the new thing.”

    Miss Gretchen from United States
  13. Proof of crowd sourcing and crowd funding already exists in the success of social media. Proof the designers are interested in this type of revenue exists in the fact that FashionStake cites over 200 interested parties. Belief in the business model is seen by willing investors.

    This is certainly an interesting proposition and a large part of the success will hinge on the ability to provide continued value to both the individual investors and the brand designers through an experience that exceeds expectations. The ultimate brand positioning and strategy will be an integral part of rewarding both sides of this equation and ensuring long-term success.

    Kudos to FashionStake for garnering so much interest and launching an innovative concept, and to Business of Fashion for reporting on it. We are looking forward to the progress.

  14. I wanted to say I was sorry to the people at FashionStake for over-reacting in my post last night. I had had some bad news from a friend in the city, and lost my cool.

    I’ve seen some great success stories at kickstarter.com — for instance, Noon Design for plant-dyed textiles — and I look forward to following your journey.

    Miss Gretchen from United States
  15. I’m one of the co-founders of Catwalk Genius.

    We’re delighted to have fully funded the world’s first fashion collection here in Europe (Katie Eary @ Catwalk Genius) and wish Fashion Stake all the best over for their launch in the US.

    Glad to see BoF covering our interactive/tech corner of the industry!

  16. How is this “democratic” or a “democracy” ? Just because a customer or “fan” can give feedback? These are simply buzzwords that actually mean nothing. Is getting feedback from one’s micro investors the same as actual “market research” ? Do these investors actually really understand how to connect all the dots in the world of building fashion brands? Most brands start from humble beginnings with simple ideas. Ralph Lauren sold wide ties. At the time they were fresh and a bit unusual. What if he had micro-investors saying they hated the ties. Would have listened and gone to something else? And then maybe failed? Harvard MBAs like to believe that everything is quantifiable and market research(able). The fact is, creative endeavours are very, very different.

    Charlie Gup from Nottingham, Nottingham, United Kingdom
  17. When will Part II be published??

    lesley from Los Angeles, CA, United States