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.
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.