Digital fashion brands, 4 tips for obtaining funding
In the sector well cluttered with online fashion, how to convince a fund to invest or a bank to lend?The JDN asked them the question.
Not easy, for fashion digital brands, and more generally start-ups specializing in consumer goods, to find funding.Investment funds and banks prefer tech players and therefore very often the BtoB, recalls Antoine Régis, co-founder of the Early Stage Eutopia fund, which specializes in French and foreign DNVB.Growing a brand requires time, and this time may not be compatible with the investment conditions of a fund.Especially for a fashion brand."For fashion, it's more complicated, it must be recognized.Between the evolution of trends, the management of the supply chain, the hyper fragmentation of the market and the consumption habits that change, several parameters are to be taken into account ", exhibits Cayetana Hurtado, VC at Balderton Capital.
Fashion brands do not need to finance themselves.In any case, some of them: "Either you create a niche brand and achieve maturity around 3 million euros in turnover with a business that works, or you want your brand to pass the CAP of 8 or10 million euros and you have to raise funds to recruit, finance production, open shops, etc..", Underlines the founder of a fashion digital brand.Projects that involve borrowing or lifting because the low margins made by digital fashion brands do not allow enough cash flow to be accumulated.This same fashion brand is struggling to obtain the support of banks and investment funds to finance its BFR."It is however crucial to guarantee growth, continues the anonymous founder, who denounces an ambient reluctance.As for banks, they are not familiar with the problems of ready-to-wear ".On this point, Nicolas Parpex, director of the Creative Industries Fund at Bpifrance, confirms the difficulties encountered by private banks in the face of fashion brands files."The specifics of their digital business model requires skill keys, he explains.This is the reason why we share our expertise with the banks in order to be able to support fashion brands together."How do you stand out if you are a fashion DNVB in search of funding? What are the points of vigilance to study closely?
Beware of fashion effects
At Eutopia, the Danish brand Organic Basics is the only one in the portfolio specializing in clothing.An observation revealing the difficulty of being differentiating in this competitive market."The traditional model does not suit us for fashion.With Organic Basics, we find the environmental dimension and especially the notion of clothing more than fashion ", explains Antoine Régis.Because the effects of fashion and their ephemeral character are not likely to reassure a potential investor."By favoring timeless clothes as organic basics does, there is less risk of being out of date," approves the co-founder of Eutopia.
Confess your creativity
What is the common point between asphalt, Rouje and Bonnegueule?In addition to being fashionable fashion marks, all three are distinguished by a value proposition other than the essential eShop.Asphalt, specialist in pre -order, presents its products and their composition in video, Bonnegueule retains its customers thanks to its historic blog, and Rouje evolves through the influence of its founder in the million subscribers on Instagram."Working your brand image and creative differentiation is a significant point in fashion.When we intervene very early in the adventure of a brand like Bonnegueule, it means for us that creativity is strong, "explains Nicolas Parpex, adding that Bpifrance is investing in clean funds but also granting loans.
Differentiating on CSR
In the manner of Organic Basics, which designs sustainable basics in organic cotton, digital fashion brands can no longer ignore the CSR issues, observed under the magnifying glass by investors.Reflection on the end of life of clothing, second hand, eco-design and new fabrics or even rental of clothing ... A fashion brand must now differentiate on these subjects that have become prerequisites for consumers who have known the COVVI-19."It is innovative to position yourself on these issues so as not to rest the whole economic model on the usual collection issues, which lead to their share of stress around the stock, the margin and the mobilized capital", argues Antoine Régis.
Limit acquisition on social networks
For the co-founder of Bonnegueule, Geoffrey Bruyère, fashion is a gourmet capital sector which ultimately checks only few boxes in the eyes of investors.The fashion brand, which raised 6.5 million euros in May 2020, is an exception."It is not easy to stand out on the product, unless you can be on matter, but on arrival male customers buy blue jeans, not pink.It is rather the economic model which can bring advantages compared to competition, "says Geoffrey Bruyère, who recognizes that the profitability and growth of Bonnegueule make the brand more eligible for funding.According to him, the DNVBs which depend on social networks to acquire new customers see their margin crumble because the cost of acquisition, it continues to increase.He therefore advises to limit his dependence on social networks to generate traffic.A pragmatic decision according to the co-founder of Bonnegueule: "The bulk of our traffic comes from word of mouth and our media.Consequence, our paid acquisition is profitable.I think that beyond the quality of the clothes, a fashion brand that wishes to lift funds must be able to guarantee traction, loyalty and margin to reassure investors ".
Do you really need to raise funds?
Depending on the ambitions of the fashion brand, venture capital is not always the best option."Between the rapid growth trajectory, significant risk taking and the vocation to seek liquidity thereafter, this does not necessarily correspond to the project of all fashion brands", explains Antoine Régis at Eutopia, who received ahundred files of fashion brands in 2020."Our role is not to support all the fashion brands with clean funds but to be able to accompany brands with high potential", adds Nicolas Parpex.For DNVB, remains the alternative of business angels, acclaimed by 21 of them among the 36 tables of 2020.