Helen Masters shares her insights into how to raise funding for your lingerie business
“In my 10 years helping lingerie businesses all over the world to excel, I have always found this time of year to be the busiest for people to take the leap to start up their business, and for established businesses to look at how to improve and to develop scale up plans.
All of those things usually require some money! Lack of adequate funds is the number 1 reason I see entrepreneurs with great ideas or established businesses with a solid foundation, failing to achieve their ambitions.
Raising funding for your business can be daunting – it can feel like too much of a risk; you may feel that the business is too small to warrant serious investors being interested; or you may not know how to find or pitch to possible investors.
All of this can be overcome with the right advice and the right approach.
“Over my 18 years in the lingerie industry, I have successfully raised funds for my own start up and helped lots of businesses to do the same.
I mentor on the Focussed For Business’ Funding Accelerator Programme, advising businesses across the fashion and retail sector on how to develop and deliver the perfect pitch to raise funds. Fund raising can feel like climbing a giant mountain with someone throwing boulders down at you – but if this is you, do not despair!
Follow my Fundraising Formula, for the tried and tested approach to raising funding for your lingerie business.
Fundraising Formula
- Understand What You Want
Raising investment is time consuming. It’s a distraction from your real job of growing your business. You don’t want to waste time talking to people who are not interested in what you have to offer or who cannot give you what you need– so make sure you have worked out what that is first.
Some investors like to get in early, others like to wait till the business is scaling. For many investors the management team behind the business really matters and that’s what they want to see in place before they will get involved.
Often investors focus in on particular sectors or the latest trends. Technology is always hot as investors see potential for lots of future growth. However, as a lingerie retailer or manufacturer although you may be in a niche that is a less obvious opportunity for some investors, you have the benefit of operating in a well- established market with a tried and tested formula for success. This means as long as you can fully understand and size the gap in the market which you plan to fill and get the proposition spot on, you can deliver more reliable and faster returns for investors.
Some investors are willing to and interested in getting involved – they bring expertise and contacts as much as they bring money. Others prefer to remain silent and simply reap the financial rewards.
Working out what you want and when you want it will help you focus your efforts at the right potential investors.
- Understand Your Target Audience
Investment in your business could come from a range of sources, or a mixture. For example:
- You – the first question an investor will ask is whether you have invested your own money. If you are not prepared to put your money where your mouth is, then why should they? Investing your own funds in the business not only shows confidence but it can also be a smart move to enable you to pay yourself back in the most tax efficient way possible once the business is up and running.
- Friends and family – this is often the first port of call for many businesses. It makes sense as the hurdles to overcome can seem easier, however this type of investor deserves the same professional approach as any other and of course it is vital to ensure the terms of any investment are crystal clear. Failure to do this can result in ruined relationships.
- Crowd Funding – funding via platforms such as Crowd Cube and Seeders has become a popular choice. It kills two birds with one stone- it is a great way for businesses to get started on a fund raising round and it attracts people who are actually interested in your product – a great way to generate future customers, secure pre orders, form a research panel and build a database. Crowd funding involves investors giving money to a business and receiving ownership of a small piece of that business. If the business succeeds, then its value goes up, as well as the value of a share in that business. Of course, the opposite is also true but smaller investors are often prepared to risk their funds – even seeing crowd funding as a sideline or hobby.
- Other similar or associated businesses – many businesses in the retail and fashion sectors grow via acquisition or becoming a shareholder in other businesses. Often, they choose businesses that complement their portfolio and thst they understand so can have some confidence in and help to grow– think Sports Direct acquiring Frasers. They may even be businesses that are perceived as competitors. Think Next, who have a significant share in Reiss. As a lingerie business you may not immediately think of approaching other lingerie businesses to invest but it could be a win-win to have an investor who understands the sector and potential synergies on board.
- Angel Investors – an angel investor (also known as a business angel, angel funder, private investor, or seed investor) is an individual who provides capital to a business usually in exchange for convertible debt or ownership equity. Angel investors have to be formally assessed for suitability so are often seen as more ‘serious’ investors. They can often provide support to startups at a very early stage, when the risk of their failure is relatively high and when most investors are not prepared to back them. Some angels join networks such as co.uk to share investment capital and provide advice to their portfolio companies.
- Venture Capitalists – Venture capital (VC) is a form of private equity financing provided by firms or funds to startup, early-stage, and emerging companies that have been deemed to have high growth potential or that have demonstrated high growth in terms of number of employees, annual revenue or scale of operations. Often these start-ups are high risk also, and based on an innovative technology or business model . VCs tend to come in after the initial concept bene proven and there is clear traction. Websites such as com list venture capital companies for free.
Investors are all different and it is difficult to predict their individual preferences and needs. The key therefore is to think about the types of funding that is right for your business at its stage of development and focus on those people. Then, clearly communicate what is on offer, listen and tailor your approach.
Foxe and Fable
- Use all the resources available to you
SEIS AND EIS – If you are a UK based company that is less than three years old you my qualify for the Seed Enterprise Investment Scheme (for startups) or the Enterprise Investment Scheme (for established businesses). These are government schemes designed to help small or medium sized companies grow by attracting investment. They offer tax reliefs to shareholders for a specific period of time.
These are popular resources for start-ups – but there are a few hoops to jump through. The company, investor and proposed investment must meet the conditions of whichever scheme you opt for, and there is a time limit on the benefits so it is important to secure this when you are ready to pitch and not too soon.
Company Ratings Agencies – companies like Fund IQ are independent rating organisations who measure the investability of a startup or scaleup to potential investors. Their rating systems combine data analytics with human assessments of a company. They can be a great resource – they will help founders identify and fix flaws in their investor proposition early, and are seen as a trustworthy and credible independent body by investors.
Mentors and Advisors – everybody needs a mentor, even the most experienced business professionals! If you are lucky enough to have a strong network then tap them up for advice and contacts. If not, and if you want support in raising equity investment, then why not sign up for a free Funding Strategy workshop with Focussed for Business. As one of their mentors I can vouch for the quality of their advice – and given their clients have raised over £22m in funding so far, they know their stuff.
- Nail The Pitch
To decide if they will back you, an investor needs to understand what is on offer – the quicker the better. It is important to give the information they need to be able to do that and to make it clear, concise and compelling. Don’t underestimate the power of telling a story.
One of my mentees, Sam Green of Foxe and Fable, says, ‘A successful pitch is built on a compelling story. It’s about connecting with people on an emotional level, whether that’s sharing the moment which sparked your idea, the narrative you give your customers to bring them to life or the journey of your mission to date; investors may forget facts and figures, but they will remember your story.’
The story is the start – but of course there is a bit more to it! I have listened to hundreds of pitches and I have to be honest and say that many initial pitches are not investment worthy! Understanding what makes a good pitch is key to your success. It is common sense, but as is often the case, it isn’t always that common!
Most investors when evaluating a pitch need to know that:
You are solving a genuine problem for your customers – either a problem that nobody else has solved or that you are solving in a superior way to others
Your proposition is clear, concise and relevant enough for the target market to easily relate to the problem you are solving and be hooked
There are an adequate number of people who will actually buy the solution – and that you are clear on which target segment will buy first so you focus your finite resources there. If there is also a track record of sales to prove this then all the better. If you don’t yet have a revenue stream then you need to find other ways to demonstrate this – test market results; database size and quality; sales pipeline; target market feedback for example. This is what investors call ‘traction’.
You understand the strategy to monetise – what you are offering , to who, why they will buy it , where they will buy it, how will you reach them and what your timing plan will be to attract and grow the customer base
You have strong revenue streams – multiple ways to monetise ideally, and that revenue starts to come in before cash runs out. Ideally you need a detailed 3 – 5 year growth trajectory.
You have the right people and skills in the team to deliver the plan – and if not you have a plan to acquire those skills.
The financial plan and deal makes sense – the investment needed is sensible, it will be used to drive growth and not simply ‘burned through’ without moving the business forward and the equity offered is fair.
5. Persist!
Rome wasn’t built in a day and raising funding can take time so if you have nailed the target audience and the pitch, don’t give up at the first hurdle.
Of course there is a lot to get right – so if you need help, cut the time needed by reaching out to those in the know. A funding workshop or a session with someone like me who has specific experience in advising lingerie businesses can speed up the process.
And when you do get in front of an investor, remember the golden rule: everything you prepare needs to be short, to the point and focused on giving investors the information they need – challenge yourself to get it onto one page that can be read in 5 minutes. That is how long most investors take to make up their mind, so make your 5 minutes count!
Helen Masters runs the leading Lingerie Business Consultancy – Pudding Consultancy, – helping lingerie businesses all over the world to excel.
