By  on September 11, 2007

Giles Deacon, one of London's leading lights, doesn't have a financial backer — and he's in no hurry to find one. Matthew Williamson waited nine years before taking an outside partner, and he's only given up a minority stake. Footwear designer Rupert Sanderson recently agreed to join forces with a backer, but only because that person happened to be a mentor.

They may be running small businesses, but a growing number of London-based designers are choosing to forgo the security and big bucks of a large fashion house or financial backer, and remain independent and free to run their businesses their own ways.

"I know plenty of people who've been acquired by large houses, and they've lost their freedom, creative control and direction," said Deacon. "At the same time, they have nice salaries."

Deacon is talking all the time to potential investors, but so far he's been happy to grow his business organically: He has 35 wholesale accounts worldwide, including Barneys New York, Nordstrom and Neiman Marcus; he's launched pre-collections, and he plans to unveil full accessories and men's wear lines next year. He also keeps his war chest filled with design consultancies: He works for the British luxury label Daks and does a collection for the high street chain New Look.

"It's never a question of an investor saying, 'Here's a million quid. Do what you want,'" said Deacon. "It depends on who is giving you the money and what their vision is. The partnership has to be absolutely right and have what everyone wants."

By now, everyone knows the story of Roland Mouret: How he fell out with his banker backers Sharai and Andre Meyers, lost the rights to his name and then came back — in spectacular style — in a new partnership with entertainment mogul Simon Fuller.

But the catwalks of London — and so many other fashion cities — are littered with stories like Mouret's. Elizabeth Emanuel, who rocketed to fame designing Lady Diana Spencer's wedding gown with her former husband and business partner, David Emanuel, lost her name to an investor in the Nineties. She's been fighting to reclaim her name and trademark for the past 10 years.Most recently, the Danish-born Camilla Staerk fell out with her backers, moved from London to New York and now designs under the name Staerk.

In July, Gianluca Brozzetti, former chief executive of Asprey, mysteriously fell out with Sciens Capital Management LLC, a New York-based private equity firm, and Plainfield Asset Management LLC, a Greenwich, Conn., hedge fund, the investors he personally brought in to rescue the brand last year.

Neither the shareholders nor Brozzetti, who is still an Asprey shareholder, have commented since the split. At press time it was still unclear who, exactly, is running Asprey.

It's no wonder, then, that smaller designers are becoming increasingly wary. "It's so lonely out there, and it's tempting to go with the money option. And the idea of having investors seems frightfully grown-up," said Sanderson, who left the advertising world to start up a namesake luxury shoe label five years ago.

"But instead of solving your problems, investors can be the start of them. It can become a second job dealing with them because you're often beholden to them. When they call up and say, 'Can you do me a little favor and make my friend a dress for a party next week?' what are you going to say? And there is often a mismatch of expectations."

But many times, the story is a happy one.

Last year, after growing his business organically, Sanderson took on an investor — the father of an old friend, a lifetime entrepreneur who'd already become a business mentor to him.

With the new cash injection, Sanderson was able to buy the factory near Bologna, Italy, that had been producing his shoes. Now, he's even producing shoes for Anya Hindmarch. In May, Sanderson opened a second stand-alone store in Knightsbridge, London, near Harrods, and now he's looking to open one in the U.S. next year.

Sanderson considers himself very fortunate. "There are always investors sniffing around small businesses, but they are rarely assessing you as a 'proper' activity. That's because it's hard to value small fashion businesses and because you may have had a few rubbish sales seasons. Then they tend to meddle, and it becomes a nightmare."Graeme Black, the Scottish designer who for years worked with Giorgio Armani and Ferragamo in Italy, would agree. Before launching his eponymous label in 2005, he said he talked to a lot of potential investors, and was confident he could secure the right amount of start-up funds.

But he turned them all down. "I looked at these financial people across the table and thought 'Can I spend the rest of my life working with you?' What a designer needs is someone who loves fashion because let me tell you, it's a 24-7 job."

In the end, he joined forces with an architect and interior designer friend, Jonathan Reed. They're funding the business together, and while Black's growth won't be rapid-fire, it will be on his own terms. "We want to do this slowly and organically," he said.

Even when investors supposedly know what they're doing — in the case of Opera, for instance — it doesn't necessarily mean they have the recipe for success.

Opera, the private equity firm founded by Bulgari and other industry investors, bought Bruno Magli in 2001, and sold it this year to the London-based investment fund Fortelus for less than the purchase price of $140 million, according to industry sources.

One investor that's becoming increasingly popular in London is Baugur, an Icelandic investment company specializing in retail. Over the past year, Baugur has taken stakes in a number of small fashion companies, including PPQ and Matthew Williamson.

Baugur, like most investors, doesn't work with start-ups or troubled companies. Instead, it looks for labels with an existing sales base, infrastructure and wholesale business. Unlike other private equity investors, Baugur takes the long view, and isn't aiming to bail out of its investments in the medium-term.

"We're looking for interesting brands, and we want to help them take the next step, whether that means helping them with international growth or establishing a retail business," said Baugur ceo Gunnar Sigurdsson.

Last year, Baugur took a minority stake in Matthew Williamson, enabling the designer and his business partner, Joseph Velosa, to plan for a stand-alone store on Manhattan's Upper East Side and start an accessories business (see related story, page 14)."Baugur has a great team in place and they know we are the experts in what we do. They're very respectful of our skills, and I still have complete creative control," said Williamson.

More recently, Williamson and Velosa took on another minority partner, TSM Capital, the new investment company founded by Marvin Traub. Baugur holds 26 percent of Matthew Williamson, while TSM has a 22 percent stake. Thanks to Traub's investment, Williamson now plans to open two more stand-alone stores, in Los Angeles and Paris.

But Williamson and Velosa were far from hasty in their decision to take on outside partners. They worked together for nine years, kept tight reins on the business and only turned to Baugur when they needed to expand in a big way.

Williamson said what kept them going for the first nine years was their own partnership. "Joseph has the skills I didn't have. I think it's rare for a designer to have both the creative and business acumen, so the sooner a young designer realizes that, the better."

PPQ founders Amy Molyneaux and Percy Parker, who partnered with Baugur last year, have a similar story. They had been growing their business organically and joined forces with Baugur when they were ready to take the next step. Today, they have a freestanding store on London's Conduit Street and will be launching a full sales Web site in the fall,

"Investors chat you up all the time — but most people are actually scared of fashion," said Molyneaux. "From the very beginning, the Baugur people knew what we were talking about. They have a retail history, they understand our problems and they didn't need educating about fashion," she said.

There is no doubt designers are becoming increasingly wary of potential investors. The same could be said for the more savvy investors out there. After all, they're the ones putting their money on the line.

"Generally speaking, serious investors aren't going to look at any company with less than $4 million to $6 million in annual sales, and they're not that interested in how much publicity a label is getting," said Guy Salter, who works in private equity and serves as deputy chairman of Walpole, the organization that represents Britain's luxury brands."And they should have their supply chain worked out. As a designer, you can have everything else in order, but if the supply chain isn't right, it can kill the business. Fixed costs can also kill a business. I don't know why the design colleges in London don't put more emphasis on things like the importance of supply chain," he added.

Salter said the most attractive businesses for an investor already have a proven "footprint and history" — and that often comes not with money but with time.

"What smaller fashion businesses actually need are four to six amazing seasons, some kind of bread-and-butter product that sells every season, and an understanding of their market niche," said Salter. "Sometimes new money can be the worst thing to happen to a young business."

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