Two financiers have formed a company to make marriages between fashion entrepreneurs and prospective investors easier and faster.
This story first appeared in the December 15, 2009 issue of WWD. Subscribe Today.
David Freschman and Karen Griffith Gryga, the founders of FashInvest, are using their knowledge of the early-stage investment world and a business model adapted from Freschman’s founding and involvement in Early Stage East, which was started to help emerging East Coast companies meet with potential backers in the biotechnology sector. Gryga, who has overseen venture capital funds, has also evaluated business plans pitched to Early Stage East.
Freschman said Silicon Valley developed into a technology hub because all the necessary pieces — from tech experts to investors and operational experts — were located in the same area. Investors talked among themselves about what was new and worthy of capital, while entrepreneurs learned quickly how to adapt ideas in ways that would be most compelling to those with seed money.
“There is nothing like that in fashion,” he said.
“A tight-knit community creates a self-fulfilling prophecy,” Gryga said, explaining that entrepreneurs with ready access to capital, coupled with easy introductions to operational experts, typically succeed because they hit the ground running.
Freschman expects to see a rise in entrepreneurship because of the post-recession realization that there is “no job security at the big companies anymore.”
FashInvest will soon begin soliciting pitches from fashion and brand entrepreneurs. An investment committee will select 30 of the most viable ideas, and have the entrepreneurs attend a “boot camp” in which they’ll be educated in pitching to potential investors. In spring, the 30 firms will each make eight-minute presentations to investors and a panel of experts in the fashion industry, who will critique their ideas in front of the investment community.
The new firm had its first networking event last month. David Rose, an investor at New York Angels, which instructs entrepreneurs on how to pitch ideas, made a presentation in which he reminded entrepreneurs that investors are most interested in them. That means anyone making a pitch should not plan on an eight-minute presentation solely on the product line. Reading material about the firm should be handed out after the pitch.
He explained that early-stage investors are more interested in the integrity, passion, leadership and vision of the entrepreneur.
Also on the agenda was a panel discussion moderated by Robin Harris of Luxeology. Panelists included Jon Brilliant of Atelier Group, which is backed by Compagnie Financière Richemont SA; Adam Burgoon of Karp Reilly; Shira Sue Carmi of Launch Collective; Mark Friedman of Trilea Partners, and John Nowaczyk of Milestone Partners.
Brilliant said the biggest deal breaker is a surprise — any surprise. “How you treat inventory is indicative of how you treat other people’s money,” he said.
Friedman, who is on the board of Iconix, said he prefers firms that have “mind share more than brand share.”
Nowaczyk said his company is interested in firms that serve a niche, with strong management and cash flow. Burgoon said his firm often does deals involving aspirational brands where the entrepreneur wants to remain involved in the company.
Carmi cautioned that many times someone gets an investment because of a personal connection, such as “the person believes in you.” While benchmarks tied to revenues are used as measuring sticks, Carmi said most firms that are looking for angel investors haven’t yet broken even.