Byline: Katherine Weisman

PARIS — What designers need most — in addition to talent — is capital, and it’s in increasingly short supply here.
The problem is that the sources of capital have changed, primarily because banks, the traditional lenders to the French fashion industry, are no longer willing to back new fashion companies, which typically take a long time to turn a profit. And that worries many industry observers, who say that today’s talented young designers are having a tougher time getting off the ground than their counterparts who began their businesses back in the Sixties and Seventies. “It’s very troublesome. Young designers are not being helped the way they used to be,” said Pierre Berge, chief of the house of Yves Saint Laurent. “There are no new resources of money.”
“The banks are just not interested,” said Ralph Toledano, former president of Karl Lagerfeld and now a consultant. Those designers who can find capital are often locating it outside traditional channels. The house of Mariot Chanet is 37 percent owned by French real estate entrepreneur Robert Bremond, while Capucine Puerari is 30 percent owned by 3I, a UK development capital company. The Seagram Co. Ltd. took a 50 percent stake in the house of Herve Leger in 1993. John Galliano’s business is being financed by John Bult, the chairman of Paine Webber International, as a personal investment. At a time when capital is scarce, the need for it is also greater than before, many in the industry believe. For one, costs ranging from real estate to salaries are relatively higher than ever before. Moreover, the fashion show — a hugely expensive undertaking — has become the main way to attract attention, compared to the private salon showings of years ago. It is also difficult to build up business in France because of the retail structure, observers said. France is filled with lots of small, family-run stores that sell designer goods. “The owners are badly educated. They don’t know how to buy a line, or sell it, and they pay badly,” observed Toledano.
But Toledano and others noted that it’s often the fault of the young designers themselves that they can’t get financing because they are living in the never-never land of “creation.” “Commercial is often a dirty word here where so many people design for their friends or for journalists,” Toledano said. “This compares to the U.S. where designers always talk about ‘pricing,’ ‘building a collection’ and ‘merchandising.’ “
“The young designers forget that they must make money,” Berge concurred. “Sure, they need talent. But they also need to have the merchandise that sells. And investors expect a return on their investment.
“The reason for our investment is that we believe this will be a successful venture,” explained Charles de Gunzburg, vice president of the board of directors of Herve Leger, and a vice president of finance at Seagram’s. But Seagram’s is behind Leger as a long-term investment and is not expecting big returns in the immediate future. “For a company the size of ours, this is not an enormous investment, and we can afford to be patient,” de Gunzburg said.
A similar perspective is shared by 3I, which has owned a 30 percent stake in Capucine Puerari since 1991. Bertrand Finet, an executive with 3I in Paris, explained that 3I buys minority stakes in promising companies that have been operating successfully.
Capucine Puerari president Laurent de Blegiers said that he and his designer wife’s firm could have continued without 3I’s investment, “but that 3I allowed us to go faster than we would have been able to on our own.”
“We felt that Capucine Puerari was a brand that could be developed. We liked the designer and de Blegiers’s management, and basically invested in the people,” Finet explained.
Jacques Mouclier, president of the Chambre Syndicale, has tried to garner financial support for a group of some 20 young designers. “We need to get a new generation of designers going like we did 20 years ago,” Mouclier said. “The story is starting all over again, but this time with much harder conditions.”
A state-owned financial company is now guaranteeing 50 percent of the total of bank loans given to the group of 20 designers. And five of the 20 design companies chosen by a commission made up of industry leaders will each be given $200,000 (1 million francs) in subsidies. But others remain worried about the prospects for young French designers. “The efforts of the Chambre Syndicale are fine, but they might not be enough,” said Pierre Berge. “What we need are people [with money] who believe in fashion, and who are patient.” — Fairchild News Service