Investing with NO Guarantees? Yep.

written by Clare Ryan on September 22, 2010 in Funding with one Comment
0 Flares Twitter 0 Facebook 0 Google+ 0 LinkedIn 0 Email -- Email to a friend StumbleUpon 0 0 Flares ×

I grew up in a small town. A really small town. A few years ago, when the town’s natural food and grocery co-op (The Briar Patch), needed to move to a bigger location, build out a site, and hire more workers, they reached out to the community for help. Here’s what the Briar Patch basically said, “We want to grow. We think we will be successful. We can’t afford it on our own.” So, instead of going to the bank to get a loan, they asked their loyal shoppers, “Will you invest in us?” The Briar Patch had no guarantee they would be successful, and investors were given no promise they would ever see a penny of their money returned. The obvious next question here is, “What would be the point of investing $100 or $1000 or $10,000 of my hard earned cash into this natural food co-op?” Firstly, if the Briar Patch was successful, they promised to pay back the money eventually with interest. There was no timeline for this, but there was a guarantee that the money would be paid back if the co-op began seeing profits. Also, every time I shopped at the food co-op hence forth, I would receive a 15% on all goods at check-out. Above and beyond that, it was an investment in something local and widely beneficial to the community. So… guess what? The Briar Patch got funding. They got a whole lot of funding. People were happy to reach into their pockets and help with no guarantees, but a whole lot of trust.

When I first read about FashionStake, I remembered the Briar Patch. Fashion Stake is a New York based startup, founded this year by Harvard Business School alumnus Daniel Gulati. In a nutshell, here is what they do:

FashionStake shows four or more up and coming designer collections on their website. They then ask site visitors to do one of three things:

1. Pre-Order clothes at a discounted rate.

2. “Invest” $50 in the designer and if the fashion line gets picked up, receive up to $125 in credit towards buying pieces from that line.

3. Invest $500 in the designer, receive one free item when the line is funded, and receive an extra bonus such as tickets to NY Fashion week or a private dinner with the designer.

Again, like the Briar Patch, there is NO guarantee people will see a return on their $50, or $500. But, there is a good chance they will, and especially if they fund the lines they think will really go that extra mile and win out.

Picture 2

So, if you go onto FashionStake right now, you can see that the Designer “Lauren Merkin” has asked for $10,000 in funding, and as of now, she is 86% of the way to that goal. She is offering versatile and beautiful handbags with a history of success behind them already. So, would you give Lauren Merkin $50? How about $500?

Picture 4

Do you think this “democratization of fashion” will work? Tell us more about what you think.

Follow us on Twitter @dealmakermedia