FashionStake Launches Today

Think you’ve got a buyer’s eye? FashionStake, a new e-commerce/micro-finance site launching today, wants to give you the opportunity to make runway looks a reality.

It’s a complicated premise, but its founders, two recent Harvard Business School graduates, believe it’ll work. Co-founders Vivian Weng and Daniel Gulati want to create a place both emerging and established designers can raise funds to produce new collections, and also a place to sell those collections. Users can either put in an initial investment, put in a pre-order for the soon-to-be designed collection, or wait until the collection is available to buy something. The goal is to spread the word about designers who mightn’t have otherwise been able to spread it.

And this New York Fashion Week, designers like Nicholas K will send pieces specifically designed for FashionStake down the runway. Consumers will be able to visit the site after the show and pre-order those pieces.

Still a bit confused? I recently chatted with Weng about FashionStake’s launch, its involvement in New York Fashion Week, and how it plans to make money. Hopefully she’ll be able to clear things up:

Fashionista: What’s the premise of FashionStake?
Vivian Weng: Myself and a classmate of mine from Harvard Business School are the founders. When we were still in school, we noticed that fashion was changing. Designers began streaming shows and offering pre-orders hours after the runway show. We had experience in crowdfunding/crowdsourcing. And we wanted to create a company that would democratize fashion. Remove the gatekeeper, if you will.

What are your backgrounds?
Mine is in finance–I worked at Goldman Sachs. On the side I was also working with a couple of designers. I helped Jeffrey Monteiro through the fundraising process when he decided to launched his own line at the beginning of 2008. He was pre-sold into Barneys and some other great retailers, but it was still quite a struggle to raise the funds. It was a huge learning experience. I realized that there must be tons of both emerging and established designers who have trouble.

Daniel’s is on the start-up side–luxury goods and apparel. Prior to school he was a consultant, and he was also the art director of Erbario Toscano, a luxury bath and body products company.

So forgive me, but there are a lot of moving parts to this. Can you pare it down for me in layman’s terms?
Every designer on FashionStake has a fundraising target–the amount of money it will cost to produce a collection made specifically for our e-commerce site. Consumers have one of three choices: They can pre-order, buy a stake in the collection, or buy the VIP package. In the case of Nicholas K, they want to raise $50,000. Capital will continue to be contributed until they hit that $50,000, which then gets deployed, the designers go and produce the collection. But during the fundraising process, users can pre-order certain styles, or suggest other styles that they might like. That way we can set a preliminary buy [which means number of units per style to be produced].

Once the collection is produced we start to sell it in our online store. We can’t give our investors cash due to legal reasons, so instead they get store credit. [They're estimating investors will get a maximum 150% return on a $50 investment.] If the money isn’t raised, nobody’s credit card gets charged.

Will the e-commerce site only be open to members?
No, it’s completely open. What differentiates us on that front from flash sale sites is that it’s not a private sale. We really want to open up the industry to everyone.

But the collection sold on your site won’t be available anywhere else?
No, it’s designed exclusively for us.

Well then how many units are you planning on buying? Designers have to produce a decent amount of units for a manufacturer to agree to it.
It depend on the designer, but we’re estimating orders will be 500 to a 1,000 units. We’d like to produce for widespread distribution in the future, but right now this is the approach.

What’s your end goal here? Obviously you’ll be able to make money on the sales, but with units so small, it won’t be much at first, will it?
We’re absolutely planning to grow. When Gilt Groupe started they were doing one sale a day with units that were pretty comparable to ours. As we bring in more and more designers, we’re definitely interested in working with department stores, etc. to increase distribution. But right now we’re just testing the concept.

Okay, and finally, I’ve got ask. You’ve obviously done a lot of market research, but do you really think people are going to want to do this? It seems like too much work to me, especially when you can’t get cash back on your investment.
We actually found that people were really excited about the chance to invest. Every girl in our target market things she has the eye to pick the right piece. Do consumers have the confidence to pick the right designers? They seem to. But that’s why we have different roles–If you don’t want to wear the investor hat, you can just pre-order. We don’t want you to gamble with your $50.

Will you try your hand at FashionStake? I’d love to hear your thoughts.