Crowdfunding proves the perfect fit for Enclothed
Rebecca Wilkinson looks at crowdfunding and how it has enhanced online retail start-up Enclothed.
With the growth in the internet and social media, companies and individuals worldwide are raising millions of pounds to fund new ventures from a variety of online sources.
Crowdfunding is the practice of funding a project or venture through contributions from a large number of people, typically via the internet. It is a form of alternative finance which is growing in popularity. With an estimated £40,000 raised every hour, more and more people are turning to this option.
One recent and very publicly successful crowdfunding venture was Dragon's Den contender Enclothed. After turning down the Dragons' offer of £70,000 for 20 per cent of their company, Levi Young and Dana Zingher turned to Crowdcube to embark on their crowdfunding venture.
The pair set out to transform the shopping experience for men by creating a virtual personal shopper for customers who want to avoid the queues on the high street.
Dragons Hoppen and Linney were both keen to invest in the sophisticated e-commerce platform and immediately put in an offer. Levi and Dana - both of whom are listed as 'Ones to Watch' in the Telegraph's 35 Women Under 35 - originally accepted the offer but this fell through after the show.
Rather than seeing this as a setback, the pair capitalised on their enhanced profile after the show and joined the crowdfunding craze.
Dana said: "We had met quite a lot of angel investors. Then we looked at crowdfunding because we were told it is the fundraising of the future. Your customer becoming your investor is a very powerful tool."
The business now has more than 7,000 customers and supplies a box of designer clothes to men based on information they provide when registering online, taking away the hassle of high street shopping. Once the box arrives, you keep what you want and return what you don't.
Crowdfunding has become far more accessible due to the explosion of platforms that make it simple for businesses to use and easy for contributors. The simplification of the process creates a far larger scope for donation.
There are hundreds of platforms allowing individuals and companies to either issue shares for a donation or serve as a network for providers by curating the offerings allowed on the platform. This connects new ventures with supporters who believe in the people behind the project and have a genuine interest in the product. With the industry set to raise more than £22bn in 2015, the value of crowdfunding and what it can do for a start-up company should never be underestimated.
After eight days, Enclothed raised £640,000 from 425 investors, with the largest single investment totalling £150,000. Their first year of operation saw them gain 1,000 customers with more than a 70% retention rate and its founders say 2015 looks to be an even more exciting year. The start-up hopes to break the £800,000 mark in revenue.
You can find out more about Enclothed at icas.com.