Crowdfunding among fashion brands and retailers is on the rise, and now one company is delving into previously unchartered territory: A live equity crowdfunding campaign, or a “mini IPO.”
Denim brand DSTLD — short for “distilled,” and popular among celebrities like Cara Delevingne, Selena Gomez and Kendall Jenner — is gearing up to open its first round of venture capital funding, making it possible for anyone to purchase shares as part of the initial public offering process. The brand is one of the first fashion companies to participate in the formal crowdfunding process following the passing of the JOBS Act, a federal regulation that allowed any consumer to invest in a private company, including unaccredited investors that make under $200,000 in annual income.
DSTLD, which specializes in jeans and sells a wide variety of affordably priced menswear and womenswear garments, joins companies like Betabrand, which integrates a crowdfunding capability in addition to its branded apparel offerings. Betabrand’s model solicits consumer input and funding to help the company determine which styles should become actual Betabrand products.
While DSTLD will continue to oversee design decisions, when the “mini IPO” launches in a few months it will give shoppers a more active stake in the company. DSTLD hopes to raise a total of $10 million through the process, and received $16 million in indicated interest through a proposal on the crowdfunding platform, Seed Invest.
The effort to open up investing to the masses is part of the overarching ethos of the company, according to Mark Lynn, co-founder of DSTLD, which is focused on a holistic democratization of fashion that permeates into marketing and sales as well.
This is in part because DSTLD largely grew to prominence with the help of “micro-influencers,” social media users who have between 10,000 and 100,000 followers. Lynn said that as a result of the “disintermediation of the media industry, people have more opportunity to have a voice than ever before.”
Lynn said opening up investing to DSTLD consumers that have helped the company grow on social media felt like a good opportunity to allow them to participate and potentially simultaneously reap financial benefits.
“To allow consumers to join in as shareholders as the company seemed like a natural progression for us and a way to reward some of our more evangelistic supporters,” he said.
He added that what sets micro-influencers apart is they drive deeper engagement and more robust dialogue than celebrity influencers. While their posts are more widely seen, it doesn’t necessarily mean they have more impact. A recent study of 2 million social media users by the marketing platform Markerly backs his assertion, showing that users within the range of 10,000 and 100,000 followers receive a 2.4 percent like rate, compared to 1.7 for users with 1 million to 10 million.
“Unequivocally, micro-influencers tend to have much higher engagement than celebs,” Lynn said. “If Kendall Jenner posts something, it’s going to get a lot of reach, but it doesn’t necessarily get a lot of engagement. While these micro-influencers have far fewer followers they have much more engaged followers.”
DSTLD also operates on a direct-to-consumer model, which helps offshoot costs and allows the company to produce garments in more of a “slow fashion” method. The company completely eschews wholesalers and sells exclusively online, ultimately helping it lower price points — jeans run for $65-$105 and are made in the same factory as denim brands that sell at two to three times the price point, Lynn said.
“DSTLD has really been about flattening the fashion market and creating much more transparency between us and our vendors and factories,” Lynn said.