Investing in 'Young' Talent - Schoenberger, Anastase etc

[Lena]

this is 'part one' of an interesting article posted on wwd earlier this week

Dirk Schonberger

Haider Ackermann

PARIS — Can investing in a fledgling fashion house reap profits?

A growing number of European investors think so, and they are starting to pump capital into young fashion brands. In France, investment bank Natexis Capital has created a fund called Mode et Finance to invest in young designers, while in Belgium, investor Anne Chapelle has purchased shareholdings in the young businesses of Haider Ackermann and Dirk Schonberger. She also holds a stake in Ann Demeulemeester's company.

Meanwhile, in the U.K., Imran Amed, a former consultant at McKinsey & Co., has assembled the first round of financing for a fund called Byesse that will buy into young fashion firms; the first investment is expected to be made later this year.

Giles Deacon, Anne-Valerie Hash, Christian Wijnants and Charles Anastase are among the young designers some think may attract this new group of investors.

The development is propitious for struggling talents, as the market has been challenging for independent fashion houses in the face of giant and well-capitalized conglomerates like LVMH Moët Hennessy Louis Vuitton and PPR, parent of Gucci Group.

Ackermann is a case in point. Just a few years ago, he was on the verge of closing, despite industry kudos — unable to scrape up enough money to produce a collection.

"It was a horrible period," he recalled over coffee at the Café de Flore here. "I was working day and night. I was loading and unloading boxes. It seemed funny at first, but doing everything yourself got old very fast."

Then the designer's fortunes reversed. He participated in the Gwand fashion festival in Switzerland and took the first prize of 100,000 euros, or about $128,000. Then Chapelle bought into his company.

Now the designer is on track, having moved from Antwerp, Belgium, to Paris, where he has assembled a new studio and feels fresh creative energy. Chapelle is banking on his business moving into the black within a year.

"It all happened at a very critical moment," said Ackermann. "I could show again. Even more than the money, which I needed desperately, it gave me confidence again."

Chapelle's support has given Ackermann more breathing room and brighter prospects for future growth, he said. "When I started, I thought it was a luxury to be independent. Now I think it's a luxury to have a financier."

More and more young designers feel the same, which represents a big change in their mentality. The new attitude underscores how difficult it has become for them to survive. Even fashion graduates these days say they want to work for a big house, where they can expect a monthly paycheck, instead of schlepping it on their own with uncertain prospects for survival.

And while designers recognize the value of financing, investors see untapped opportunity in such creative voices and a potential niche for developing brands that stand out in a retail landscape that is becoming increasingly standardized. Generally, the investment strategy entails taking small shareholdings in a stable of young brands with the view that maybe one or two will make it. The strategy mirrors that of venture capitalists in the high-tech and pharmaceutical sectors, sprinkling seed money around to see what sprouts.

Investors dream of finding a jewel along the lines of Jimmy Choo, which Tamara Mellon — adding business acumen and marketing savvy — helped to build into a business with sales of almost $150 million within a decade. The company is now owned by the private equity firm Lion Capital, which bought it in November 2004.

But many investors are simply besotted by fashion and love nurturing creative types. They know that elevating a budding name takes patience, and that fashion offers few quick returns.

"First you have to be willing to invest, and then you have to work with the designer to get [the formula] right," said Chapelle. "With a young designer, it takes at least three seasons before you can reach breakeven."

Amed said many fashion start-ups lack the business expertise needed to succeed in today's highly competitive landscape. "Throwing money at young designers isn't enough," he argued. "You need a business partner."

He pointed to successful fashion-business tandems Tom Ford and Domenico De Sole, Yves Saint Laurent and Pierre Bergé, and Miuccia Prada and Patrizio Bertelli.
.........

more to come

credited to wwd.com

 

[faust]

Thanks a lot, Lena. Please post the rest of it - some serious talent has been mentiond. I love Schonberger

 

[Blackalicious]

Another great article! very appreciated, Thanks alot

 

[Arturo21]

I love Schonberger

Ditto. And Ackermann.

 

[Lena]

i tried to post but it got lost in cyberspace, i'll try again tomorrow, promise

you are all welcome

 

[*sayan]

Thank you so much Lena for always bringing in amazing articles.

 

[Scott]

Finally! Investors with integrity! Too often it's been about control and overdone commerce. It's really great to hear of money people genuinely interested in taking risks on young talent...and interested in these talents maintaining their creativity. I still think these designers are independent,though,even if they are invested in. I think this just provides a thicker foundation so they can continue on doing what they do brilliantly already.

But I am not without my wariness,either. I do hope that when the ships are down,they won't do what most companies do-pushing them to sell their souls.

 

[forgetaboutit]

about time....

 

[Spacemiu]

Finally! Investors with integrity! Too often it's been about control and overdone commerce. It's really great to hear of money people genuinely interested in taking risks on young talent...and interested in these talents maintaining their creativity. I still think these designers are independent,though,even if they are invested in. I think this just provides a thicker foundation so they can continue on doing what they do brilliantly already.

But I am not without my wariness,either. I do hope that when the ships are down,they won't do what most companies do-pushing them to sell their souls.

agreed

 

[Lena]

here comes the rest of this article, designers have a BIG problem dealing with business and i think its natural and understandable.

"Fashion is a complex business, and [designers] aren't trained to run businesses," said Amed. "Each designer has challenges and faces different problems. The pattern of real success in the fashion industry is to have a real business partner."

Understanding the idiosyncrasies of the business is important, too.

"Having an artistic sensibility is important for an investor," said Amed, who started in the performing arts before going on to Harvard Business School and McKinsey. "You have to have a feel for the business and share the designer's passion."

Investors said one problem many young designers are unable to surmount is structuring their collections so that they have retail legs. They often focus too heavily on image-generating showpieces to the detriment of sales potential.

"Determining your market is very important, whether it's a niche product or a product with a wider appeal," said Chapelle. "It's important to build a collection. You can't just do transparent tops, for instance. You need a balance of coats, jackets and pants. You can't just make 20 pairs of pants and just one coat. That doesn't work. You need to have a commercial balance."

Young designers today can find other avenues to secure financing and business support. Fashion festivals and scholarships certainly help, as Gwand did for Ackermann. Raf Simons, who won the Gwand prize a year before Ackermann, was in a similarly difficult position before he won the Swiss honors.

"The financial support connected to the prize did a lot," said Simons. "It enabled us to do our Paris show as we wanted it to be."

That show was widely praised in the press and helped to position Simons for wider recognition. Last year, he was hired to oversee the turnaround at Jil Sander, and last February showed his first women's wear line for the house, which generally was well received. "Financial support is needed to promote your brand," he said.

But fashion's philanthropists are doing more than doling out cash these days. Strategy, marketing and commerce are important focuses for them as well.

Nathalie Dufour, who runs France's Andam prize, which has awarded bourses to designers from Viktor & Rolf to Martin Margiela and Charles Anastase and Jean Touitou of APC, said Andam and French business school HEC have a study under way to evaluate what it takes business-wise to succeed in fashion.

"The idea is to help designers who are starting out to understand what type of business strategy could help them to develop," she said.

The steps mirror what the Council of Fashion Designers of America is doing with its CFDA/Vogue Fashion Fund, which selects three designers each season for financing of up to $200,000, as well as mentoring from a senior executive from within the industry. In the U.S. generally, though, young designers tend to get funding more by doing consultancy work for large companies in the jeans, beauty and fashion sectors than backing from private equity companies.

France's Chambre Syndicale also is involved in finding business financing solutions for young designers. Didier Grumbach, the Chambre's president, said he and France's minister of industry, Renaud Dutreil, are working on a bank credit system for young designers that would help finance the expensive production process. "It is designed to keep them solvent during this cycle," he said.

But even beyond financing, Grumbach argued that the biggest hurdle a young designer often faces is naïveté in the ways of the world and the fast-changing nature of today's fashion business.

"They need to change their attitude," he said. "It's not enough to design. You have to have a product that is produced in innovative ways. You can't only produce in France. Today is 2006, not the 1980s. The system has changed; the rules are no longer the same. One has to adapt and find solutions that work on a case-by-case basis."

article by Robert Murphy
credited to wwd.com

 

[gius]

It's nice that they're actually working with designers, not just backing them up financially, that they teach them the business too.

"They need to change their attitude," he said. "It's not enough to design. You have to have a product that is produced in innovative ways. You can't only produce in France. Today is 2006, not the 1980s. The system has changed; the rules are no longer the same. One has to adapt and find solutions that work on a case-by-case basis."

What does this mean^: produced in innovative ways???
Does it also mean "market in different ways"?

 

[Scott]

I think he means in terms of the manufacturing and using not one but many outlets outside of one's country.

Not liking those words that much from Grumbach. I know plenty of designers who still produce out of their own country's manufacturing facilities and are still surviving. I think most all the Belgians still do. And if he's really that interested in talent,he needs to lose such a contradictory and corporate attitude. Rules?? Product?? Where does that really come in this venture because it sounded all the world completely different than conglomerate take-over's. That's taking away from the entire premise...which is supposed to be helping lesser-known,struggling "creatives" and putting them back into the forefront of fashion. Haven't we already endured enough product pushing in the Dior's and Prada's of the world?

 

[gius]

^Thanks Scott. I was wondering if he might be referring to for example labour-intensive processes, like hand embroidery or weaving, where if a designer wanted these, it would be more helpful to the business/company to outsource to a different country so that production costs will be lower...
But... I had read some things Lena posted maybe last year, and she was saying it's sometimes better to keep things local/national so you can be sure of the outcome of your product (the quality, etc.). This is what I think you're trying to say there

That's taking away from the entire premise...which is supposed to be helping lesser-known,struggling "creatives" and putting them back into the forefront of fashion. Haven't we already endured enough product pushing in the Dior's and Prada's of the world?

I remember she also said her ateliers were suffering because there were fewer and fewer skilled workers in her city.

 

[HELLAS]

Very interesting..Thanks for the article Lena!!

 

[Scott]

It's true,actually,gius. But it's not just one's own country's manufacturers...it's having one manufacturer in one country period. Being able to work closely and intimately with one. If you're going to have three or four different manufacturers in different countries,indeed,how does a designer know his work is being made correctly and of high quality? I know some designers might work with a different manufacturer for special things like footwear etc. but this idea that Grumbach is implying is nothing more than mass production. I mean,that's really a disgusting idea to me....it's H&M territory. And in doing it in such a way where does the "designer" equation even come in ultimately?

 

[gius]

It does look like they just want to make sure they can make as much profit as they can with the new designer.

I know plenty of designers who still produce out of their own country's manufacturing facilities and are still surviving.

^It would be so interesting to know what exactly these kinds of designers are doing to survive. I heard Dries van Noten doesn't advertise. Is it just clever PR, word of mouth?

 

[tricotineacetat]

It's true,actually,gius. But it's not just one's own country's manufacturers...it's having one manufacturer in one country period. Being able to work closely and intimately with one. If you're going to have three or four different manufacturers in different countries,indeed,how does a designer know his work is being made correctly and of high quality? I know some designers might work with a different manufacturer for special things like footwear etc. but this idea that Grumbach is implying is nothing more than mass production. I mean,that's really a disgusting idea to me....it's H&M territory. And in doing it in such a way where does the "designer" equation even come in ultimately?

i would instantly have my t-shirts done in turkey if it allows me to sell them at a decent pricepoint, i know from experience that simply having it made in italy or france doesn't guarantee you ANYTHING in terms of quality... a lot of that actually comes from supervising and rigid controls. nobody actually complains about ann demeulemeester doing that, or having her shirts made in rumania or poland.