DSTLD, a two-year-old denim brand, is in fundraising mode. It received angel rounds from institutional investors like CrunchFund and Arena Ventures. But when it came time to raise a Series A, founders Mark Lynn and Corey Epstein decided to do something different: They're calling on their customers to invest in the brand.
In 2012, President Obama signed a new act that allowed anybody to invest in companies—not just accredited investors who tend to be high net worth individuals. It's taken several years for the government to create the regulations to ensure that everyday investors would be protected from fraud and exploitation. But today it's possible for anybody to help fund a company.
DSTLD is the first fashion brand to take advantage of this new regulation. As a direct-to-consumer e-commerce brand with no brick-and-mortar stores or retail partnerships, having a committed base of customers who are also investors can play an important role in helping the brand to grow. "It makes sense for us as a consumer-facing brand," Lynn tells Fast Company. "If we give our most engaged customers a chance to invest, they will be even more committed to spreading the word about us."
On the company's website, which lists all the nitty-gritty details about how the investment works as well as how the process is regulated by the SEC, customers can sign up and invest a minimum of $500. "We're thinking of that 18-year-old who loves our jeans and wants to invest his summer job money in a Series A round," says Lynn.
Over the last six weeks, DSTLD has received $750,000 in escrow from more than 450 people investing an average of $2,400. DSTLD is hoping to raise a total of $3 million in this round. Lynn believes that the fact that DSTLD also has VC funding from investment professionals who have thoroughly vetted the company has helped these everyday investors feel confident about their decision to part with their money.
The brand is also trying to turn these investors into collaborators. It has created a forum where the company can ask questions about what marketing and branding strategies to pursue, or which new products to put out. "As customers of ours who are also interested in our success, their opinions are particularly valuable," Lynn says.