Organic Basics: a case study in pre-order funding

The founders of the Danish clothing brand financed the company through a combination of crowdfunding and venture capital, learning big lessons from both paths.
Organic Basics hero 16x9

‘We are really nerdy about what we do at Organic Basics,’ says Christoffer Immanuel, one of the founders of the Danish clothing brand, ‘from how we develop products to how we raise funding. We spent a great amount of time figuring out the dynamics of Kickstarter and how we wanted to present our brand.’ All that attention to detail paid off. 

The company, launched in 2014 by Christoffer, Mads Fibiger Rasmussen and Alexander Christiansen, initially raised $20,475 on the crowdfunding platform – more than double their target – and attracted more than 400 backers with their focus on honesty, humour and transparency (their pitch referred to the ‘discomfort’ felt by Mads in his search for good underwear). 

With a unisex collection ranging from underwear to simple dresses, all made from recycled materials and organic cotton, Organic Basics champions a sustainability ethos in everything, from how the website is run to its Organic Basics Fund, which donates a portion of profits twice a year to activists and organisations advocating for ‘justice for the both planet and communities’. And it does so with a distinctive tone of voice – ‘The fashion industry is a dirty bastard,’ begins a story on the site.

Kicking off crowdfunding

‘We had never done any crowdfunding campaigns, nor tried Kickstarter before,’ Christoffer says. ‘We put together our pitch in the format of a Kickstarter video, then tested it with a lot of people and made new iterations before we launched it. We didn’t know what to expect, but we were certainly happy with the result and it gave us a good start on our journey.’ 

He says it allowed them to get a lot of feedback on their products and purpose from the very early stages of building the brand. Not only that, but the initial campaign was so successful that Christoffer and his co-founders went on to raise funds via crowdfunding three more times. ‘Basically, the Kickstarter funding was to get the ball rolling – it was the first thing we ever did... We used it to start up production and launch new products,’ he explains. ‘So we only set a minimum – which was the minimum order value to begin our production.’

Christoffer says that this ‘pre-order funding process’ was a great way to bootstrap the first three years of the company’s journey. The only financial information the founders shared on the first crowdfunding page was the prices for products: $20 for white boxers, $30 for T-shirts and $45 for women’s basics. ‘We made a budget for ourselves so we would have a clear overview on how our cash flow was working, but we didn’t make these numbers public,’ Christoffer says. ‘We just had prices for products and explained how the process would look for our customers, from when they pledged their funding through the platform, and when they would get the product.’

Beyond the crowd

‘We really enjoyed doing crowdfunding campaigns,’ Christoffer says. ‘It’s a great way to connect with our early customers and, funding-wise, it was an easy way to bootstrap. We used the funding to get a product-market fit.’ Yet he and his team were keen to keep their funding options open – and attract some PR – which led them to apply to participate in Løvens Hule, a TV show in which business owners pitch for investment. Christoffer admits it wasn’t a great success – ‘nobody wanted to invest!’ – but now, with hindsight, he reckons the outcome was a positive one. ‘Today, we are happy we didn’t get an investment as we learned a great deal from that experience, and we would have ended up [giving away] too much equity at too low a price.’

Instead, they went in search of like-minded people who would, Christoffer says, ‘have skin in the game’. As an online retail brand, the founders also wanted any potential investors to help them scale the Organic Basics team, operations and inventory. ‘We had a good product-market fit, so the amount of cash we could get from selling equity seemed reasonable. Our motivation was to find investors that could help us build a brand with purpose,’ he says. ‘For us it was more important to build something at scale to have a positive impact on the dirty fashion industry, rather than own 100% of the brand among three founders.’ Christoffer says the team spent a lot of time finding the right type of investors who understood what they wanted to create.

The venture capital game

In 2017, Organic Basics ended up closing a $1m investment round, with participation from Johan Uggla and his wife Laura Hay (Johan is heir to the Maersk shipping conglomerate and CEO of Maersk Training) and venture capital fund Bumble Ventures. ‘The money was used to scale Organic Basics to a level where we could become profitable, which we are today,’ Christoffer says. ‘When we raised venture capital, it was to scale the market fit that we had already proved earlier [through crowdfunding]. That way, we de-risked the investment as we already had good traction and, in the end, we ended up selling only a very small piece of the company.’

He connected with other founders that had fundraised from venture capital and listened to their feedback and experiences. ‘Then we researched which funds there were in the direct-to-consumer space in Europe and the US, specifically looking for venture capitalists investing in early-stage startups.’

When the opportunity was there – such as after introductions from other founders – Christoffer, Mads and Alexander took them up. They also prepared well for cold calls, creating a small teaser deck that they shared with prospective investors, before contacting them to request a call to learn more about their funds.

Today, Organic Basics’ main investors are Eutopia and Bumble Ventures. ‘Most of these venture capitalists are looking for great founders and great traction. I guess we had both, since we successfully raised from two,’ Christoffer explains – not that he particularly enjoys the process. ‘I think very few founders like fundraising,’ he admits, likening the endless pitching to ‘putting on a play’ with everyone in character so that, in the end, ‘you never know whether they want to invest or not’.

According to Christoffer, there are typically two kinds of venture capitalists. One gets you up early in the morning, excited to build your company with you. The other keeps you up at night worrying whether you can fulfil your milestones. ‘You want the first type,’ he explains. ‘I would say it’s kind of like dating. Most of the time it’s super awkward, and you know it’s not a match after five minutes, but you have to sit through the full meeting. When you meet investors and there’s good chemistry, you instantly recognise that these are the people that you want to build your business with.’

This article was first published in How to Start a Business 2021. To become a subscriber or purchase our newest guide, head to our webshop.

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