Fashion startup Institchu raises $3 million from massive Chinese suit manufacturer: Why the startup thinks it’s past the point of accepting VC
Tuesday, February 27, 2018/
Tech-focused custom menswear startup Institchu has today announced $3 million in funding from Dayang Group, one of the world’s largest suit manufacturers.
The funding and partnership deal is described as a “natural progression” by Institchu co-founder Robin McGowan, who began the online tailored suit retailer with James Wakefield in 2011 as a way to give shoppers easy access to tailored clothes.
“[We and the Dayang Group] have been working together for quite some time, working quite closely on some new product developments and innovations,” he told StartupSmart.
“They knew our ambitions to grow in Australia and Australasia, and it was a simple partnership that was probably always going to happen.”
Dayang will become a production partner for Institchu through the investment, also gaining a minority stake in the company.
Founded over 20 years ago, this isn’t the first investment Dayang has made, injecting $US30 million into similar made-to-measure menswear company Indochino in 2016.
McGowan acknowledges the “strategic investment” is a deviation from the norm for startups in similar positions to Institchu who would usually seek venture capital. He believes Institchu is past the point in the company’s life cycle to seek venture capital funding. The last venture capital investment it received was to the tune of $2 million from Aura Capital in 2013.
Tacking additional investors on to potentially raise a greater amount was not something the startup considered, due to the way the Dayang Group deal came about, says McGowan.
“We were happy to push ahead with it as a founder and working in a startup, you never know how long offers are going to last. If it ticks all the boxes for yourself and it benefits you, go for it,” he says.
“It’s given us that support for everything behind the scenes – from ensuring we’re always improving production times and delivery times, to innovating on product developments and offerings. It basically allows us to focus mainly on the online and retail experience.”
Dayang Group chief executive Dongmei Hu said in a statement the company was looking forward to working with the founders to help Institchu “create a menswear experience custom-built for the 21st century”.
Non-traditional investors are possibilities for startups
Having launched their first international bricks and mortar location in New York at the start of last year, the company is continuing to expand its presence, currently rolling out 15 global locations and continuing to look for new showroom opportunities. The company boasted a 114% year on year growth over 2017.
The funding will be used primarily for this expansion, and also to improve the company’s tech offerings in-store and online. Despite operating in both the ecommerce and bricks and mortar space, McGowan says the company views it all as one in the same “at the end of the day”.
“Where ever a customer wants to shop, we want to be there for them and helping them do it in the best way possible. If they want to visit the website first, go into store, and then go home and order it online they can,” he says.
“We are keeping an eye on the general retail landscape, and we’re seeing the traditional retailers being replaced by those innovative and versatile ones.”
Reflecting on the investment process, McGowan warns founders that every part of it will “probably take two or three times longer than you think”, and says to not start spending your investment money until “you can see it in the bank”.
“Think outside the box of who you think is the right investor for you, it’s not always the people you think it is,” he says.
“There are other interested parties who may not necessarily be front of mind, but there’s always someone out there suited to every company.”