Objective: This What Works for Cities case highlights how an industry-specific business incubator was launched in partnership with the City of New York’s Economic Development Corporation and the Council of Fashion Designers of America in order to draw talented designers to Manhattan, as part of a broader effort to support local entrepreneurship and strengthen the Garment District’s position as a worldwide capital for fashion.
Major Participants: New York City Economic Development Corporation; Council of Fashion Designers of America; New York University Stern School of Business; Target; W Hotels; Mac Cosmetics and others.
Background: As part of a broader effort to encourage startups and entrepreneurs to locate in New York City, then-Mayor Michael Bloomberg advocated for the implementation of cluster-based economic development strategies across all five NYC boroughs. In Manhattan, there was a push to strengthen the fashion industry. Already, the City had efforts underway to strengthen its Garment District – which supports 180,000 jobs and generates $1.6 billion in tax revenue and another $11 billion in wages annually – as a core for worldwide fashion. For example, the City helped to relocate the bi-annual Fashion Week to Lincoln Center and established a website to provide buyers with information on showrooms and Market Week calendars. To supplement these efforts, and to draw additional entrepreneurs to the Garment District, in 2009 the NYC Economic Development Corporation (NYCEDC) teamed up with the Council of Fashion Designers of America (CFDA) to launch the NYC Fashion Incubator. The NYCEDC provided a three-year, $200,000 grant to the CDFA, which has since managed and operated the Incubator. The Incubator provides below-market-rate space and management education to emerging designers interested in growing or sustaining their businesses in NYC.
How it Works: The CFDA launched a competition to select a cohort of designers to occupy this below-market design studio space for up to two years. To be eligible, designers must have established their potential through substantive editorial coverage and orders from top retailers. Applicants must be in business for a minimum of two years and have a paid and/or volunteer professional staff. Tenants are then selected by members of an advisory board comprised of fashion experts. Selected candidates take up residency at the 10,000 square foot incubator, located at 209 West 28th Street. Three runners-up are chosen in the event that any of the finalists drop out or determine they are not quite ready for the program. Every two years, the CFDA selects a new cohort to enter the program.
Early on, the CFDA realized that business was not a strong suit of the designers. Most designers were not prepared for the intensive incubation period. As a result, the CFDA teamed up with the New York University (NYU) Stern School of Business for a program in which MBA candidates work with designers from the Fashion Incubator to create strategies for their business and growth plans. Now, designers work with MBAs for eight months before entering the two-year design incubation phase in order to bridge the knowledge gap between fashion and business strategy/marketing.
Once the incubation phase is underway, the CFDA provides educational support and additional access to resources. The average incubator space costs designers just $1,500 per month because the CFDA is able to underwrite half of the cost for the design studios and collective workspace. Business mentoring services, networking opportunities and monthly educational seminars (covering topics such as branding, production, sales and raising capital) are all components of the residency, but these components may vary by client. At the beginning of the program, and then on a bi-monthly basis, the CFDA sits down with designers to identify their challenges and needs. The two-year incubation phase is divided into four six-month terms, each with a customized focus. As a result, the CFDA is regularly adding or swapping seminars from the curriculum based upon what the current designers are hoping to accomplish. In every case, designers are assigned to industry executives who serve as mentors. Moreover, through partnerships like W Hotels and Mac Cosmetics, all designers are given stipends for travel and for funding business projects. For example, some use the funds to attend trunk shows in various markets to cultivate brand awareness.
Results for Local Economy: A total of three cohorts have participated in the NYC Fashion Incubator to date. The first consisted of 12 designers. After working with this cohort, the CFDA realized that the very nature of the industry—creating multiple sketches, using different fabrics and embellishments—can create a mess at individual design studios. To protect the integrity of designers’ studios, the CFDA turned two of the original studios into common workspaces, thereby reducing the number of design studios to 10 in the second and third cohorts. This spring, the CFDA will begin the application process for the next 10 designers.
Also in 2015, the CFDA plans to ramp up its tracking of various metrics in order to better gauge the impact the designers are having on the local economy once graduating out of the NYC Fashion Incubator. Currently, the data the CFDA tracks is anecdotal. They’ve found the designers express a better understanding of margins, production, payment and terms, as well as the ability to communicate more effectively with retailers in order to expand their brands’ presence.
Remaining Challenges: While Lisa Smilor, Executive Director of the NYC Fashion incubator, highlighted the need to collect better metrics regarding program success in a recent interview, this may not be easy to quantify. One complication to defining success, however, is that each brand in the incubator defines success differently depending on their company’s needs. Otherwise, the primary challenges in running the incubator have been overcome. Funding and demand for the incubator remain strong.
Instead, Smilor emphasized the challenges faced by the designers within the incubator. Specifically, educating the designers about production, sales and cash flow remains a critical component to the program. Teaming up with the Stern School at NYU is what has drawn so much attention to this incubator; whereas other co-working spaces for designers exist, the NYC Fashion Incubator ties in a pre-eminent business development program with top-notch programming and mentorship. But business management cannot be taught overnight, or even over the course of the eight-month program with NYU. As the designers progress within the incubator, ongoing management education is necessary.
Lessons Learned: The strength of the NYC Fashion Incubator is in large part because of the quality of experts that the CFDA has been able to draw upon. As the fashion capital of the United States, there are incredibly talented designers in NYC who support the incubator.
Another reason for the NYC Fashion Incubator’s early success is that it has been part of a larger effort, supported by the City, to grow the fashion industry. For instance, a complementary Fashion Manufacturing Initiative has pumped more than $1 million into facilities and programs to keep high-fashion manufacturing local. This initiative created an opportunity for designers like those coming out of the fashion incubator to then manufacture their goods locally. The program includes a training program to teach lower-income residents, those who may otherwise be pushed out of the expensive market, to become technicians and sewers in high-quality factories. The increase of highly-skilled workers is especially beneficial to emerging designers who cannot risk low quality products as they try to build their brand in an already competitive market.
For more information, visit the NYCEDC Fashion Incubator website at http://www.nycedc.com/program/cfda-fashion-incubator/.