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Birdsong - Offer Closed

Birdsong Equity offer

£2,000 minimum

Risk factors

All investment and commercial activities carry risk, and investors should consider whether Birdsong is a suitable investment for them in light of their own personal circumstances.


Investment risks associated with the business

The Directors consider the key risks to be as follows:

Birdsong’s ability to be in a position to enable an exit for investors after five years, or at all, is dependent on the continued success of its business model, which is not guaranteed.

Investing in the shares is not the same as depositing money in a bank account as your capital is at risk and you may not get back the full amount that you invested. The shares are not covered by the Financial Services Compensation Scheme and in the event of Birdsong being unable to secure an investor exit you will not be entitled to make a claim against the scheme.

Birdsong’s directors have forecast that a potential investor exit will not be viable until 2023 at the earliest. Investors should therefore only invest if they are prepared to wait until then to exit, even then this is not guaranteed and is dependent upon the company being able to deliver against its business plan.

Although the shares are transferable, they are not listed on a recognised investment exchange. An investment in an unquoted security of this nature, being an illiquid investment, is speculative, and involves a degree of risk. It may not be possible to transfer or realise the shares or to obtain reliable information about the risks to which they are exposed.

For further information on risks and the Directors' perception of mitigating factors you should read the entire business plan.


Specific risks

Risk: Birdsong makers have varying skill level, with some more advanced in their craft than others.

Mitigation: Birdsong has mitigated this by carefully designing collections with pieces of varying complexity and having each separate product line produced by specific makers each time. In doing this it has ensured each product can be made to a consistent high quality.

Risk: Due to the nature of the women the company works with, there is a risk around reliability of the workforce as the majority of them are working on a part time basis and susceptible to things like childcare commitments during school holidays, or reduced working hours during Ramadan.

Mitigation: These risks are mitigated with careful planning, and making sure Birdsong has a broad base of women who make its clothes so that it is able to fill in gaps throughout the year. With four years’ experience working with the women it works with, Birdsong are now able to predict slow periods, plan ahead and stock up. 

Risk: The company's supply chain in its current form is operationally challenging. The business is working with disparate maker groups that make things logistically complicated. As such, there is potential for difficulty scaling supply chain efficiently to meet demand.

Mitigation: Currently Birdsong is working with seven maker groups in London and production is manageable. The short term approach to mitigating this risk is to rely heavily on products that are easy to produce in high quantities (embroidery, screen printing). E.g. Mona, Birdsong's embroidery machinist, can produce up to 100 embroidered t-shirts alone in one day. With this approach it is estimated that the business can scale to £200k monthly revenue by producing with a maximum of 20 women’s groups. In the longer term operational risk will be cut out by centralising the supply chain. In 2019-2020 the company wants to open a London-based, vertically integrated manufacturing unit in Tower Hamlets, becoming an ethical employer for low-income women in the area. There are many women from migrant communities in East London with high quality making skills. There are also lots of pools of talent elsewhere in Britain, e.g. Scotland and the North East, that Birdsong has potential to expand into. Birdsong has been offered low-cost space at PoplarWorks to start this on a small scale from September 2019.

Risk: High labour costs due to London based manufacturing.

Mitigation: Birdsong's manufacturing costs are higher than other brands, even brands who produce ethically overseas. However, it also has a significant advantage given to it by the proximity of its manufacturing. The company can dramatically cut product lead times from the six months that many brands face, to two weeks. This means the business does not have to forecast so far ahead and is much less likely to overbuy. On top of this, the company can be reactive to consumer demands, producing small quantities and restocking popular lines quickly. Unseen costs like customs fees and expensive shipping are also avoided. There are brands like Reformation leading the way with US production, or Finisterre and Hiut Denim in the UK proving that it can be done.

Risk: Potential for approach to be replicated by other brands. Competitor brands’ ability to produce ethical clothing for lower prices.

Mitigation: Having built up relationships for four years with the women who make its clothes, Birdsong has now built a model that is very difficult for other brands to replicate. It is true that other ethical brands can offer consumers a lower price point. However, Birdsong can still attain a 60% margin and rival high-end high-street brands in terms of pricing. The company has several USPs and brand equity that customers are willing to pay a premium for. Furthermore, with clever manufacturing and focusing on low cost production techniques like screen printing and embroidery, it is possible to produce an entry level range of products at a very competitive price point. Currently these products make up 30% of total revenue.
 

Offer Closed

 As of the 15th April

Offer closed

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