From the Editor: Garment Decorators Are Reeling in Investors, But...

Why the cash flowing into the garment industry may not necessarily be good news.

In the late 1980s, corporate America took a sudden, keen interest in garment screen printing. Brand owners and the garment mills that cranked out the blank goods began to appreciate the immense marketing potential of licensed apparel, and both groups wanted bigger pieces of the pie. They acquired many of the largest sportswear printers, but the recession of 1991 deflated lofty growth expectations; then NAFTA and its cost efficiencies proved too tempting, so off the high-volume work went to places where labor was cheap. By the late 1990s, what remained for American printers was mostly custom work that was usually designed, sold, produced, and distributed within individual communities. That appeared to be the end of Wall Street’s fascination with printed apparel.

But over the past few years, the money people have rediscovered us. Not because they are interested in the thousands of small businesses across the nation doing custom printing, but rather in a handful of online entrepreneurs that sought to create entirely new channels of distribution. Perhaps the only thing more astounding than the size of the investments has been the pedigree of the people writing the checks. Consider:

• Teespring has generated about $56 million from several venture-capital firms including Andreessen Horowitz (a group that backed Twitter, Skype, Facebook, and others) and Khosla Ventures (Airbnb, YouTube).
• Zazzle obtained about $50 million in financing from firms including Kleiner Perkins Caufield & Byers (AOL, Amazon, Google).
• CustomInk received $40 million from Revolution Growth (Groupon, Resonate).

Meanwhile, scores of like-minded startups emerged – Redbubble, Viralstyle, Woot, Represent, Skreened, Threadless, and more. Amazon itself got into the decoration business with its Merch program, aimed at helping video game and app developers bring branded goods to market, but promoted to all types of content developers.

Some of these companies operate on a mind-boggling scale. (Teespring alone is said to be shipping 12 million garments a year.) Most outsource a significant part of their production, bringing lucrative contract work to some shops. Artists are finding new paths to market; consumers are finding apparel that appeals to their unique interests. (Or rather, thanks to big data and targeted social media advertising, it is finding them.) Consumer demand for domestically printed apparel is once again soaring.

So what’s not to like? It’s a question of how today’s custom printers fit into these new supply chains. Clearly, investors look at screen shops the way they once viewed cab companies, booksellers, and music stores. “The venture capital community sees this as the next multibillion dollar industry that hasn’t yet been disrupted,” says Mark Coudray, longtime Screen Printing author, who has given a lot of thought to the matter (and who, in the interest of disclosure, has been marketing social media consulting services to printers).

Some may look at the proliferation of similar business models and see a parallel to the dot-com crash of the late 1990s. Others might point to the difficulties of CafePress, one of the first online custom printing sites, which went public in 2012 and at press time was trading at about 20 percent of its price at IPO. Disruptors don’t always succeed. But now is an excellent time to learn about these companies and the financiers who are betting they will.

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