When Michelle Lei and her sister Judy took up yoga five years ago, they became obsessed. Not only did they make the practice part of their daily life, but they wanted to start a business creating yoga wear.
With Ms. Lei's six years of experience as a sourcing manufacturing manager for Nike Pacific Rim and International MBA from the Sauder School of Business, and her sister's artistic flair as a fashion designer, they were well-equipped to set up Light Activewear, which designs and sells spandex garments to more than 60 fitness centres and yoga studios across Canada and the U.S.
But when they decided to establish a competitive edge by introducing a sustainable product line made of recycled polyester materials, the sisters hit a snag.
"The cost of sustainable raw materials is much higher compared to regular materials, which pushes up manufacturing prices," says Ms. Lei. "When we showed our current retailers samples of our sustainable line We Care, they declined on the grounds that they were too expensive, fearing that they wouldn't get a fast enough turnaround from their customers."
In 2009, the Lei sisters founded Light Activewear in Vancouver. Michelle leveraged her contacts from her previous role at Nike in Shanghai to source material manufacturers in China and garment makers in Taiwan, while Judy drew on her graphic and fashion design background to design the clothes in a functional, yet fashion-forward style.
"From the very start, we wanted to use solely sustainable materials for our products," says Michelle. "But while large brands like Nike and Lululemon can afford to do this, the startup cost for these materials compared to regular, non-sustainable cloth is drastically higher."
Since the retail outlets they worked with did not show interest in the more expensive option, the Lei sisters were forced to put their We Care line on the back burner.
"We just couldn't risk carrying at least $10,000 worth of inventory sitting in our warehouse, without being able to sell it," explains Michelle.
Light Activewear needed to find buyers for their We Care line or they risked losing their competitive edge.
Michelle brainstormed for a solution. "During my IMBA studies in Shanghai, I gained an invaluable overall knowledge of business management," she recalls. "Even though I'd worked in several countries across Asia with Nike, and had experience in sourcing and manufacturing, it was Sauder that encouraged me to step back, look at problems from different angles and come up with creative solutions."
Her research led her to the international crowd-funding website, Indiegogo which allows entrepreneurs to raise money for their ventures.
Cutting out the retail middleman, Ms. Lei and her sister went straight to consumers. They created an Indiegogo campaign for their We Care line, asking people to pay for advanced orders of the sustainable yoga outfits. "In April 2013, we set a fixed goal of $10,000. The idea was that if we didn't reach it within two months, we would give everyone their money back," she explains.
The Lei sisters contacted everyone they knew to help fund their campaign. "We sent thousands of customized e-mails, as well as phone calls and text messages to persuade people to buy our products," says Michelle. "We also added constant updates to our Indiegogo campaign page, in the form of product photos and 'behind-the-scenes' stories."
In a show of support, their close friends helped to promote the We Care line, pulling in even more customers from different markets.
Within their time limit, the Lei sisters exceeded their crowdfund goal by 120 per cent and raised $12,125. All three of their proposed garments for We Care are going into production and will be distributed to their supporters by November 2013.
Once they have built up a sufficiently large network, the sisters plan to target Asia as their next big market.
"This time we won't be put off by the status quo," says Michelle. "Our experience with online crowd-funding has definitely taught me to innovate to get ahead."
Jeff Kroeker is a lecturer in the accounting division at the Sauder School of Business at the University of British Columbia.
This is the latest in a regular series of case studies by a rotating group of business professors from across the country. They appear every Friday on the Report on Small Business website.