Case Study Daymond John, founder, FUBUFUBU is an American hip-ho

Case Study Daymond John, founder, FUBU
FUBU is an American hip-hop apparel company started in 1992
by Daymond John, a current investor on Shark Tank, along with
Keith Perrin, J. Alexander Martin, and Carl Brown. FUBU
currently sells T-shirts, rugby shirts, hockey and football
jerseys, baseball caps, and accessories, all embroidered with the
now-popular FUBU logo.
Daymond John grew up in the heart of a thriving hip-hop
culture in an area of Queens, New York, called Hollis. Also out
of the Hollis neighborhood came hip-hop legends such as
Russell Simmons, LL Cool J, and all three members of Run-
DMC. Daymond had a love for hip-hop and the culture that
surrounded it, especially the clothes. Daymond explained how
the idea for FUBU was sparked. “We started to hear rumors that
clothing companies, apparel companies did not want rappers,
African Americans, inner-city kids, anybody wearing their
clothes. I started to get fed up hearing about all these types of
brands and I wanted to create a brand that loved and respected
the people that loved and respected hip-hop, and I called it
FUBU: For us by us!”
Daymond tested and experimented with his concept from 1989–
1992. He printed a few “FUBU” labels and attached them to
Champion-branded T-shirts that he bought off the rack from
local retailers. He wore the T-shirts himself to see if people
noticed. He also tested a hat concept. He noticed that many
rappers were wearing a particular kind of hat. It was a type of
ski cap with a small piece of shoestring on top. These hats were
mostly sold by street vendors for $20. He thought he could do
better, so he bought $40 worth of fabric. He stitched 80 hats
together, added the FUBU labels, and tried to sell them for $10
on a street corner outside a local mall. He sold out in 3 hours
and made $800.
He was the consummate bootstrapper, and the word about FUBU
started to spread around town. He started selling more and more

hats and soon added T-shirts to his product line. He approached
retail booths outside the malls whose street corners he would
stand on and asked them to sell his goods on “consignment” for
him. “I was trying to figure any and every way out that I can to
increase my sales!” He was sourcing his T-shirts from
companies that would provide high=quality T-shirts with no
brand name. He would then sew or screen print or even
embroider his logo on the T-shirt and sell it. While continuously
improving the product, he was also testing the market to see
what customer preferences were in terms of pricing, colors, and
styles.
Daymond was working at Red Lobster in the early days of
FUBU, so he would spend early mornings visiting potential
printers and embroiderers and make the T-shirts at night. He
even closed FUBU three times because he ran out of cash. “I
would be walking around the blocks when someone would say,
Hey! Aren’t you that little kid that sells FUBU? I need some
more; I’ve been looking for you! I had to keep opening the
business back up because the business started to call me instead
of me calling the business.” Fortunately, a friend of Daymond’s,
J. Alexander, saw FUBU’s potential and invested, but he
brought more to the table than money.
J. Alexander came up with a very interesting marketing plan.
“The big black guys in the neighborhood had little options on
what they could have to be very stylish. They had to go to
Rochester Big & Tall and get a big white shirt or a black shirt
or they had to pay a lot of money to get this stuff custom made
for them because nobody was really making them. We just
found a place that made 4X, 5X, 6X shirts and we made around
20 of these shirts. We made 20 of those shirts because we knew
that these guys are normally bodyguards. Not all of them, but
the ones we gave T-shirts were bouncers and something like
that. They would not just wear it once—not like some of the
stylish kids who don’t want to be seen wearing something twice.
We knew that these guys would wear it forever.” These early
adopters were walking billboards for FUBU!

Soon hip-hop artists who visited the clubs noticed FUBU on
bouncers and bodyguards and demand started to increase. FUBU
T-shirts were also being worn by video music director Ralph
McDaniels’s bodyguards. Between 1985 and 1998, Ralph was
well-known for bringing hip-hop music artists into the spotlight,
and Daymond wanted a meeting with Ralph. Since his
bodyguards were wearing FUBU, Ralph was familiar with the
brand and agreed to the meeting. Daymond recollected, “We
were scared to death but he was very sweet and told everybody
that FUBU was the next best thing. I really owe Ralph so much
as he was one of my mentors and he was also mentor to the
community. He really put us out there and after that all the
rappers, all of them, were ready to wear our stuff because Ralph
gave us the thumbs-up!”
Daymond John brought in business partners to help get the work
done. While the partners together had accumulated around
$50,000 in credit card debt at the time, they decided to go to the
1995 MAGIC fashion trade show in Las Vegas. They couldn’t
afford a booth at the time, but Daymond made the best use of
his limited resources. He and his partners wore their FUBU-
branded apparel and approached like-minded brands, such as
Timberland. “I would stand outside their booth and say, ‘Hey!
How are you doing? I got this new brand, FUBU’ and people
would say, FUBU? the For Us By Us stuff? Where is your
booth? I’ll walk over to your booth. I would say, Instead of
walking into my booth, you want to hop into a cab and head to
the Mirage Hotel. I have my booth in one of the rooms there and
we worked it out. We wrote $300,000 in orders and that’s when
I realized how much capital I actually needed.”
To fulfill the Las Vegas orders, Daymond approached banks for
a loan but none would work with him. As a result, Daymond’s
mother gave FUBU a $100,000 loan to cover operating
expenses. Daymond set up manufacturing inside the house. He
and his partners brought in sewing machines and hired
seamstresses, all with the objective of completing the Las Vegas
order by hand. Since he was paying all salaries on time, and

paying for raw materials in advance, and having stores take
credit for 30, 60, or 90 days, Daymond ran out of money within
4 months after having completed only $75,000 of the $300,000
orders promised.
The stores were starting to lose trust in Daymond, and Daymond
was worried about losing his mother’s house. Daymond’s
mother knew he needed a strategic investor and placed a
classified advertisement in a local newspaper asking people to
fund the company. Thirty of the 33 people who answered the ad
were loan sharks charging extremely high interest rates, but one
legitimate inquiry emerged. It was Norman Weisfeld, the
president of Samsung’s textiles division. Samsung agreed to
finance the operations of the brand but asked Daymond to
commit to selling $5 million within the next 3 years. Daymond
said yes and the deal with Samsung was done.
With Samsung’s backing, FUBU reached $30 million in revenue
in 3 months, and the big retailers started to show renewed
interest. Daymond recalled the resistance and discrimination of
some buyers. “Many of the big retailers wanted to jump in on
the highly profitable hip-hop bandwagon. Some of them were
scared because they didn’t want ‘those’ type of people in the
store or were afraid of shootouts or shoplifting. One large
retailer also asked me to take off the picture of myself and my
three partners because we apparently looked like a gang.”
Undeterred, FUBU reached $350 million after 2 years and today
has sales in the billions thanks to product line expansion,
licensing, and partnering.
Today, Daymond John is semi-retired from FUBU and is now a
Shark on Shark Tank. He’s invested more than $8M in Shark
Tank entrepreneurs.
Tiffany,
Good paper! You covered the key elements of the assignment. I
encourage you to work on writing mechanics and clarity, using

APA paragraph headers, and using more peer-reviewed sources.
All else is good!
Professor Harris
Case II Study case feed back
Case IV Study case feed back
more peer reviewed sources, and APA paragraph headers to
better organize your work. All else is good!
Professor Harris
Case Study V feedback
more peer reviewed sources, and APA paragraph headers to
better organize your work. All else is good!
Case VI Study case Feed back
Excellent paper! You covered the key elements of the
assignment. I encourage you to work on writing mechanics and
clarity and use more peer-reviewed sources for support. All else
is good!
Professor Harris

BUS 8303, Entrepreneurship and Innovative Business
Development 1
Course Learning Outcomes for Unit VII
Upon completion of this unit, students should be able to:
5. Differentiate innovative business strategies.
5.1 Describe funding strategies.
5.2 Differentiate innovative bootstrapping choices and
traditional financing strategies.
6. Evaluate financial implications involved with organizational
growth.
6.1 Contrast equity financing and debt financing.
7. Describe legal aspects of business growth.
7.1 Explain how decisions have financial consequences.
Course/Unit
Learning Outcomes
Learning Activity
5.1
Unit Lesson

Chapter 12
Chapter 13
Article: “How Do Entrepreneurs Obtain Financing? An
Evaluation of Available
Options and How They Fit into the Current Entrepreneurial
Ecosystem”
Unit VII Case Study
5.2
Unit Lesson
Chapter 12
Unit VII Case Study
6.1
Unit Lesson
Chapter 12
Chapter 13
Unit VII Case Study
7.1
Unit Lesson
Chapter 13
Student Resource: Defining Equity Financing
Unit VII Case Study
Required Unit Resources
Chapter 12: Bootstrapping and Crowdfunding for Resources
Chapter 13: Financing for Startups

In order to access the following resources, click the links
below.
Wright, F. (2017). How do entrepreneurs obtain financing? An
evaluation of available options and how they fit
into the current entrepreneurial ecosystem. Journal of Business
& Finance Librarianship, 22(3/4),
190–200. https://doi-
org.libraryresources.columbiasouthern.edu/10.1080/08963568.2
017.1372011
UNIT VII STUDY GUIDE
Venture Growth and
Financial Implications
https://libraryresources.columbiasouthern.edu/login?url=https://
search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=125
629798&site=ehost-live&scope=site
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Navigate to the Video and Multimedia area in Student
Resources for Chapter 13 of the eTextbook to view the
item listed below.
• Defining Equity Financing
Unit Lesson
Funding Choices
Bootstrapping is the idea of starting a new venture without
funds or looking for approaches that support the
resource needs of the new venture with limited funds. Examples
of bootstrapping include working out of
personal space like a home, apartment, or garage or using
resources that are not used to their full capacity by
the owner of the resources. An example is using a grade school
kitchen on weekends to build a food-related
business. Bootstrapping requires creativity in thinking about
how to gain access to resources when personal
funds are limited. Crowdfunding and crowdsourcing can also
provide access to resources. Other than
bootstrapping, there are two primary approaches to funding your
entrepreneurial venture: debt financing and
equity financing.
Debt Financing
Debt financing relates to acquiring debt (borrowing money)

with a payback timeline established by the lender.
This could be a bank loan, a loan from a family member, or
some other source of borrowed funds. Debt
financing, in most cases, requires an established repayment
plan, payment of interest, collateral, and meeting
the conditions for receiving the loan. If receiving a loan from a
family member, these terms might be more
lenient, although it is a good idea to create a formal document
to avoid misunderstandings between family
members.
From an entrepreneurial perspective, there are a few negatives
related to debt financing. If borrowing from a
financial institution, the bank will want collateral. Since your
venture will most likely not have a track record of
generating an income and banks have a fiduciary responsibility
to protect their depositors’ funds (a bank’s
business model is to accept deposits and loan those deposited
funds out to other individuals), a bank is risk-
averse. This means that if the bank loans the entrepreneur
money, the loan is based on traditional terms
including treating the entrepreneur as an individual who wants
to borrow money, rather than approaching the
loan as a loan to the business. The bank will typically not want
to become involved in the new venture as the
new venture does not have a performance track recourse. Banks
prefer low-risk loans and will consider the
borrower’s character, credit score, repayment ability, and the
quality of the collateral. The repayment plan is
based on the entrepreneur’s established income. Many
entrepreneurs continue their traditional employment
while working on their new venture. This traditional
employment and related income position are what the
bank will consider regarding your ability to repay the loan. The
repayment plan means these repayment funds
are not available to invest in your new venture, although the

borrowed funds are used in building the new
https://edge.sagepub.com/neckentrepreneurship2e/student-
resources/13-financing-for-startups/video-and-multimedia
Development 3
UNIT x STUDY GUIDE
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venture. Taking these regular payments that are owed to the
bank out of your monthly cash flow is a financial
consequence of the decision to use debt funding; this decision
can be a burden to the success of the venture.
Another negative is the assignment of the asset as collateral for
the loan. Careful consideration is needed to
foresee if the collateral could be better used in another manner
and contemplate the worst-case scenario that
the collateral is reposed in the event of failure to repay the loan.
This financial decision's consequence could
potentially mean the loss of your home if the home was
mortgaged to borrow money to support the
entrepreneurial start-up. A third negative financial consequence
relates to the payment of interest, as the
money paid in interest is also money that cannot be used in
starting the venture.
If borrowing funds from a family member, collateral and

interest might be disregarded, although the family
member might require these conditions. Specifically identifying
the terms and conditions of the transaction is
important. Let’s say the venture is wildly successful, and the
family member that loaned you money now says
the loan was really an equity investment and now the family
member wants an equity share in the profits. This
means that the family member wants percent ownership in the
new venture rather than the payback of the
originally loaned money. Consider if the opposite happens,
where the venture is a complete failure, and you
want to pay the family member back with monthly payments,
but the family member wants repayment at the
news that the venture is unsuccessful. In either situation, the
financial consequences of these decisions can
be daunting. Clearly stating the terms and conditions that both
parties agree to is important to avoid family
conflict. Another consideration is how other family members
understand the transaction. Creating a formal
document alleviates tensions within a family and avoids
concerns of favoritism or other emotions and
interpretations of the transaction.
Equity Financing
Equity financing is when someone invests funds into the venture
in return for an equity stake in the venture.
An equity stake means that the person investing the funds is
now part-owner of the venture—the person has
an equity stake in the venture. The terms for this arrangement
should also be formally established.
The negative financial consequences connected with debt
financing are removed when using equity
financing. There are no collateral, interest, or repayment terms.

Instead, the investor receives payment
through a return on investment (ROI) either from future equity
financing rounds, such as the entry of venture
capitalists (VCs), or when payment is received when the venture
is sold to another company. VCs step in to
fund the venture at larger dollar amounts, generally paying off
the original investor based on the valuation of
the venture at the time the VCs purchase equity in the venture.
The expectation from an angel investor’s perspective is to
invest in the venture and realize a significant ROI
within a short timeline. A common mistake that new
entrepreneurs make is to accept equity funding from the
first person who offers money. Instead, taking the time to find
the right person can provide greater benefits
than the invested dollars. Let’s first explain what an angel
investor is, then address the benefits beyond
money that angel investors provide to the funded entrepreneur.
An equity investor in an entrepreneurial
venture is called an angel investor. The name angel investor
comes from the world of financing theatrical
productions in the 1800s. The cost to produce a theatrical
performance was significant and risky as the
production could be well received and, therefore, financially
successful or poorly received, thus amassing
debt. Angel investors were the people who were willing to
invest in the production with the hope that the
production would be successful, and the angel investor would
receive a sizable return on their invested funds.
Due to financial risks, traditional lenders were unwilling to loan
money to the theatrical group to produce the
play. In the entrepreneurial world, the name angel investor
represents a wealthy individual who is interested
and willing to invest in the entrepreneur and the venture. Angel
investors are typically people who have
previously acted as an entrepreneur, harvesting their venture for

a sizable return, and now have an interest in
helping other entrepreneurs. With this previous experience as an
entrepreneur, the knowledge gained through
the angel investor's experiences becomes a significant resource
and benefit to the funded entrepreneur. This
is why it is so important for the entrepreneur to take the time to
find the right angel investor.
Finding an angel investor who has the experience that transfers
to the new entrepreneur’s needs provides a
plethora of benefits such as making contacts with other people
who can provide guidance and support
through accessing the angel investor’s network and making
better decisions based on the angel investor’s
Development 4
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experience and knowledge. Finding the right angel investor i s a
bit easier than it was in the past as most
communities now have events where entrepreneurs can meet and
present their ideas to angel investors.
When the venture grows to the point that larger sums of equity
funding are needed, that is the point at which
venture capitalists become involved in adding larger equity

dollar amounts to support the venture’s growth.
The angel investor can also guide this process; another example
of how an angel investor’s knowledge can
be worth more than the invested dollars.
Grant Funding
A third possibility is grant funding. Grant funding is neither a
debt funding method nor an equity funding
method because the grant is not paid back unless the terms of
the grant are violated nor is any equity in the
venture assigned to the grantor. Grant funding requires
searching for an appropriate grant, applying for the
grant in a competitive process and, if receiving the grant,
complying with the conditions of the grant.
Complying with the conditions of the grant means that not only
are the conditions of the grant fulfilled correctly
but tracking these conditions is also required. The process of
searching for an appropriate grant takes time,
as does the documentation required as part of the conditions in
the grant application and reporting process.
Some companies conduct the search for an appropriate grant and
provide assistance in completing the
application process on a fee-based payment system, a possible
option if the venture has components that
might fit within a grant-funded situation, especially if the
venture is a social benefit-based idea.
Financial Knowledge
Understanding basic financial statements is important in
managing the new venture, especially the cash flow
statement. Cash is king is a common phrase in the

entrepreneurial world because if the entrepreneur runs out
of cash, no matter how great the potential is for this venture, the
potential for success is compromised.
Keeping a close eye on the cash position of the venture is
essential for the success and viability of the
venture. In writing the business plan, financial projections are
created to assist in thinking through various
decisions. For example, how much of an increase in production
costs can the venture sustain, and how would
a price increase impact the projected cash flow statement? This
is just one example of why understanding the
financial statements and related decisions are essential for the
success of the venture.
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UNIT x STUDY GUIDE
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All financial decisions have consequences; some consequences
are good, other financial decisions can be
challenging to recover from. Considering the consequences of
these decisions is well worth the time and
should be reviewed before starting the venture. The right
financial decisions can result in supporting the

successful creation of the entrepreneurial start-up.
Interactive Activity
In order to check your understanding of
concepts from this unit, complete the Unit VII
Knowledge Check activity.
Unit VII Knowledge Check
PDF version of the Unit VII Knowledge Check
Note: Be sure to maximize your internet
browser so that you can view each individual
lesson on a full screen, ensuring that all content
is made visible.
Remember, this is a nongraded activity.
https://online.columbiasouthern.edu/bbcswebdav/xid-
136933318_1
138335264_1
136933318_1

Development 6
UNIT x STUDY GUIDE
Title
Suggested Unit Resources
Supplement A: Financial Statements and Projections for
Startups
below.
The article below provides an overview of innovative
approaches for entrepreneurs seeking financial support.
Bonini, S., Capizzi, V., & Cumming, D. (2019). Emerging
trends in entrepreneurial finance. Venture Capital,
21(2/3), 133–136. https://doi-
019.1607167
The following article includes information on early-stage
finance resources for entrepreneurial ventures
including incubators, accelerators, science and technology
parks, and other options available to support the
entrepreneur’s needs for start-up funds.
Bonini, S., & Capizzi, V. (2019). The role of venture capital in
the emerging entrepreneurial finance

ecosystem: Future threats and opportunities. Venture Capital,
21(2/3), 137–175. https://doi-
019.1608697
The following article includes information about online
crowdfunding and the most success factors for funded
projects through Kickstarter.com.
Kromidha, E., & Robson, P. (2016). Social identity and
signalling success factors in online crowdfunding.
Entrepreneurship & Regional Development, 28(9/10), 605–629.
https://doi-
016.1198425
Learning Activities (Nongraded)
Nongraded Learning Activities are provided to aid students in
their course of study. You do not have to submit
them. If you have questions, contact your instructor for further
guidance and information.
below.
Utilize the following Chapter 12 Flashcards and Chapter 13
Flashcards to review terminology from the
eTextbook.

search.ebscohost.com/login.aspx?direct=true&db= bsu&AN=120
resources/chapter-12/flashcards
resources/chapter-13/flashcardsCourse Learning Outcomes for
Unit VIIRequired Unit ResourcesUnit LessonFunding
ChoicesDebt FinancingEquity FinancingGrant FundingFinancial
KnowledgeInteractive ActivitySuggested Unit
ResourcesLearning Activities (Nongraded)

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Case Study Daymond John, founder, FUBUFUBU is an American hip-ho