This is a message to all of the dedicated followers of fashion out there: start saving your pennies and re-assess your wardrobes. The latest offering from the world of Crowdsourcing proudly presents ‘Fashion Stake’- a new start-up business website that will allow fashionistas the chance to directly invest in designers.

Here’s the deal. Instead of handing over your hard earned cash to a third party (the retailer), your money is invested into a designer’s new collection and in return, your investment (a minimum of $50) will help keep their business afloat. In exchange, your investment is exchanged for credits which are used to purchase items from the said collection.

Daniel Gulati, Fashion Stake’s joint-founder, chief executive and a student at Harvard Business School, believes his model removes the consumer’s choice away from the hands of a team of executives. Instead, the public has the opportunity to establish a more personal relationship with their favoured designers and a chance to provide financial clout for items that they would like produced en masse.

“We think this can be a real game changer,” Gulati told Reuters. “What we’re basically doing is redirecting the margin to fans and cutting out the retailer altogether.”

As the company slogan states: Support a designer. Shape the creative process. Share in clothing and cash. It sounds simple enough.

In a discussion with fashion website, Styleite, fellow Fashion Stake founder Vivian Weng said that the ‘creative process’ will be a “delicate balance” that will involve a careful two-way communication between the designer and the customer.

The company says that all the designers involved with Fashion Stake will have a solid understanding of the production processes involved in the fashion industry and have had their work sold to at least one top retailer. In theory, the blend of fashion expertise, good business sense and direct consumer feedback should bode well for Fashion Stake.

So is this a new and innovative way that will ‘democratize fashion’?

For all of the hype surrounding the September 2010 launch of the Fashion Stake website, the idea is not entirely new. For instance, ‘Catwalk Genius’, founded in June 2007, has adopted a similar model. Reporting on Catwalk Genius for The Wall Street Journal in March 2009, Andrea Ordanini said:

“Aspiring designers sell samples of their work on the site. Customers can invest in designers they like in increments of £10 ($14), plus a £1-a-share processing fee. When a designer amasses ($70,000), the company says it will use the money to help the designer develop and sell a new line.”

The business model even has a specific term, according to Ordanini- ‘Crowd Funding’.

Crowd Funding, as defined by blogger Nick Smith:

“It’s based around using the internet to build a much larger group of private investors. It’s a shift to a much more transparent form of investment (normal Venture Capitalism is very secretive). With Crowdfunding everything goes into the public domain.”

Crowd Funding has already been used as a way to infiltrate a section of the music industry, with websites such as SellABand working along similar lines to the aforementioned fashion sites. By working at grassroots level, the consumer has a greater affiliation to the artist/designer/musician or suchlike. But can it work effectively in the world of design and fashion?

As Huffington Post blogger Eric Gaskins points out, professional designers may not appreciate the level of scrutiny and input provided by random outsiders.  He says:

“A designer’s mission is to create something the public wants or needs before they even know it. If suggestions are part of the mix, they are coming from a Creative Director, a Buyer for a store or a trusted colleague. Information from a stranger, though kind enough to pay in advance for merchandise down the road, is not necessarily the voice a designer is likely to take as gospel.”

There are a few further potential stumbling blocks that Fashion Stake will need to address before their reported September launch date.

First, pricing will prove key for the designers. It’s all very well offering ‘credits’ in a designer’s collection, but only if the items within the collection are relatively affordable. Designer prices are notoriously expensive- but blowing the consumer out of the water on price is probably self-defeating, no matter how quirky or novel the website first appears.

The second problem may lie in the murmurings which question the legality of running such a company. Jeff Nolan, the author of Enterprise Irregulars, says:

“My first thought upon reading about Fashion Stake was that it can’t possibly be legal… it doesn’t matter what you call the quid-pro-quo for an investment, whether equity or credits it is still an investment regulated by securities act and the SEC.”

That said, any business that attempts to break up the cliquey nature of the fashion industry should be applauded. In the age of the so-called Web 2.0, the Harvard Business School pair of Gulati and Weng have recognised the importance of social media, and, more importantly, the growing need to develop tighter relations and dialogues with the consumer.

With the removal of the middleman, the designer gets a greater share of their profit, and the consumer has greater access and influence over the proceeding season’s designs. As with all start-ups, there are ifs, buts and maybes that will need to be addressed before one can say whether Fashion Stake is the revolutionary business that will really take off in a big way.

Nevertheless, if the legalities can be ironed out, the company’s principles are intriguing and their ambition to try and shake up the fashion industry is truly admirable.