The e-commerce industry has come a long way since being an alternative for shopping in-store. In 2020, revenue from e-commerce grew 33%. While much of this was credited to the COVID-19 pandemic, the ease of convenience and variety of options have turned – once strictly brick and mortar – shoppers into avid online shoppers. As an e-commerce business owner, how can you keep up with the increased demand and competition? The simple answer: funding. In this White Paper we will break down why funding is important, what the different funding options are for your business, and how to secure funding. This trend isn’t going anywhere, so let’s dive into how we can help your business thrive.
Why do I need funding for my e-commerce startup business?
In order to make money, you need to spend money. While at first you may be able to makedo spending personal dollars to finance (or bootstrap) your business, as you grow, you’ll eventually look to find a more long term way to fund your brand. Funding allows you to cover your necessary costs for production, operations, marketing, employee costs, etc. It enables you to fulfill your day to day business needs, and ultimately help take your brand to the next level. While each business differs on their wants and needs, there are a couple of options for funding that could work best for you.
Funding Options
Line of Credit
A line of credit for your e-commerce startup business is a mixture of a business loan and a credit card. It is a flexible funding option that allows for your business to rely on them when necessary. This is typically used for short-term projects such as ad spend, new inventory etc. and less so for long term investments. The benefit here is you’ll only pay interest on what you’ve borrowed!
Crowdfunding
Think of crowdfunding like a go-fund me for businesses. It utilizes funding from investors, family, friends, customers and your community to back your business. Crowdfunding generally comprises small amounts of money from large amounts of people. Momentum behind this type of funding comes from social sharing methods, word of mouth, advertising, etc. In 2015 alone, over $34B was raised via crowdfunding!
Venture Capital
Venture capitalists (VC’s) are corporations that provide capital for startups and small-to medium size businesses. It’s best to work with venture capitalists when you’re looking for larger sums of money. Now just because you’re looking for more money, doesn’t mean you’ll ask and you shall receive. When working with Venture capitalists are oftentimes looking for an industry disruptor and a business model/brand that they believe in. VC’s bring you their capital, but ultimately you give them a % of your business through equity.
Angel Investors
Angel investors are similar to venture capitalists, except they are individuals providing capital and investing in your business. These are typically wealthy individuals who use their personal funds in exchange for equity or sometimes even debt in your business.
What’s Next?
Now that you’ve learned a bit more about what options are out there, it’s time to decide what’s best for you. Ask yourself how quickly do you need funding, what are you looking to do with the capital once received, what does your financial history look like, and of, course how much money are you looking to raise this round? Remember, you can raise multiple times, you don’t need it all at once!
Once you decide what route is the best, check your eligibility for funding. Specific requirements will vary depending on who and what type of funding you’re applying for, however you should check on requirements on how long you need to be in business for, your current financials, your revenue and spend, and any additional accounts you may own in support of this business.
After you’ve decided which funding route you’re going to take, and have determined your eligibility, it’s time to apply for funding for your e-commerce startup business. There are a variety of platforms that can guide you through the application process to determine if you have all your ducks in a row. These platforms work with lenders to vet through your application, and decide on an appropriate dollar amount. It’s also a great option to reach out to your network, and see who can assist you in the process whether it’s through a referral or direct contact with a firm.
While you may think working with investors and different traditional e-commerce startup funding options are your only option, selling your business to a strategic buyer and having an exit, can be a way to take risk and cash off the table, and ensure your business is able to keep growing – with someone else operating it. Now this is something that unybrands can help with. When you work with unybrands, we take the guesswork out of selling your business. Through our seller prioritized approach, we walk you through each step of what it means to sell your business to us. From helping you understand LOI’s, multiples, quick timelines, to how we’ll grow your brand, we give you an easy solution to funding your business, without actually having to find the funding for it. With our investors already backing us, we can not only back you but we’ll take your business to new heights. If you’re interested in learning more about how unybrands can give you the perfect exit strategy, email our expert growth team at growth@unybrands.com.
The process to get funding may seem daunting, but thanks to this guide, the right business model, and proper preparation, you’re steps closer to success. With a little hard work and research you’ll be able to find the right choice that fits your business needs. So what are you waiting for? Let’s get funding!
FAQs
1. Why do e-commerce startup companies need funding?
Many online retailers look for e-commerce funding to cover costs of inventory, shipping, storage, marketing, employee wages, and any tech that is needed for operations. Because companies may not have enough disposable cash flow prior to attaining revenue, it’s pivotal to get funding.
2. What can I do to grow my e-commerce startup business to get more funding?
While the list can go on and on, there are two primary things you want to achieve to ensure your business is thriving: increase website traffic, and increase the conversion rate. Ways to increase your website traffic vary from SEO, email marketing, affiliate marketing, paid search, and more. To increase your conversion rate, it’s helpful to do A/B testing, and increase customer experience options like free shipping, simple returns, live chat support, etc.
Have more questions? Reach out to us at growth@unybrands.com for more insight on how you can get the top valuation for your business.
