How To Bankroll Your E-Commerce Business – The global e-commerce industry is estimated to hit $3.5 trillion this year. And by 2023, it is projected to nearly double, hitting an astonishing $6.5 trillion. That leaves a lot of room for profit for any entrepreneur considering an e-commerce startup. All you need is a niche, winning strategy and powerful user interface (UI) and user experience (UX).
It’s easy, right? Well, not so fast. Starting an e-commerce business takes a bit of funding that you may not have lying around. I’ve consulted for a number of e-commerce startups that have struggled to get funding right out of the gate — even ones that have pretty impressive business models.
The truth is, funding can make or break your e-commerce startup, or any other startup for that matter. Did you know that the second-biggest reason most startups fail is a lack of funds, only behind not having a market? That can be discouraging for budding business owners, but it certainly shouldn’t be.
From angel investors to bootstrapping your way to e-commerce success, let’s take a closer look at ways to net the cash you need to get started.
If you can bootstrap, do it!
Many funding scenarios call for proof of return. If you are just getting started, it will be pretty difficult to show any hard numbers that your e-commerce store is working. In this case, bootstrapping can be the best option, if you can do it. And if you use this method, you’re certainly not alone. In fact, 77% of startups begin with personal savings.
There is a big benefit to bootstrapping, too: You don’t need to give up any equity in your business. You can also get going faster, since you’re not waiting for investor decisions or bank loan approval.
A few ways to maximize bootstrapping efforts include:
• Learn as many core business skills as possible to cut down on outsourcing or payroll costs.
• Join developer forums and connect with highly skilled people via networking platforms like LinkedIn to get free advice.
• Create a strict business budget and stick to it, but also have a small emergency fund for unforeseen issues.
• Stay the course and never give up on yourself or your startup dream.
Find a private lender
Private lenders can be a great way to fund your e-commerce startup since you can sidestep a lot of red tape. And there are plenty of private lenders eager to inject cash into a strong business idea. Upstart and Funding Circle are person-to-person (P2P) funding platforms for business owners and private lenders to connect.
Going the private lender route makes sense for budding startup founders if you have a less-than-desirable personal credit score that traditional banks will look at. But always be sure to really qualify a private lender because not all lenders are looking out for your startup’s best interest.
When it comes to raising funds for your e-commerce business idea while building brand awareness at the same time, crowdfunding may be the way to go. This option can help you raise enough capital to get your startup moving in the right direction.
However, crowdfunding does take a bit of work to be a success. The anatomy of a successful crowdfunding campaign has these key elements:
• An enticing value proposition for backers.
• The solution to a problem people really care about and can get behind.
• A detailed crowdfunding page.
• Plenty of prototype images, videos, demos and other visual assets.
• Pledge rewards that are worthwhile.
• Efforts to drive traffic to your crowdfunding page via social media, blogs, website, etc.
Know that if you successfully hit your funding goal, you really do need to fulfill your promise and deliver pledge rewards. And even if you’re a few hundred dollars short of your goal, you won’t get a dime, so be sure to ask for what you need and be modest to get funded.
Don’t rule out venture capitalists
One of the most common funding options for business owners, even in the e-commerce startup space, is venture capital (VC) funding. Venture capitalists have the money and network to make any viable business idea a major success. The investable equity venture capitalists have is pretty amazing.
Did you know that Kobe Bryant has a venture capital firm worth $100 million? Venture capitalists are everywhere, and you can start your research via LinkedIn. However, you will need to have a pretty solid business idea and business plan and be willing to give up a piece of your business’s equity.
When it comes to pitching to VCs, keep it concise. Deliver data-driven facts, and tell your story. Most VCs are investing in you, not your startup.
Go the angel investor route
Of all the options, angel investor funding may be the best. Angel investors have plenty of investible capital to put into an e-commerce startup, and they usually follow industry trends. This is good since the e-commerce industry shows no sign of slowing down.
I find that angel investors are also a bit more relaxed and hands-off when it comes to the startups they invest in. They simply want the return and a small piece of equity down the road.
There are plenty of resources online to find angel investors, or you can take a more personalized approach via social media to spark conversations with angels who may be interested in your startup.
Ready to fund your e-commerce startup?
The above funding options for your e-commerce startup are certainly not the be-all and end-all when it comes to netting funds for your business. There are small business loans or lines of credit to consider as well. The main aim is to get the cash you need to move the needle, but you’ll also want to get the best deal with the right investors.