- Business Tips, eCommerce

How to Fund Your eCommerce Startup

Unless you’re the heir to the Saudi throne, funding a personal business venture is not an easy task. Although the global eCommerce market is on the rise, only 50% of startups are expected to make it through to their second year. This percentage starts to decrease as years go by. While funding is not the sole culprit responsible for such a high rate of business failure, it certainly remains one of the key factors, alongside incompetence and a lack of proper experience.

Therefore, it is of utmost importance for eCommerce startups to secure adequate funding before engaging in the market, to secure and develop their services, products, brand recognition and marketing strategies. By contributing to these efforts early on, you will make sure the company’s success in the long run.

How to Fund Your eCommerce Startup

Here are the best ways to safely secure funding for your online business venture.

Crowdfunding

Probably the most obvious option to raise money to launch your business is crowdfunding. Public funding platforms allow you to raise money without prior first investment and very little risk. Although it might seem a good idea, it’s important to note that crowdfunding works best for niche products and ideas, something that inherently has a very passionate following.

If your business strategy is unclear or your brand purpose too broad in nature, it will prove to be very difficult to find followers and entice them to make a contribution. Acquiring followers and supporters is easier when you plan on developing your own unique products that people can relate to and connect with. Rather than asking people to fund a typical eCommerce store, ask them to give towards the creation of a unique brand with its unique set of products.

This means you need to create an angle. The global market is overly saturated with companies and online merchants indistinguishable from one another, and if you want to stand out and secure your own loyal following, you need to develop a unique story and brand image.

Lastly, keep in mind that people expect to receive something in return for their contributions. This “return of investment” can come in many forms, such as giving contributors stakes in your company, relinquishing some of your decision-making power, or letting people sell their stake for their own profit at a later time. Be wise when opting for crowdfunding and be sure to launch your business on your own terms.

Cash flow funding

One of the newly risen trends of private business funding is cash flow funding. There are businesses specifically designed to help your business out by securing its cash flow and managing invoices. These companies can help a startup in many ways, and it’s probably the safest bet for an entrepreneur looking to secure funds and launch their business quickly.

If you have already launched your business but need working capital to get through seasonal fluctuations, or are dealing with slow-paying customers, you can secure cash flow with a funding company. Just as well, new startups that are still in the preparation stage and require funding can opt for invoice factoring in order to secure a constant cash flow and make sure business growth until paying customers and clients have been acquired.

While every investment comes with its downsides, cash flow funding might be the one solution with which entrepreneurs struggling to obtain funds can feel safe.

Angel investing

Angel investors are a lot easier to find than actual angels, but they aren’t quite as altruistic as they might seem. This is a great way to get funding for your business, whether you need an initial capital investment or someone to get your business through the tough times. But unlike the name might suggest, angel investors usually want something in return.

These are wealthy or semi-wealthy people who are ready to invest in a business that has potential, in exchange for partial ownership or a high stake in the company. Whether you are ready to relinquish some of your decision-making to the angel investor is up to you, but you need to be able to effectively negotiate the terms of the investment, in order to secure the capital, but also retain the majority ownership of the company.

Given the fact that only moderate funding is required to start an eCommerce business, angel investors can prove even easier to find than with traditional businesses. An angel investor can be anyone from your friend or colleague, to your next-door neighbor, and it’s a solid choice for eCommerce startups with a moderate risk margin.

The type and amount of investment will vary according to the skills, expertise, and resources of the investor, and you should negotiate the terms according to these variables. Always keep in mind, if you give up partial ownership of your business, you might be looking at potential conflicts with the co-owner in the long run.

Acquiring funds for your startup is not an easy task, as it requires networking, negotiating and risk management. While no one can guarantee you will retain complete ownership or management of your company, these funding strategies are the best ways for a startup to acquire necessary capital investment, so choose wisely.

How to Fund Your eCommerce Startup

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