How to Fund Your eCommerce Startup
- eCommerce, Startup 101

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 rising, 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 critical 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 connect and develop their services, products, brand recognition, and marketing strategies. By contributing to these efforts early on, you will ensure the company’s success in the long run.

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 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 contribute. Acquiring followers and supporters is easier when you plan on developing your 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 creating a unique brand with its unique set of products.

This means you need to create an angle. Unfortunately, the global market is overly saturated with companies and online merchants indistinguishable. If you want to stand out and secure your 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 profit at a later time. So be wise when opting for crowdfunding, and be sure to launch your business on your terms.

Cash flow funding

One of the newly risen trends of private business funding is cash flow funding. Businesses are 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.

Suppose you have already launched your business but need working capital to get through seasonal fluctuations or deal with slow-paying customers. In that case, you can secure cash flow with a funding company. New startups that are still in the preparation stage and require funding can opt for invoice factoring to ensure a constant cash flow and make sure the business grows 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 entirely 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 through the tough times. But unlike the name might suggest, angel investors usually want something in return.

These are wealthy or semi-wealthy people ready to invest in a business that has potential in exchange for partial ownership or a high stake in the company. Whether you are prepared to relinquish some of your decision-making to the angel investor. Still, you need to effectively negotiate the terms of the investment to secure the capital and retain the company’s majority owner.

Since only moderate funding is required to start an eCommerce business, angel investors can prove even easier to find than traditional companies. 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 investor’s skills, expertise, and resources, 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 control of your company, these funding strategies are the best ways for a startup to acquire the necessary capital investment, so choose wisely.

How to Fund Your eCommerce Startup

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