The ever-growing e-commerce market is taking the world by storm. Australia is currently the eleventh largest e-commerce market globally, and it seems like everyone is trying to find their place in the online market.
In theory, starting an e-commerce business seems simple and easy. However, it’s not all so simple and without risks. Before you venture into e-commerce waters, you need to get the much-needed funding for your startup unless you have money laying around.
Even though there are many ways to raise capital for a startup, you’ll need to take a lot of things into consideration, and you’ll need to come to terms with what you’re willing to risk. Therefore, you should be prepared for every case scenario.
We’re here to tell you all about simple ways to raise capital for an e-commerce startup.
1. Ask friends and family
If you can’t ask the people closest to you to help you with business funding, who will you ask? According to research, one in ten businesses is funded by friends and family.
But first, you’ll need to pitch the business plan to them. If they agree to fund your idea, the great thing is that you’ll have help running the business, plus they could also have some amazing business suggestions as well.
Getting funding from friends and family could be a great thing; terms you agree on can be a thousand times better than those from commercial providers, loans, and investments. Additionally, the repayment period can be flexible. Not to mention that friends and family may be willing to invest more and without securing the loan.
Simply speaking, crowdfunding means getting fundings for your business from many different people. Depending on the type of crowdfunding, people may donate money without expecting anything in return, or they may expect something in return for their contribution – your services, products, or equity.
Crowdfunding is still very popular in Australia, and there are several methods of how crowdfunding works, but two main ones include reward-based crowdfunding and equity crowdfunding.
Reward-based crowdfunding is the most popular method, and it involves people or companies raising money and expecting rewards in turn when and if the company hits the target. Rewards vary depending on the type of business they invested their money in.
Equity crowdfunding implies that people who invested their money will be getting shares from your company. And you should also know that there are limits on how much the investors can invest in your company.
When it comes to bootstrapping, it means that you’re starting a business with little capital, investing only your personal savings. A great number of businesses are funded this way. If you’re trying to open an e-commerce store, bootstrapping is the ideal solution for you.
If you have some money saved up, think about investing your money first instead of seeking funding from somewhere else.
Not to mention that when you have your own money put into your own business, the motivation will be greater, and you’ll work even harder to get your business off the ground.
4. Commercial Business loans
Probably the first thing that comes to your mind when you’re thinking about finding help for funding your business. The best thing about commercial business loans in Australia is that they are flexible, and they offer the lowest interest rates of all loan options out there.
With a commercial loan, you can borrow a large amount of money at once, plus you won’t need to provide your lender with collateral – which means that commercial loans are unsecured loans.
Moreover, you have enough time to pay the money back with commercial business loans once your business profit increases. So, if you’re looking to grow the business and increase profit, applying for a commercial business loan is the right choice for you.
5. Angel investing
An angel or seed investing happens when an individual provides seed money for your startup. In return, angel investors usually expect ownership equity in your business.
If you’re wondering where to find these good Samaritans, the answer is pretty easy – they could be anyone from your family, friends, or even your neighbors. If a certain individual has enough money to fund your startup – they can become an angel investor.
If none of the people close to you fit this profile, you can also find angel investors through online funding sites.
6. Venture capitalists
A venture capitalist is an investor who invests in businesses with high-growth potential in exchange for an equity stake. VC is one of the most frequent ways to find funding for an e-commerce startup.
VCs are similar to angel investors; they are willing to invest more money, which is quite a bit pickier. If a VC is willing to invest money in your company, they must see some serious potential in your business venture.
Many VCs use social media to promote their business and interact with entrepreneurs if you wondered where to find a venture capitalist. So, look for VCs on platforms like FaceBook, LinkedIn, Twitter, Instagram, etc.
Whatever funding option you chose, make sure you thoroughly research it before applying. Additionally, don’t forget that raising capital for your startup comes with risks, but also, don’t let that stop you from making your dream of owning an e-commerce business come true.