E-commerce has been experiencing constant growth since the Internet has taken over the world. Compared to brick-and-mortar businesses it needs no physical space, and thus goes easier on initial funding. All the reliable companies commenced with just an idea, proper planning, a great deal of perseverance and diligence, and, naturally, proper funding – these are the key factors to help the company grow and develop into a large-scale business. Business history knows numerous startups with truly brilliant ideas, yet they didn’t succeed because some things went missing – Reali, CommonBond, Kitty Hawk, Airlift, etc.
One of the biggest issues for a start-up is funding; even the best idea itself, will not survive without financial means. When planning on developing a new startup into a prosperous company, the product must be elaborated to the tiniest detail, making its profitability obvious to investors.
Startups are always risky, as no one can foresee the externalities, even with new and revolutionary ideas. There are quite a few funding options to choose from: while they share their aim, they differ in the way they function. It’s crucial to understand how everything works and choose the type that fits you best.
Angel investors
Angel investors provide money for aspiring business ideas. They are not involved in any board or company and rely on their experience and vision of the product. However, with the investment, they purchase the ownership and equity. In order not to be left high and dry, the investors may have total control over the matters.
Angel investors typically help with pre-seed or seed funding, and even close people can possess the role. However, it’s important to find the most attractive and strongest points of the service to persuade the person to invest. As angel investors and like business unicorns – hard to spot.
Funding rounds
A very standard procedure. The product and company can reach a certain level of funding only by reaching a certain level of revenue and track record. The stages go from series A to series D, however some stop at A, as a balanced stage.
Series A – raise approximately $2 million to $15 million. However, this amount can change due to the existence of business unicorns, mainly tech-oriented. For this level, the company must have a substantial number of clients, as well as a business plan focused on the long-term-profit perspective. Among all A levels, about 10% only move to the next stage.
Series B – a larger scale investment, is oriented on further expansion of the company, which includes more tech support, advertisement, talent acquisition, etc. The valuations are about $30-60 million.
Series C – is about current success and new ambitious plans – adding new products and functioning in new markets. Typically, such companies possess a large share of the local market, from coast to coast, and want to expand overseas. It may imply the merger of companies to strengthen the position of both and spread the influence.
Series D – is reached by a few and they become major players in the market.
Funding rounds are suitable for your needs if you are okay with partial ownership and have a decent and proper business plan.
Small business loans
Small business loans are similar to personal loans, with a certain interest rate in case you’re approved. When looking for investors, be sure to check their reliability and check reviews. Make sure ecommerce startup funding is safe and secure before you make any arrangements.
Such funding is mainly issued by various financial institutions and banks in particular. In order to obtain the loan, you need to have a good credit history built, as it will open the gates for a bigger loan and a low-interest rate, which is crucial for starters.
A venture capitalist (VC)
Venture capitalists are mainly the members of a larger venture capital firm, who give sponsors the bravest and most promising ideas. As a rule they have a voting board, to choose the company for the investment. In return, they get equity in the company and a certain type of payout when the company is successful.
The VC funding can get the startups to bring their service or product to the masses but are short on money.
Crowdfunding
Crowdfunding is an increasingly popular option for those with no funding or just a little. Basically, the investors buy your service or product before it’s available on the market, providing means for its production. Such type of investment is available on special platforms. You need to make it clear why this particular idea or product is worth the money.
Crowdfunding is a consumer-oriented approach. It’s about transparency and a clear vision of the ‘goodness’ of your product. Prove its necessity for the potential clients.
Incubators
Business incubators are a group of companies that offer financial support for the most aspiring startups. They provide a working space, mentorship, and financial assistance.
Such support can help a small startup develop into a decent company. Those who have a clear vision of the product and a solid business plan can make the most out of this collaboration.
Just the idea is never enough, it always requires a great deal of work, luck, money, and work again. Choose the funding that fits your ideas best and help the business grow.
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