5 Funding Opportunities for E-Commerce Startups You Should Know About
Starting a business can be extremely difficult. Your ideas are only going to take your business so far because of the limited funds that you have. E-commerce sites are constantly feeling this struggle. According to www.forbes.com, 80% of e-commerce businesses fail due to lack of funding. It is true that there is a lot more to starting your startup than only fundraising. E-commerce startups have the opportunity of raising funds from different places in order to establish their business in the best possible manner. With the help of ideal funds, you can not only grow your e-commerce business but also find customers, who will be interested in the kind of products that you are providing. It is important to know that each and every kind of investing has numerous pros and cons. It is crucial that you find the ideal funding opportunities for your business.
Angel investors are individuals who are responsible for providing seeding money in order to start a business. They can also provide ongoing support in order to assist an e-commerce company to carry on the business even when it is facing financial struggles. As soon as you are successful in finding angel investors, you have to start negotiating. An investor who is responsible for investing in e-commerce startups as an angel investor is often going to ask for partial ownership of your business. It is completely up to you to decide what you want to do.
It has also been observed that most of the times an angel investor is connected to a business owner, for instance, he can be a family member or even a friend. They might not always be super wealthy entrepreneurs. Therefore, the seed amount that you are going to get from them can vary greatly. This kind of fundraising is the ideal choice for e-commerce businesses that have just started.
A venture capitalist is responsible for investing only in those e-commerce businesses from which he is expecting to get back profits. He is a capitalist as well as an entrepreneur, who is obviously going to be extremely business savvy. A venture capitalist also has a deep pocket, and hence, you can be assured that he is capable of investing a lot more in your business in comparison to the angel investors. Venture capitalists are going to have a strong desire for being a part of the management and consulting efforts, which can be an ideal asset, on the basis of the investor that you choose.
However, there is a chance that this is going to become a great hurdle if you and your investor have different ideas and visions for the e-commerce business. Investment from venture capitalists is going to be ideal for the huge e-commerce sites because the investors are known to have much more equity for investing. They might also want to offer expertise for guiding your e-commerce business in order to make it a profitable venture.
Venture capitalists normally expect higher returns on the investments in comparison to angel investors. They are deliberate when it comes to making business decisions, which means that, it can take several months for you to receive your business fund. Since they are going to invest more money than angel investors, they are going to ask for larger claims to the business. In case if you are already in debt, you can opt for the debt relief options by visiting NationaldebtRelief.com.
A private equity investment is known to work in the same way as venture capitalist investments. Private equity funds, which are going to invest in your e-commerce company, will be looking forward to selling the stakes in the business in order to make a profit. Investment from private equity funds is not going to be realistic for the small e-commerce businesses, or the e-commerce businesses that have just started. They are considered to be the big players, who have big pockets, and they are interested in investing a hundred million or more.
This kind of fundraising can easily become complicated. A private equity fund is responsible for offering different kinds of investments, which include, leveraged buyouts, mezzanine financing, and growth capital. They are known for having their own personal agendas, and hence, are not ideal for the startup businesses. The ideal use of the private equity investments, when a startup is being considered, is basically fueling the growth of the business as opposed to making use of their investment for building the company right from a scratch.
Crowdfunding is one of the most common funding options that most of the businesses make use of for raising funds. A number of people are responsible for investing tiny amounts for helping a particular person to launch his business successfully. This is going to be lucrative if the e-commerce business has a huge following. Also, if the e-commerce site is responsible for developing its own products, it is going to work ideally. Even when you have a single idea, crowdfunding is going to work in a smooth manner, because it is obvious that you require funds for developing your idea as well as launching your e-commerce site, which is going to sell your idea.
Crowdfunding helps a business owner to retain all the stakes in their businesses. Some crowdfunding platforms also have certain reward programs, which are used for encouraging you to donate and are also less costly in comparison to providing partial ownership of your e-commerce business. Another ideal aspect associated with this kind of funding is that it is a request, which will help in building a transaction for the e-commerce business, and also build an audience base even before your business has been launched.
Traditional Bank Loans
You also have the option of taking traditional loans from the banks or credit unions. It is true that they are going to have a high rate of interest but you can definitely try this option if the other options do not work out.
Raising funds for your e-commerce business or any kind of business that you are interested in starting can be extremely challenging. This is why it is crucial that you have sound knowledge about all the possible funding options that can help you to raise your capital.
Walter Moore is a notable management consultant and digital marketing expert. He is an experienced digital marketer and has helped e-commerce businesses in all niches gain with his effective marketing strategies and guidance.