Although there are many ways to raise capital for an eCommerce startup, funding is still the most difficult part of getting things going. While it is true that improper funding isn’t the only thing to blame for business failure, it still remains one of the key factors, in addition to incompetence, lack of experience and careless recruiting. If you don’t want to end up a part of the 20% of startups that haven’t made it through to their first year, finding the best way to fund your eCommerce business is your first building block!
1. Saving up/bootstrapping
Looking for investment without using your own money first is a mistake – you can’t expect others to invest in you when you haven’t injected any of your money into your business. There are examples, of course, where entrepreneurs have made the great having invested zero of their finances, but you shouldn’t rely on these rare examples. As a businessman, you need to actually mean business and nothing speaks better in these terms than money; at least an amount that you can afford.
Of course, selling your home and hocking your car shouldn’t be your go-to choice, so start saving early.
Every investor loves seeing founders that inspire confidence and put their money where their mouth is, not those who have no idea how to bootstrap and keep their costs at a minimum!
Unless you’ve been living under a rock for the past couple of years, you have definitely heard about this term. Crowdfunding is among the best ways for a new tech company to raise funds, seeing as how it allows you more financial freedom, especially when compared to VC. It also immediately validates/invalidates the need the company is trying to satiate.
On the other hand, crowdfunding can also be used as a marketing tool, which kills two hugely important birds with one cheap stone.
Although there are many crowdfunding websites out there, the top three include Kickstarter, Indiegogo and GoFundMe.
3. Angel investing
Don’t let the name fool you – angel investors will want something in return for providing you with their financing. These people are usually wealthy or semi-wealthy businessmen who will invest in your business if they happen to see potential, but in exchange for either a high stake in the company or partial ownership. This is the tricky part about this type of financing – you have to be able to effectively negotiate the terms of the investment, so that you can secure the capital, while retaining the majority ownership of your company.
Essentially, an angel investor for your eCommerce startup can be a friend, family member, colleague, even your neighbor!
4. Cash flow funding
There are businesses out there that are specifically designed to help businesses out by securing their cash flow and managing their invoices. This is likely the safest bet for those looking to launch their business quickly.
If your business is already, well, in business, but still needs working capital for seasonal fluctuations or dealing with owing or slow-paying customers, you can opt for securing cash flow with a funding company.
On the other hand, new startups that are still in the preparation stage are perfect candidates for the innovative invoice factoring, which will land a startup with a constant cash flow to ensure a steady business growth until the business in question has acquired regular paying customers and solid clientele they can rely on.
5. Loaning out
This is the most traditional way for an aspiring entrepreneur to get funded. Of course, applying for an SBA loan will offer you low interest rates, long repayment terms and many other benefits, but asking friends and family for a loan or investment will likely nullify the interest, but, on the other hand, may compromise your personal relationship with them. Thread carefully with loans!
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