The Startup Guide for Emerging Commerce Brands Part 4: Obtain Capital to Scale
Discover the essential steps to fuel your growth in Part 4 of our Startup Guide. Learn about raising equity capital, finding angel investors and venture capital firms, and explore different funding options to meet your business needs.
Many small and emerging businesses have worries about securing funding for growth whether it is through borrowing money or giving away equity. But raising capital comes in stages with many options that can prove beneficial. Knowing how and when to raise capital at the right time can give you a leg up on your competition.
The Path to Raising Equity Capital
If you’re interested in raising capital, know that it can be a massive, multi-stage effort that is time-intensive and dilutive. On the other hand, you have strategic new partners that have the expertise and connections to help grow your brand. If you have the time, resources, and are open to give up some control of your business then it might be worthwhile. Your main sources are venture capital firms or angel investors.
Angel investors are high-net-worth individuals who tend to invest their own money in entrepreneurs or startups in early stages of development, typically by exchanging equity in their company.
When looking for angel investors, ask for references from other founders. Ensure you talk to investors with deep experience in your particular sector, are knowledgeable of market forces at play, and share views on future projections. You’ll also want to know that they have experience with brands similar to yours and have an entrepreneurship background themselves.
Venture Capital Firms
Venture Capital (VC) Firms are private institutions that combine their funds to invest in emerging businesses with a high potential for growth.
Many VC firms offer additional strategic resources on top of capital. This could include contacts or assistance in operations, sales, human resources, legal services, or marketing. Also, vet their portfolio and ask for founder references to see if they are connected to other companies or individuals that can help your business, whether it’s talent or other investors.
When is the best time to raise?
The ideal time to start raising is typically 5-6 months before your brand needs new working capital to meet proven demand from DTC customers and/or retailers. VCs will be more likely to align with brands aiming to scale or sell, versus to start or save their businesses.
Here are four scenarios that indicate it might be time to inject a large amount of cash into your business.
- You want to invest in growth: Building out go-to-market strategies help strengthen your brand in the long run. This could include experimenting in new marketing channels, trade shows, and customer loyalty programs.
- You need to hire more talent: If in-house staffing shortages are holding you back from reaching your next milestone, then it’s a good time to raise capital.
- You want to test and release new products: Research and development (R&D) testing is crucial to set you apart from your competition, but can take time and be costly.
- You need to keep up with demand: There are some scenarios where your product(s) are a huge hit and you need more capital to scale effectively to keep up with the market.
The Stages of Fundraising
- Pre-Seed or Bootstrapping: Business owners typically use their own resources and funds to finance their startup.
- Seed: Businesses will have formally launched their initial product or offering and need outside funding to scale.
- Series A: The business has shown traction in the market and seeks to secure funding from VC firms, angel investors, and potentially crowdfunding.
- Series B: Venture capitalists and investors often get involved in this funding stage to further business expansion.
- Series C, and later: Businesses continue to create new products, expand into new markets, and may acquire other startups, attracting investment bankers, hedge funds, and private equity firms.
- Initial Public Offering (IPO): A business sells corporate shares to the general public which can lead to more funding or an exit opportunity for early investors and employees.
Need Capital Now?
There are a variety of ways that fast-growing companies can get capital quickly. Make sure you read the fine print to ensure you pick the best option for your business.
- Traditional Line of Credit (LOC) is a solution that offers capital in exchange for physical assets as collateral, such as accounts receivable (AR) or inventory in the case of a default.
- Merchant Cash Advances (MCA) provides you with funds upfront based on your eCommerce channels in exchange for a percentage of your future sales.
- Venture Debt is a type of loan typically offered from specialized banks once a business has raised equity from venture capital firms.
Ampla offers emerging commerce brands fast, flexible financing to grow their business. We are the only solution to take into consideration revenue streams across all retail, eCommerce, and omnichannel channels to provide you with two to four times the capital of our competitors at lower APRs. Our pricing structure uses a single APR — you will never pay more than this rate, or any other fees outside of it.
- Easy access to cash: Our application process is simple and efficient.
- Quick approval and turnaround time: We aim to turn around offers in 48 hours or less.
- Reasonable rates and repayment terms: You’re only charged for the money that you’re putting to work, and you can prepay at any time without incurring a fee.
- Clear information on repayment period and amounts: Transparent APRs with non-dilutive capital — no warrants, personal guarantees, or pre-payment penalties.
- Tech-enabled to integrate with current systems: Connect your accounting, banking, and commerce systems through seamless integrations.
- Scalable Credit Limits: We automatically recalculate our customers’ credit limit as they scale.
Ampla works to address all working capital needs. Our solution can support inventory, product, marketing, supply chain logistics, or operational expenses. Ampla’s model works, which is why top venture capital firms like Forerunner Ventures, VMG Partners, and Core Innovation Capital have partnered with us for continued growth.
With the help of a strong inventory management stack, best practices to maximize your marketing ROI, consistent accounting updates and reminders, and capital-raising knowledge, you will have a solid foundation to support and grow your business.
If you haven’t quite found what you’re looking for, we’ve helped hundreds of companies grow over the past few years and our team is always happy to help. Learn more ways to scale your growing business by reaching out to the Ampla team for help -- contact us today!