Introduction
As per a report by Orios Venture Partners, Indian startups had raised USD 11.5 Billion in 2020. This amount almost quadrupled in 2021 to an incredible USD 41 Billion. The year also saw the creation of 46 unicorns (companies valued at USB 1 Billion and above). Now with 90+ unicorns, India is behind only the US and China in the most successful startup ecosystem in the world. Another report estimates as many as 60,000+ active startups in the country. And in the context of the global economic slowdown of the last 2 years, this becomes an even more incredible feat.
It is not possible to become this big without proper and timely eCommerce startup funding. While unicorns may be a small percentage of the overall ecosystem, the principle remains the same. Startups constantly require an influx of funds, especially during their nascent and fledgling stages. The adage ‘go big or go home is apt here, since many startups end up closing down due to the lack of funds when they need it the most. It is no wonder then, that small to midsize eCommerce startup funding brands are constantly on the lookout for Venture Capitalists (VCs) for eCommerce startup funding to get their businesses off the ground or take it to the next level.
What is a VC?
Venture Capitalists are people or organizations who will fund your business in the different stages of its life cycle, most commonly in the initial take-off stage. As is usually expected, the initial stage is mostly a loss-making one. VC will absorb these losses as well, with the intent of making future profits on their investment. Unlike banks, VCs are willing to take a much higher level of risk, if they are convinced about the future of your business. On the flip side, taking a higher risk also makes VCs seek higher returns in the arrangement.
Reasons To Give VCs To Fund Your Business
Try to put yourself in the shoes of a VC. With hundreds of startups lining up for funds regularly, how would you be able to decide where to put your money? After all, for a VC it is a financial investment that should provide sufficient, tangible returns in a proposed time frame. Hence, while meeting with prospective VCs for eCommerce startup funding for your business you need to be mindful of the reasons and USPs that will attract them to finance your enterprise.
Business Model: A key attribute to convince VCs to provide funding is through your overall business model. We use the term Business Model in its broadest sense, here. In the eCommerce startup funding space, businesses are predominantly focused on products or services. With so many such businesses already active, unless you can show you are different you will be unable to excite a VC. Having a carefully carved out business model, highlighting the innovative strategies, displaying a robust supply chain and sourcing model are just some of the business plan aspects to get a VC interested.
Market Scope and Research: Another reason that can convince VCs to finance your business is by showing them how well you understand the market segment you intend to operate in. The eCommerce startup funding industry is estimated to be well over USD 100 Billion globally, so the scope of growth here is pretty apparent to all investors. However, what about the particular products and services you plan to provide? This is achieved by the means of a thoroughly researched report showing statistics around the present and future demand and supply ratio, consumer demographics, your particular target audience etc.
Knowledge and Experience: This reason may be a bit subjective and driven by emotions that influence VCs individually and differently. But it must be noted that the eCommerce startup funding industry has become extremely competitive, which also makes the VCs smarter and more fastidious in making their choice of business to invest in. While until a few years ago VCs were willing to be more patient in making profits from their investments, today they are spoilt for choice and have become more demanding, as a result. With this in mind, VCs try to gauge your own entrepreneurial experience and that of your team’s. Having a well-balanced team with exposure and experience in the different facets involved in online selling can be a big USP while seeking eCommerce startup funding for your business. metaverse
Sustainable Growth: This has become a relatively new yet important reason due to the evolution of the industry and the change in the attitude of associated financiers towards businesses and related profits. While earlier it was common for VCs to take an approach that involved selling off stakes in businesses that have made it big or become publicly listed, lately VCs are looking at long term growth through their investments. Therefore, by being able to show your plans for the growth and expansion of your enterprise. By providing a clear path for multichannel sales, diverse product portfolios, self-investment (or bootstrap) contributions and future projections, you are highly likely to impress VCs into giving the funding you need.
Ecommerce funding is not easy to come by these days. While it appears that there are several VCs just waiting to provide funding, that is certainly not the case. There is a disproportionately large number of startups seeking seed money for their enterprises as well. The expectations of VCs have evolved too. With the information provided in this article, you should be in a better position to manage these expectations and wow them with your business proposal.