Last Updated on November 21, 2022 by Tabraiz
As per a report by market research company, IMARC, the e-commerce industry has breached the USD 13 Trillion mark in the financial year of 2021, globally. While this is a jaw-dropping figure in itself, it seems to be just the tip of the iceberg. The same report predicts the market to reach close to USD 55 Trillion by the end of 2027. This translates to a staggering growth of above 25% year-on-year. All signs indicate that the e-commerce industry is the place to be in for making near-term and long-term gains. If you have decided to build a startup in this industry, then you’re clearly on the right track.
Click post suggests that there are over 19,000 prominent e-commerce companies in India alone. It is not hard to imagine how many hundreds of thousands (even millions, likely) exist globally. But are all of them successful? Unfortunately not. Most of them cannot sustain amidst the steep competition from bigger brands. It is no wonder then that e-commerce startup funding is getting so much attention lately. Let us understand a bit more about it and the reasons for its relevance.
What is the importance of e-Commerce startup funding?
Having a unique business idea is very important, but it alone cannot guarantee success. Along with it there are several aspects that need to be considered. Technical aspects include website development, order management and payment processing systems, technological infrastructure and online security etc. Then there are business insights to be considered such as market research, identifying target audience etc. Furthermore, there are the tasks of advertising, marketing, branding, setting up a team, supply chain management and much more. All of these entail high costs, collectively. e-Commerce startup funding helps you meet these costs through the different stages of your business and keep it steady.
While e-Commerce startup funding can be a lifesaver, it is not easy to get. This is largely due to the heavy competition in this space. With so many entrepreneurs vying for the same pool of capital, investors and loan providers have become battle-hardened and more demanding in their expectations. They expect quantifiable returns in a measurable time frame. If you are seeking e-Commerce startup funding for your own enterprise, then here are some handy tips for you to make use of.
Steps To Take
Before approaching anyone for securing e-Commerce startup funding, ensure your business plan is well articulated, easy to understand, and has tangible targets built into it. Any lender or investor is likely to visualize the return on investment (ROI). Having this project in your business plan along with various key milestones and the specific amount needed is going to help you stand out. From an intangible perspective, do not forget that lenders meet hundreds of fund-seekers on a weekly basis. Your crisp plan will save time while providing clarity, something which is bound to be appreciated.
Back up your business plan with careful market research and a thorough study of the product or services you wish to engage in. Not only does it convey professionalism and meticulousness, but it also conveys your seriousness and belief in your plan, something that can be infectious and transmitted to the lenders. Have hardcopy binders and digital versions of your business case handy always, as you never know when the opportunity strikes. To safeguard your idea, add a non-disclosure agreement (NDA) or a similar legal document to your prospectus.
Whom To Target
With the above-mentioned in place, it is time to go on the hunt. There are different avenues through which you can seek e-Commerce startup funding from. Some of the prominent ones include:
- Friends and Family: Easy to acquire with more trust involved,you can approach your social circle to help fund your enterprise.However, the amount you can hope to get may not be sufficient for future growth. Moreover, there can be hesitations in mixing business with pleasure and involving money in the relationship. In such a case, check out the other options you can explore.
- Government or Corporate Grants: There are several government-backed incubators or private corporate trusts and organizations that dole out grants to establish young startups. The best part about these grants is that they do not need to be paid back, however, there may be a lot of red tape and bureaucracy involved in securing them.
- Banks and NBFCs: Several entrepreneurs turn to banks and non-banking financial companies (NBFCs) to secure a startup loan. The concept is simple here. The lending organization assesses your ability to pay back and loans you a fixed amount over a mid-term tenor in lieu of some collateral or security to be put up by you (like a house or other immovable property). It charges a recurring annual interest rate over the principal loan amount. This is the most common form of debt financing available for entrepreneurs.
- Angel Investors and Venture Capitalists (VC): Since the startup ecosystem has become mature, there are plenty of individuals, firms, and companies that are willing to invest in fledgling businesses. They understand the market better and are willing to take higher risks too. Instead of charging interest on the e-Commerce startup funding, they may ask for part-ownership through stock holding or some other financial and legal structuring. This is also known as equity financing, unlike a bank or other lenders. Investors usually get their returns by selling off their stake for profit, once the business has become well established or in a position to raise capital from the market.
As you can see, there are several ways to secure e-Commerce startup funding. You need to identify which one suits your unique needs the best. While ascertaining this, also take into account the amount you need, the stage your business is in (like establishment, development, growth, etc.), and your means to repay it over the stipulated time period. Apart from this evaluation, patience is a valuable virtue in this process as it can be a long and arduous one. Check out the guide for e-commerce startup to get more ideas and suggestions on how to fund your e-commerce startup.