Have you ever wondered how to get funding for your retail business? Wonder no more! In a new series from Future Commerce - the number one retail podcast - we walk you through all that you need to know in order to build and exit from a successful retail business. In partnership with Shopify Plus, we'll take you from zero to hero, Step by Step.
- Brian and Phillip are joined by Jamie Oliver and Jordan Knapp from Shopify Plus to discuss funding for your eCommerce store in a new part of the Future Commerce Shopify series.
- This series is targeted towards the merchants with online stores between the $1 million and $5 million range and entrepreneurs that want to think through the avenues of raising capital.
- How do you choose what type of capital would be the best fit for your brand?
- What are the steps my brand should take to attract an investor, and how do I make the investment process easier?
Introductions and Dreams: Helping Merchants Achieve Their Goals:
- Jordan leads the Market Development team but has been in eCommerce for the majority of his career.
- A year and a half ago, Shopify set out to explore new channels and see where they could place Shopify Plus in the market to expand it in new directions.
- One of the ideas between Jamie and Jordan was about the fact that very few of the merchants are selling on Shopify without bigger dreams or aspirations.
- Their goal has been figuring out who the investors to empower Shopify merchants to get the funding best suited for their needs, and thus, in the Investor Collective was born.
Scaling and Growth: How Shopify Plus Grew:
- Jamie joined Shopify in 2014 on the HR side was responsible for hiring for Shopify Plus just as it was starting.
- The needs and wants of the merchants on the platform were pivoting, and the Shopify Plus team scaled in a way to meet these needs.
- In 2018, Jamie left the recruitment team and decided to join Jordan's product development team.
- The Investor Collective is integrating with venture capital and private equity firms.
Venture Capital vs. Private Equity: What's the Difference?
- In terms of investment firms as a whole, the motto is value creation on repeat; their main functions are to source and acquire companies, improve the operations of those companies, and then either sell those companies or go public.
- Venture capital tends to look at earlier seed-stage business and often takes a minority stake in the company in addition to offering their expertise and talent pool.
- On the private equity side, they are looking to take a bigger stake in the business and will typically provide a lot of capital to take that business to the next level.
- Understanding the options available to you is extremely important.
The Reason Behind the Series: Why Partner With Future Commerce?:
- After digging into the Shopify Plus merchant base, the Shopify Plus team came to realize that a substantial portion of their merchants had garnered some form of investment throughout their lifetime.
- If they can assist merchants looking to obtain capital and provide them with more information, then everyone benefits.
- There are a lot of negative rumors and misinformation floating about regarding investing, but arming yourself with knowledge can prevent these.
- When it comes down to the contract, it is always negotiable, so knowing what you are trying to do is imperative in the process.
The Investors Collective: Going Beyond the Deal:
- The Investors Collective is a partner program that interfaces with venture capital and private equity firms that are actively investing in consumer products in the retail space.
- Shopify Plus also hopes to educate investment firms and their portfolio companies about Shopify Plus and the capabilities of the platform.
- The collective provides expertise, a lifeline for information, and when investment firms have opportunities, they receive complete white-glove service.
- At the end of the day, the objective is not just to build a cool network but to evangelize why Shopify Plus is the right platform for the DTC entrepreneur.
Making the First Step: What is Right for Me?:
- Phillip asks Jordan and Jamie to put themselves in the shoes of a merchant who might be looking for capital and to walk them through the beginning steps of choosing what type of funding to pursue.
- In any situation, any time you accept cash, you are giving up some control, so if you can fund yourself, try to do that.
- Consider an accelerator because you are getting actual resources to assist your growth as opposed to just cash.
- The average VC investment in 2019 for an angel seed was about $1.8 million.
- Series A refers to the first time you get money, Series B is the second, and so on.
What Comes With Money: Some Advantages of Funding:
- Some advantages of accepting money are that success is incentivized for your investor, so they want you to succeed, and an injection of funding can help you achieve your goals.
- Operational expertise also comes along with your investor, along with a conglomerate effect that comes with discounts across the parent company's network.
- There is a spectrum that ranges from the gross side to the cost reduction side when it applies to your company.
- Without early and midstage investments, there wouldn't be any businesses without taking on some risk.
The Struggle of the Firms: Challenges in Today's Investment Environment:
- The biggest challenge present today is that there are a lot of new funds, and everyone is trying to raise a new round.
- If you are an entrepreneur looking for investment, this is probably the best time to pursue investment due to the influx of funds available to you.
- This makes it difficult for VC firms because there is more capital available than there is opportunity.
- With this new paradigm of available capital, how do brands know which type of funding is the best fit for them?
Finding the Right Fit: Investor Matchmaking:
- Figure out what you want in your firm: do you want a firm that is going to let me be autonomous or do you want a firm to be very hands-on with your business?
- There needs to be a firm that links the right amount of capital as well as lines up with your short and long term needs.
- Look at the brands that the firm has worked with in the past and see what those brands have done after receiving capital.
- A true digital agency is always needed for a DTC eCommerce brand, so some firms are building a suite of services to fit all of these needs.
The New Breed of Merchant: Where is Retail Headed?:
- How can investment drive this new age of DNVBs?
- Anyone can be anything that they want with all of the resources available today, so it all comes down to a brand's influence and customer service.
- This environment puts the power back into the hands of the artist, and none of this would happen if it wasn't for investors empowering creativity.
- How would you embrace your entrepreneurial side if you obtained the perfect investment?
Attracting an Investor: What Makes Me Stand Out?:
- With the immense opportunity in the retail space, private equity firms are starting to play a significant role in accelerating the growth of brands.
- Get out there and make your brand known and make connections that can build connections with private equity firms.
- Come to the table prepared with the type of data and information that is required of the firm to do their due diligence, and if not prepared ahead of time, make sure to make time to get this information.
- Raising capital is a full-time job, and a lot of brands don't realize just how time goes into the process of raising capital, so set priorities.
- Get your hands on a due diligence document and start preparing your data and your company for investment.
Brands Mentioned In This Episode:
As always: We want to hear what our listeners think! What are some steps that you can take right now to prepare the road to investment?
Have any questions or comments about the show? You can reach out to us at firstname.lastname@example.org or any of our social channels, we love hearing from our listeners!
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