The Dos and Don’ts of Securing Venture Capital Funding for eCommerce
Venture capital funding is a key piece of the puzzle for growth-minded eCommerce brands. But if you’re new to the game, acquiring VC funding can be one of the most challenging aspects of getting your eCommerce business off the ground.
The Dos and Don’ts of Finding the Right Venture Capital Funding Partner
You can’t search blindly for a venture capital funding source. You need to foster a relationship with your VC partner to ensure that you will continue to get financial support as your business continues to grow. Failing to properly research potential investors could come back to haunt you if the relationship doesn’t work out.
Not sure where to begin? Here are a few helpful dos and don’ts as you begin searching for a qualified VC partner:
- Establish business goals for the relationship. It’s important to develop a strong working relationship with VC funders from the outset. Disagreements about business goals later on could sabotage prospects for growth and expansion. From the start, have an open and honest conversation with potential VCs about your goals for the company. This will help weed out the funders that aren’t the right fit for your intended trajectory.
- Take an in-depth look at the VC’s portfolio. If you’re working with an experienced VC, chances are you won’t be the only company under their umbrella. However, it’s important to take a careful look at the other companies those VCs are funding. Are they your competitors? If so, you might not be comfortable receiving funding from the investor that is also fueling your competition. Additionally, what do the successes and failures look like in the VC’s portfolio? You want an investor that understands your industry. Studying up on potential partners can help you avoid problems down the line.
- Use broad search tactics to find funding. Sorting through hundreds of venture capital funding partners is arduous and time consuming, and can become so overwhelming that you might pick a VC firm out of pure frustration. Before you even begin looking for firms, establish criteria. What business values are you looking for? What are the must-have experiences and previous work in their portfolio? With these specifications in mind, compile a list of no more than 30 funders, and work your way to the best fit from there.
- Shy away from asking VCs about exit strategies and previous relationships. Eventually, eCommerce startups outgrow VC funding and move on. But the way those relationships are terminated can tell you a lot about how the VC firm handles expiring relationships and contracts. Look at companies VC funders have worked with in the past, and if you can, reach out to former business partners and contacts. Ask how and why the business relationship ended. If a VC has a sketchy past or refuses to talk about their exit strategy, you might want to cross them off your list.
Ultimately, you want to know that your relationship with venture capitalists is going to help foster the growth of your eCommerce brand. It might take some time, but once you find the VC firm that works for you, it’ll be the right fit.
Want even more tips on securing venture capital funding for your eCommerce brand? Download Dotcom Distribution’s eBook, “Emerging in eCommerce: A 360º View From the Inside,” for tips and tricks on how to obtain the right VC funding for your business.
To learn more about Dotcom Distribution, contact us today.