June 14, 2011, 5:49 PM

IRCE 2011 Report: Securing funding takes patience and diversity

Online retailers need to know the ins and outs of raising funds.

Mark Brohan

Research Director

Lead Photo

Even though it’s tough for many smaller online retailers to secure working capital, there are still deals out there to be made, a pair of executives told attendees at the Financing Growth workshop today at the Internet Retailer Conference & Exhibition 2011 in San Diego in a session entitled "Where else can you find investment money?"

The key to securing a good deal is to know where to look for capital and then to follow through on the detail. Elisabeth Robert, the CEO of Terry’s Precision Bicycles for Women and the former CEO of Vermont Teddy Bear Co., No. 236 in the Internet Retailer Top 500 Guide, secured about $350,000 in economic development grants to fund growth in her online retail enterprise, which sells bicycles, clothing, saddles and accessories designed specifically for women.

Robert, who acquired common stock in Terry’s Precision Bicycles for Women and kept the original owners actively involved in the business, says acquiring capital for an e-commerce business is a constantly evolving priority. But economic development grants helped give Terry’s Precision Bicycles for Women more equity to grow the business and deal with a type of investor that cared about the company long term. “They realize you are investing in the community,” she says. “They want to help you succeed over the long run.”

Securing capital for a start-up operation or funding existing operations can come in many forms, ranging from money from venture and angel investors to commercial bank loans and seed capital from family and friends, says Robert. But at the end of the day, investors most want to know about the history, capabilities and values of the person to whom they will write the check. “They are investing in you, so you need to understand them and they you,” she says.

Investors these days are inundated with requests for capital, says Joe Rubin, president of FundingPost.com, which connects entrepreneurs with angel and venture capitalists. To stand out, online retailers seeking funding need to approach investors with:

• Only a one-page business plan.

• A crystal clear “elevator pitch” that sums up the business plan in about two minutes.

• Clear and succinct reasons for how the business seeking funding is unique.

• A summary of current milestones and the status of the company.

In following up with investors, retailers should be persistent—but not overly aggressively—with staying in touch. “When you make contact, tell them something positive about what’s new with the business and the current milestones,” says Rubin. “Show them why you need to fund your future growth.”

 

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