September 16

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Choosing the Right Investment for your Brand

Seeking funding to grow your DTC business? Whatโ€™s the right type of investment for your business?

The exercise of both fundraising and navigating potential exits can be incredibly time-consuming, stressful, and confusing for founders.

๐Ÿ—๐Ÿ–% ๐จ๐Ÿ ๐œ๐จ๐ฆ๐ฉ๐š๐ง๐ข๐ž๐ฌ ๐š๐ง๐ ๐š ๐ช๐ฎ๐š๐ซ๐ญ๐ž๐ซ ๐จ๐Ÿ ๐ญ๐ก๐ž ๐”๐’ ๐ž๐œ๐จ๐ง๐จ๐ฆ๐ฒ ๐š๐ซ๐ž ๐œ๐จ๐ง๐ญ๐ซ๐จ๐ฅ๐ฅ๐ž๐ ๐›๐ฒ ๐ฉ๐ซ๐ข๐ฏ๐š๐ญ๐ž ๐ฆ๐š๐ซ๐ค๐ž๐ญ๐ฌ (PitchBook Data)

There can be significant differences between private equity and venture capital when it comes to raising capital and exiting startups. In addition, there are far more opportunities for fundraising and exits than in the past.

Additionally, different capital sources are playing a larger role and the various players are shifting how long and at what stage they desire involvement.

๐Ÿ“ ๐ˆ๐ง๐ฏ๐ž๐ฌ๐ญ๐ฆ๐ž๐ง๐ญ ๐’๐ญ๐ซ๐š๐ญ๐ž๐ ๐ข๐ž๐ฌโ€ฆ๐ƒ๐ž๐ฆ๐ฒ๐ฌ๐ญ๐ข๐Ÿ๐ข๐ž๐:

๐Ÿ. ๐๐ซ๐ข๐ฏ๐š๐ญ๐ž ๐„๐ช๐ฎ๐ข๐ญ๐ฒ: Traditionally, PE investors have focused on companies at a more mature stage in theirย growth lifecycle when revenues have been established. They will expect a good amount of solid data, due diligence to make a decision on and prefer predictability and lower risk, even if it means lower returns. Rather than being an early seed investor, PE is more likely to be your end game or at least a great part of your exit as a startup founder.

๐Ÿ. ๐•๐ž๐ง๐ญ๐ฎ๐ซ๐ž ๐‚๐š๐ฉ๐ข๐ญ๐š๐ฅ: VC firms typically take much smaller stakes in businesses than their private equity counterparts because they are investing at a much earlier and riskier stage. They too will require due diligence and data to make a decision.ย VC tends to spread their bets across more companies to hedge bets. However, more are starting to participate in earlier funding rounds as they gain experience and as competition grows.

๐Ÿ‘. ๐€๐ง๐ ๐ž๐ฅ ๐ˆ๐ง๐ฏ๐ž๐ฌ๐ญ๐จ๐ซ๐ฌ & ๐ˆ๐ง๐œ๐ฎ๐›๐š๐ญ๐จ๐ซ๐ฌ: This category of investment is more likely a fit for early-stage startups. They are willing to participate in the initial rounds of funding because theyโ€™re placing their bets on you as an entrepreneur or an idea versus historical data and profits.

๐Ÿ’. ๐…๐š๐ฆ๐ข๐ฅ๐ฒ ๐Ž๐Ÿ๐Ÿ๐ข๐œ๐ž๐ฌ – These investors are different from the others because they provide more patient capital, however, they are seeking more cash flow in the short term. or seek cash flow.ย Investment from Family Offices is on the rise.

For the most efficient and effective fundraising process be sure to define ๐Ÿ) ๐ฒ๐จ๐ฎ๐ซ ๐ฌ๐ก๐จ๐ซ๐ญ ๐š๐ง๐ ๐ฅ๐จ๐ง๐  ๐ญ๐ž๐ซ๐ฆ ๐ ๐จ๐š๐ฅ๐ฌ ๐š๐ง๐ ๐Ÿ) ๐ž๐ฏ๐š๐ฅ๐ฎ๐š๐ญ๐ž ๐ฐ๐ก๐ž๐ซ๐ž ๐ฒ๐จ๐ฎ๐ซ ๐›๐ฎ๐ฌ๐ข๐ง๐ž๐ฌ๐ฌ ๐ข๐ฌ ๐จ๐ง ๐ญ๐ก๐ž ๐ ๐ซ๐จ๐ฐ๐ญ๐ก ๐ฉ๐š๐ญ๐ก ๐ญ๐จ ๐ฌ๐ž๐ฅ๐ž๐œ๐ญ ๐ญ๐ก๐ž ๐ซ๐ข๐ ๐ก๐ญ ๐ข๐ง๐ฏ๐ž๐ฌ๐ญ๐ฆ๐ž๐ง๐ญ ๐ฉ๐š๐ซ๐ญ๐ง๐ž๐ซ ๐Ÿ๐จ๐ซ ๐ฒ๐จ๐ฎ๐ซ ๐ฎ๐ง๐ข๐ช๐ฎ๐ž ๐ง๐ž๐ž๐๐ฌ.

Different partners will provide different benefits at each stage of maturity. ๐Ž๐ง๐ž ๐ฌ๐ข๐ณ๐ž ๐๐จ๐ž๐ฌ ๐ง๐จ๐ญ ๐Ÿ๐ข๐ญ ๐š๐ฅ๐ฅ.

Interested in chatting more about preparation for raising your funds? DM us!

Rose Hamilton

About the author

With over 20 years in Omni-channel retail, Rose is a proven Ecommerce expert specializing in evaluating, launching, growing and scaling Direct to Consumer businesses.


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