Seeking funding to grow your DTC business? Whatโs 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.
๐๐% ๐จ๐ ๐๐จ๐ฆ๐ฉ๐๐ง๐ข๐๐ฌ ๐๐ง๐ ๐ ๐ช๐ฎ๐๐ซ๐ญ๐๐ซ ๐จ๐ ๐ญ๐ก๐ ๐๐ ๐๐๐จ๐ง๐จ๐ฆ๐ฒ ๐๐ซ๐ ๐๐จ๐ง๐ญ๐ซ๐จ๐ฅ๐ฅ๐๐ ๐๐ฒ ๐ฉ๐ซ๐ข๐ฏ๐๐ญ๐ ๐ฆ๐๐ซ๐ค๐๐ญ๐ฌ (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 ๐๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐ญ๐ซ๐๐ญ๐๐ ๐ข๐๐ฌโฆ๐๐๐ฆ๐ฒ๐ฌ๐ญ๐ข๐๐ข๐๐:
๐. ๐๐ซ๐ข๐ฏ๐๐ญ๐ ๐๐ช๐ฎ๐ข๐ญ๐ฒ: 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. ๐๐๐ง๐ญ๐ฎ๐ซ๐ ๐๐๐ฉ๐ข๐ญ๐๐ฅ: 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. ๐๐ง๐ ๐๐ฅ ๐๐ง๐ฏ๐๐ฌ๐ญ๐จ๐ซ๐ฌ & ๐๐ง๐๐ฎ๐๐๐ญ๐จ๐ซ๐ฌ: 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 theyโre placing their bets on you as an entrepreneur or an idea versus historical data and profits.
๐. ๐ ๐๐ฆ๐ข๐ฅ๐ฒ ๐๐๐๐ข๐๐๐ฌ – 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) ๐ฒ๐จ๐ฎ๐ซ ๐ฌ๐ก๐จ๐ซ๐ญ ๐๐ง๐ ๐ฅ๐จ๐ง๐ ๐ญ๐๐ซ๐ฆ ๐ ๐จ๐๐ฅ๐ฌ ๐๐ง๐ ๐) ๐๐ฏ๐๐ฅ๐ฎ๐๐ญ๐ ๐ฐ๐ก๐๐ซ๐ ๐ฒ๐จ๐ฎ๐ซ ๐๐ฎ๐ฌ๐ข๐ง๐๐ฌ๐ฌ ๐ข๐ฌ ๐จ๐ง ๐ญ๐ก๐ ๐ ๐ซ๐จ๐ฐ๐ญ๐ก ๐ฉ๐๐ญ๐ก ๐ญ๐จ ๐ฌ๐๐ฅ๐๐๐ญ ๐ญ๐ก๐ ๐ซ๐ข๐ ๐ก๐ญ ๐ข๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐ฉ๐๐ซ๐ญ๐ง๐๐ซ ๐๐จ๐ซ ๐ฒ๐จ๐ฎ๐ซ ๐ฎ๐ง๐ข๐ช๐ฎ๐ ๐ง๐๐๐๐ฌ.
Different partners will provide different benefits at each stage of maturity. ๐๐ง๐ ๐ฌ๐ข๐ณ๐ ๐๐จ๐๐ฌ ๐ง๐จ๐ญ ๐๐ข๐ญ ๐๐ฅ๐ฅ.
Interested in chatting more about preparation for raising your funds? DM us!