There is no denying the fact that ecommerce has been the biggest thing to happen in the word of finance over the last two and a half decades. But ecommerce today is not what it used to be back then when it all started; things seem to have changed for investors and entrepreneurs alike. The question now is how you can invest in an ecommerce business if you are starting out. Investing in ecommerce giants like Amazon would be the wisest choice. Make better decisions after going through this article here – https://www.laweekly.com/how-to-buy-amazon-stocks-and-shares-the-ultimate-guide-by-finixio/. Here are some ways you could consider investing in an online business:
- Bootstrap approach is simple and refers to organic growth. It means expanding your business without outside funds, simply by using your own profits to grow it. This is actually how many businesses had taken off and their founders have been more than happy about not having had to take external financial help. However, this is not true completely because expansion without help from outside is practically impossible. When you choose to follow this approach, it can be praiseworthy but it means a slow growth for the business. You are also likely to lose out to competitors who have external funding.
- Venture Capital/VC is an attractive prospect for budding entrepreneurs to fund their startups. These typically have lot of capital ready for investments and unlike loans; you basically take on influential partners who are keen to put money into your project. However, this approach has its pros and cons. While you can enjoy fresh insights as a result of venture capitalists, you may also have to sacrifice your control over priorities and company vision. VCs are only interested in profits for investors and partners, not founders. Examples of some VC-supported businesses are Emma and Simba and Casper that faced huge losses in selling and needed large doses of VC to survive. The benefits of choosing to opt for VC are venture capitalists usually have lots of funds, are unaffected by losses, and can share strategic contacts and advice.
- Another easy way to fund your business is by reaching out to banks or business lenders for loans. Loans have been the traditional investment solution for SME businesses. Interest rates however will be high when risks involved are high. This approach works because you can avail of specialized loans for investments in your business at any time that will bring down costs as compared to general loans. Business loans are an excellent option when you can pay the interest regularly but it may be a slow process when you are running startups. In case things do not go as planned, you will be left drowned in huge interest payments.
- Revenue capital is a relatively new way to invest in an ecommerce business. This financial model is meant for sales-driven businesses such as ecommerce businesses. It is referred to as revenue capital since the funds, along with fees, are paid directly back through revenue share agreements. The main purpose behind this funding is to get capital at the start to invest into online ads and inventory. Afterwards, you give up shares of the sales instead of repaying the capital through loan payments. It is advantageous because as an entrepreneur, you will not have to sacrifice control and there is no uncertainty about the amount to be paid back. In case you record fewer sales in a month, you make less payment, but the total that you must repay will not change.