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9 simple ways to raise capital for your ecommerce startup

9 simple ways to raise capital for your ecommerce startup

Entrepreneurs and investors share their tips on how to get cash to fund a new business.

It is easier than ever, or so it seems, to open a new business, especially an ecommerce or tech business. But getting money to fund your startup, especially with so many new businesses competing for the same pool of seed money, can be tough. So which methods, or sources, are the most likely to get or give you the money you need to grow your business? Following are nine of the best, according to entrepreneurs and investors.

[ Related: 8 keys to ecommerce success ]

1. Start saving/Bootstrap.

“My top tip for raising money is: use your own money first,” says Brandon Ackroyd, director, TigerMobiles, who has invested in a number of companies as an angel investor. “Far too many startups expect others to invest when they've injected zero of their own money into a business.”

That doesn’t necessarily mean selling your home or hocking your car, but if you are serious about your business and plan on approaching investors at some point, you need to invest your own money first. So it’s important to start saving early.

“I want to see founders who have the confidence to put their money where their mouth is,” he says. “Sweat equity is all well and good, but if you don't know how to bootstrap and keep costs to a minimum, you're going to turn off a lot of serious investors.”

2. Join an accelerator, incubator or mentoring program.

“First time tech or ecommerce founders can realize enormous benefits by joining an accelerator, incubator or business mentoring program,” says Ron Flavin, a funding specialist. Tech-focused startup accelerators (e.g., Cleantech Open) can be found in nearly every state, and a growing number of cities are also home to startup incubators. There are even online accelerators.”

An additional advantage of joining an accelerator, incubator or mentoring program is that “these programs provide tech and ecommerce founders with access to valuable tools, resources, connections and expertise that can help them place their startups in a strong position to get funded,” he continues. And “there are also several excellent no-cost mentoring programs (e.g., BusinessAdvising.org) that provide expert guidance that help founders build a strong, fundable business model.”

3. Use crowdfunding.

“The best way for a new tech company to raise funds for their startup is crowdfunding,” says Tamar Huggins, a serial entrepreneur. “Crowdfunding allows the startup to have more financial freedom (when compared to VC and other investor funds). It immediately validates or invalidates the need the company is trying to solve. And crowdfunding can be an impactful marketing tool when used correctly.”

Top crowdfunding sites include Kickstarter, Indiegogo and GoFundMe. There is also StartEngine.

“StartEngine is an equity crowdfunding platform that allows companies to raise capital from the crowd by exchanging equity in return,” explains Howard Marks, founder, StartEngline. “With the recent passing of the JOBS Act, the opportunity to invest, which was originally reserved for accredited investors, is now open to [everyone]. Moreover, companies can raise up to $50 million within a 12-month period.”

[ Related: 6 ecommerce categories that will take off in 2017 ]

4. Take pre-orders.

“Pre-orders can bring cash in before you make or distribute a product, and help you plan production,” says Andrew Haller, founder & co-CEO, AirDev. “Tesla built a wait list of nearly 200,000 customers just a day after announcing the Model 3, [with] each [paying] a deposit of $1,000 toward their purchase.”

5. Enter a pitch contest.

“Entering a [pitch] competition [is] a great way to connect to the right people and secure funding for [your] startup,” says Sagi Gidali, cofounder & CPO, SaferVPN. “While we were in university, my cofounder and I entered the Microsoft Imagine Cup competition. At the time we were seeking seed funding. We won second place and afterwards received many inquiries from potential VCs and investors. In the end, we built a long-term relationship with one of them, and this relationship led us to establish the company we have today, which is very successful, profitable and sustainable.”

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