Finding small business funding can be an effective way to financially support and grow your retail business, whether you need $5,000 or $5 million. But seeking startup funding is also a challenging and time-consuming task—one that can seem daunting to a new founder.
The reasons a retail business might consider fundraising can vary; some entrepreneurs can no longer bootstrap their business and continue to scale, whereas others might need additional business funding to manufacture their next round of orders, to invest in digital marketing, or for product development.
We consulted with a handful of retail founders to learn more about their fundraising experience and asked them to share their top three tips for a successful first round of small business funding.
Gem produces a snack-like multivitamin for women made with all-natural ingredients. In April 2018, it launched a beta version of its product to members of a private, invite-only Facebook community consisting of about 400 women across 100 US cities.
“I invited prospective investors to join this group and observe what people thought about our first product—their curiosities, excitements, concerns, and reactions. This ended up serving as early traction for my proof of concept,” says Sara Cullen, Gem’s founder.
Cullen started and closed her pre-seed funding round—the point at which startups look for business financing to cover early stage product development, testing, and building a core team—in less than two months.
“I first created a pipeline of investors segmented by type of investor,” Cullen says. “To inform my pipeline, I spoke with mentors, fellow entrepreneurs, and friends about the type of investor relationship I wanted and the value-add I was looking for beyond share of wallet.”
Sara Cullen’s top tips for fundraising
- Don’t be afraid of being told no. Your goal is optimizing time and momentum, so you want to push for an answer, whether it’s a yes or a no, as quickly as possible and not be afraid of the latter. The faster you get a response, the better.
- Build relationships before you start fundraising. This can help refine your pipeline and create a quick roadmap to help you get funding faster.
- Be irrationally optimistic. This can be hard after hearing no several times, but show up to each conversation with updates on your progress and your growth. Show the excitement you’re building, even if your wins feel small.
2. Litty Bird
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Real talk: Women only receive 2-6% of venture capital funding, even though we are majority owners in 36% of all businesses in the United States (that number should be higher, too!) Many research studies have shown that the companies owned by women that receive capital are actually more successful in the long run. What gives? There is a funding gap just as there is a wage gap. And that is why I went with iFundWomen. By investing through this crowd funding campaign, you are investing in this woman run business. You are investing in me. And I would love to have you as a customer: Click the link in my bio to support female entrepreneurship!
Litty Bird sells ergonomic shoulder straps and bags. Founder Sara Axelbaum worked with iFundWomen, a female-forward platform offering startup and small business fundraising coaching, to launch her crowdfunding campaign.
“I started my campaign in July 2018, and it was a very challenging experience,” says Axelbaum. “However, by the time the campaign ended in August, I had surpassed my goal and had enough funding to cover the first run of production at the factory.”
Crowdfunding didn’t only help Axelbaum produce her first round of orders, it also helped build a group of beta testers to make sure the product was sound after mass production.
Sara Axelbaum’s top tips for fundraising
- Leave behind your discomfort about asking for money. We’re often taught to be polite and not ask for much (this is particularly true for women), especially when it comes to money. That’s why there’s a funding gap in the same way there’s a wage gap.
- Know your numbers. For example, if shipping costs and import and export taxes have recently changed, make sure you’re adjusting your prices to maintain healthy margins. Effective small business accounting makes it easier to pull this data.
- Be prepared for a roller coaster of emotions, and just keep going.
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Flex is a company producing menstrual “discs,” a safe alternative to tampons and menstrual cups. Founder Lauren Schulte started her small business fundraising once she ran out of her own money.
“I did it with the advice of a good friend who worked in venture capital and acted as a coach,” Schulte says. “He later joined me as a co-founder."
He said, ‘Don’t be afraid to tell everyone you meet about your idea.’
This advice pushed Schulte to have awkward conversations with investors about women’s periods and the products that were currently on the market. These conversations also helped her overcome some of the other critical hurdles that early-stage entrepreneurs face, like building a team, getting traction on a product, and, in Schulte's case, proving that her product is safe and high-quality.
“I didn't have a lot of money when starting Flex, and it was a bit of a chicken-and-egg problem,” says Schulte. “I needed a product before investors would believe in it—customers needed to buy to prove demand—yet I needed cash to manufacture a medical device. So, I found other ways to generate interest to prove demand to investors, such as pre-orders, T-shirt sales, email signups, anything I could do to demonstrate traction.”
Schulte’s out-of-the-box thinking to gain traction eventually helped her raise startup funding. She received her first investment check nine months later, and the funds helped Flex buy its manufacturing line, hire a team, and invest in marketing tools.
Lauren Schulte’s top tips for fundraising
- Get working on your business before you think about fundraising—launch your website, start marketing your product, and invest your time and money in the idea. Take the business as far as you can without looking externally for funding. This can help show investors you’re putting everything you can into your own business.
- Get as much traction as you can. Getting people to pay for your product, even if it's at a discounted rate, is better than getting paid nothing, and it will demonstrate to investors that people want whatever you’re making.
- Tell everyone you meet about your idea. It can help you find early users and recruit a team of talented people who can do the things you can't or don't know how to do. Having the right team in place can eventually help you raise money because investors will see you have the support you need to scale your business.
4. Mi Ola
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Performance swimwear brand Mi Ola is a direct-to-consumer retailer. Founder Helena Fogarty raised multiple rounds of funding in the early stages of starting her business, from sources including friends, family, an angel investor, and regulation crowdfunding.
“Through raising capital, we have been able to pay to acquire our customers and grow faster than we would have without the funding,” says Fogarty.
Helena Fogarty’s top tips for fundraising
- Raise more than you think you need right away. The brands we look to as successful unicorns, like Warby Parker and True & Co., started with money in the bank. Don’t get discouraged as a small bootstrapped brand by comparing yourself to these types of companies.
- Pay yourself and your team. Build that into your model.
- Always be pitching, even when you’re not pitching. You can share your frustrations with fellow entrepreneur friends, but get those thoughts out of your head when you’re talking to potential investors—don’t let humility or a lousy day dull your shine. We’re all building companies of value, but the ones that get funded are playing a confidence game. If you’re not willing to play this way, raising money may not be for you.
Moving forward with small business fundraising for your retail brand
This advice from like-minded entrepreneurs can help you feel more confident as you begin your small business fundraising process. Keep in mind that successful fundraising looks different for each company. Taking the time to crunch your numbers and define what success means to you can help you start the process on the right foot.
Are you fundraising for your retail business? What tactics work for you? Tell us about it in the comments below.