Raising funds forces e-retailers to ask questions
June 9, 2016 07:44 AM
Retailers looking to raise venture capital need to take a long, hard look at themselves before taking the plunge. And that’s the opinion both of one online retailer who went the venture capital and another who avoided it.
Ross Petersen, founder of online arts and crafts retailer Blitsy, and Brian Fricano, founder of web-only merchant Sustainable Supply LLC, discussed the pros and cons of seeking outside funding during a presentation titled “To VC or Bootstrap? Pros and Cons to Fund Your Startup” on Wednesday afternoon at the Internet Retailer Conference & Exhibition in Chicago.
Petersen told attendees that his company has raised $12 million so far across three rounds of funding, but that investors won’t be interested in all e-retailers.
“Some companies just aren’t fundable,” he says. “If you’re one of those people who has been receiving a lot of no’s, make sure that you’re understanding the whys of everything. Don’t think ‘I’m going to break through this wall.’ Make sure you’re listening to what these people are telling you and why they’re saying no.”
Fricano, whose Sustainable Supply ranks No. 768 in the Internet Retailer 2016 Second 500, opted not to raise funding from outside sources. Fricano launched the retailer of environmentally friendly industrial supplies in 2009, bootstrapping it with $2,100 in money from his personal savings.
Fricano says he was approached by venture capitalists in 2013 about investing in his business when it was doing $5.8 million in sales and turning a profit, but he turned them down because he thought they undervalued his company.
Turns out he was right. By 2015, Sustainable Supply’s online sales had more than doubled to $12.3 million.
“If you’re bootstrapping your business, you are the boss of everything,” he says. “You get to make all the decisions. You learn and you’re forced to learn about all aspects of the business.” Fricano, who had previously worked in sales and marketing roles for W.W. Grainger Inc. (No. 34 in the B2B 300 Guide) and commercial plumbing manufacturer Bradley Corp., recalled learning about logistics and shipping on the fly as his business grew rapidly.
Of course, there are challenges to going it alone.
“You spend your time working in the business versus working on the business,” he says. “There are days when we’re behind in shipping and I’ll pick up a tape gun and go down and help out. You’re insulated from outside mentoring and expertise.”
Petersen says if an entrepreneur decides to seek venture capital funding, he should know about their prospective business partner’s goals and how his own business aligns with those goals.
“If you just come in with your one-size-fits all approach on how you see (your pitch to potential investors), and you’re not understanding what their goals are, you’re not going to be successful,” he says.
Sustainable Supply was a finalist for the B2B E-commerce Website Redesign of the Year Award at the 2016 Internet Retailer Excellence Awards.