For companies that want—and are positioned for—explosive growth, there is no better place to go for cash than the venture capital market. Compared with other funding sources, VCs write bigger checks and are more likely to provide the expertise a young company needs in order to manage growth.
Internet Retailer’s newly released report, 2017 Top Investors in E-Commerce, shows that, while venture investors were not as free-spending in 2016 as they were in the record-setting year that preceded it, there was still a lot of money to go around in online retail. E-commerce companies raised more than $2.6 billion last year.
The 58-page report breaks down e-commerce funding in 2016 by company and provides a snapshot of the top players investing in online retailers and the technology companies that serve them, as well as some insight into what venture capitalists look for in a good bet.
One of the things e-commerce investors look for is how a company differentiates itself from e-commerce giant Amazon.com Inc. For e-retailers seeking capital, Ross Davisson, vice president of business operations at broker/dealer CircleUp, says a key to success is being able to convince investors they offer consumers something distinct from what’s already available.
Ways to do that, Davisson says, come down to doing one or both of two things very well:
- Sell your own stuff: Davisson says investors like retailers that sell their own branded merchandise. An example of a company doing this right is American Giant, which sells its own line of U.S.-made casual clothing and includes a lifetime warranty.
- Create an experience: Retailers that don’t make and sell their own goods can still succeed if they do an excellent job of merchandising and creating an experience shoppers can’t get anywhere else. A good example a company doing that well is apparel retailer Revolve, which sells apparel aimed at younger, fashion-conscious consumers. Among other things, Revolve offers shoppers the opportunity to use the services of a “style expert.”
Just as there are things venture capitalists look for in a potential investment opportunity, there of things e-commerce technology companies and online retailers should consider when looking to partner with a venture capital firm.
Gunnar Lovelace, founder and co-CEO of Thrive Market, an e-retailer of organic and natural grocery products, says it’s important for companies seeking capital to look for investors that share its values. In Thrive’s case, that meant backers strongly behind the mission of improving access to healthy food and making healthy living accessible and affordable for everyone. Last year, Thrive raised a $111 million round of funding.
The $299 report also includes:
- Data on the 221 e-commerce funding rounds in 2016 for which a value is known, arranged by company category.
- A ranking of the biggest e-commerce funding rounds.
- Profiles of the 18 VC firms most active in e-commerce funding rounds in 2016.
- The top 10 VC firms ranked by the value of the e-commerce funding rounds they invested in.
- Insight from investors about why they might or might not invest in an e-commerce company in the future.
- Trends that shaped the environment for e-commerce funding rounds in 2016.