The Power of D2C Working Capital Alternatives

Like the small and medium-sized enterprises (SMBs) of Main Street, upcoming consumer brands continue to prove their creativity, courage and insight in the face of a mock pandemic. Unfortunately, access to finance remains a major obstacle for entrepreneurs who passionately pursue their ideas.

With conservative traditional banks and the venture capital (VC) space a universe unto itself requiring expert knowledge, options for smaller brands to access working capital have been slim until recently. However, more and more startups are seeing great opportunities among fledgling brands.

As Karen Webster recently wrote, “There are 31 million small businesses in the United States and many more have sprung up in the past two years. Most of them do business with traditional banks, but maybe not for long. Unless, of course, the big banks buy one to offer what they can’t easily afford today. Working capital is at the top of the list for budding small brands.

Noting the growth of consumer credit options throughout the pandemic, Anthony Santomo, CEO and founder of Ampla, told Webster that “there hasn’t been that B2B wave yet.”

“There are a few companies making noise and we appreciate and appreciate them,” Santomo said, “but there’s a lot more room to grow in the B2B space.”

Estimating that B2B lenders currently capture around 3% of the total addressable market for working capital from such SMEs, Santomo said a B2B surge is coming.

While many vendors offer businesses checking and savings accounts to hold cash, he said, they often just put a new interface on top of the same old products. What sets the innovators apart is a more customer-centric approach to banking.

“What makes us unique and different is that we’re really good at taking long-term risks,” he said. “We have proven that over the past two years. This allowed us to stand out by offering a product that is structurally different from what exists on the market.

Ampla’s emphasis on the growth line of credit concept is gaining traction, particularly in attracting capital for its own operations. In December, Ampla raised $40 million in a Series A funding round co-led by Forerunner Ventures and VMG Partners, with participation from existing investor Core Innovation Capital. It has raised approximately $330 million since 2019.

The funding helps Ampla offer non-dilutive loans to small brands “concentrated between $0 and $100 million” in revenue, Santomo said.

He went on to say that often, “they’ve innovated and they’re trying to bring a ‘better for you’ product to consumers, because they’re very passionate about it.”

“Therefore, they are the fastest growing and they need this solution today,” Santomo continued. “They need to spend money on inventory and marketing. For us, they are perfect customers. These are low hanging fruits and have been poorly served by any traditional player.

“They don’t want to go and raise venture capital funds. They run lifestyle businesses, pouring money into the bottom line.

See also: FinTech B2B Investors Target SMB Banking, Talent Trade Payments

The right financing is important

That’s not to say Ampla is locked into the SMB space — the platform has multiple enterprise customers, and more established players are using the solution differently than startups, as their needs differ significantly.

“There are a ton of businesses on our platform that are backed by VC,” Santomo said. “What’s great is that we can work together with venture capital. When they raise equity, they can also provide a solution like us on the growth capital/debt side, and now every dollar of equity they raised can go much further with us, and we’re growing limits over time.

Some of these brands started out with a possible sale in mind, while other founders don’t want to get out. The platform is designed for both, taking a unique approach to business mindset.

For those who don’t have big dreams of release plans, Santomo said, “It’s a different value accessory, and right now there aren’t a lot of options.” Traditional venture capital financing is often not a good choice, so they usually have little recourse except for high-interest cash advances.

The capital growth line, on the other hand, allows Ampla “to use all of its business and look at every revenue channel rather than focusing on just one or two, which is very limiting.” .

“We also don’t have the size of the business or the time in business requirements that a traditional bank would typically impose,” Santomo added. “It’s a huge value accessory for us, because again, we’re able to see so much [many] more businesses that have been underserved by these legacy players for so long.

Related: Bank-FinTech mergers target corporate working capital management

SME financing for the overwhelmed and underserved

As the pandemic slowly ebbs and commerce stabilizes, the omnichannel environment left in its wake provides fertile ground for new brands, provided they can access the cash to grow. As financing solutions proliferate and provide businesses with more options, it can also create headaches for SMBs with small teams – and the power of platforms serves as an antidote.

“People use the word loosely these days, but we want to be the financial operating system for these brands,” Santomo said.

Highlighting the fragmentation of banking and payments, Santomo said he even served small teams of one to four people.

“They’re not the most financially savvy,” he continued. “It’s not their fault. They focus on other much more important priorities. We want to simplify their back office financially, and we want to bring all of these systems together so that they have a better chance of success — so that we increase their access to capital sooner, so that they don’t have to give up so many benefits from day one.

As for bigger markets and growth in other areas, he added, “We’re proud to help the little guy and we’ll never lose touch with that, but at the same time we’re pushing upstream. quite aggressively – and we have big closing logos.

Ampla also focuses on underserved communities, and Santomo told Webster that about 60% of Ampla’s customers are women-owned or minority-owned businesses.

“It’s no coincidence,” he said. “These happen to be the companies most overlooked by traditional incumbents. They are also operators who are releasing new products and really leading the charge in innovation. We are super proud of it. It’s a stat we haven’t really promoted, but it’s important.

See also: 10 things that will define digital transformation in 2022

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