How to Choose Capital That Fuels (Not Controls) Your Growth #573

Funding growth in ecommerce isn’t just about raising cash: it’s about choosing capital that matches your stage, strategy, and stress tolerance.

Kirstin Hunter, CEO of Birchal, has seen equity crowdfunding evolve into a serious growth engine for ecommerce brands. By turning loyal fans into investors, founders are able to extend the customer relationship into ownership, deepening connection and advocacy in the process.

In Today’s Playbook:

• How Birchal’s Kirstin Hunter helps brands raise capital without giving up control
• Why community-led crowdfunding builds deeper customer loyalty and advocacy
• The pros and cons of revenue-based finance with insights from Tractor Ventures and Wayflyer
• How Who Is Elijah used profitability to pivot and regain brand control
• Why investor readiness starts with clean systems, solid data, and clear unit economics
• How to match your funding pace to your business stage and stress tolerance

Connect with Kirstin
Explore Birchal
Tractor Ventures’ Episode
Wayflyer’s Episode
Who Is Elijah’s Episode
Glow Capital’s Episode

Transcript

SPEAKER_00: 0:01

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SPEAKER_01: 3:08

Yeah, I think crowdsourced funding, crowdsource equity in particular can be a really, really great source of capital for e-commerce businesses. It sits nicely in the middle of kind of the pros and cons of other sources of capital. I think rewards-based crowdsourced campaigns like Kickstarter can be really awesome. But I've heard from a lot of founders a lot of the challenges of then having this fulfillment, you've got all of these customers and timelines and delays and all these kinds of things that can create massive, massive headaches. Whereas crowdsourced equity doesn't give you so much of a headache because there isn't a timeline that your shareholders are kind of locked into for the results to be arriving at their home address, I suppose. And so it can have that really nice balance where you get the benefit of that large community outpouring of support. You get the indicator that your idea has traction, but you don't end up getting locked into a production and delivery timeline in the same way. Compared to sort of like loans or bank financing, I think it's really good as well because one, a lot of business loans, you'll be required to hit certain metrics, can be difficult for e-commerce businesses because revenues often aren't recurring. They're kind of transactional or one-off or cyclical. And so that can make it difficult to meet the thresholds that banks have on loans, particularly in the early stages when you're growing and your revenues might not be as predictable as they will be down the line. Often as well, in those cases, founders are asked to put personal security down on the lines. And so that means that you are personally at risk to be able to repay this money if something goes wrong. Venture capital, on the other hand, the risk all sits with the VC. So they put the money in, they buy equity. If your company goes under, they lose their money, you're not on the hook for having to pay it back in the way that you are with banking. But venture capital is very, very difficult to get funding, especially for anything that's not a very no archetype of founder building a B2B SaaS AI product.

SPEAKER_00: 4:57

IE, if you're not a bro.

SPEAKER_01: 4:58

Yeah, exactly. If you're not a tech bro, you know, if you don't already have access to capital to be able to get your product to a certain level where it's already got customers and it's already showing traction, VC can be very, very difficult to actually get funding for for anything outside of that. And so crowdsource funding sits really nicely in the middle. It's equity-based, and so the risk sits with your investor. You obviously share that risk because you are the main shareholder in your business outside of those investors, but you're not going to be personally having to pay them back if the business goes under. They understand that risk and they're putting their money into back you anyway. You can get access to the capital really quickly on a timeline similar to what you might be able to with the bank, but without the kind of need for predictable revenues. And yeah, as I said before, you don't have the kind of locked-in delivery fulfillment timelines like you do in a rewards-based crowdsource funding campaign. So I love the crowdsource funding regime because I think it gives you all of the flexibility of all of the different options with a predictable timeline and it gives you that benefit as well, the strategic benefit of having your community of customers or followers who are activated as shareholders.

SPEAKER_00: 6:00

All right, so we just heard from Kirsten at Birchill who told us about how equity crowdfunding helps you raise capital for your e-commerce business without giving up control and helps bring some of your most passionate customers into the investment process to build real momentum for e-commerce brands. It's a brilliant model. But as we've learned from so many founders on Ad DeCart, there is no one size fits all model when it comes to funding growth. Every model, no matter how beautiful it sounds, comes with a trade-off. And that trade-off might be speed, might be control, stress, complexity. So I think it's worth just zooming out for a moment and looking at the bigger picture and all the other options that we have for funding as well. First, if you want the fast lane, revenue-based finance. We've heard from Matt Allen at Tractor Ventures and Aidan Corbett, the founder of Waveflyer, who both explained how revenue-based finance is tailor-made for scaling e-commerce businesses with proven traction. You get fast access to capital for the big drains like stock and marketing, and you don't have to give up equity. But as Aidan pointed out, it only works if your unit economics are rock solid. Investors will have access to all of your data in your dashboards, and they're not betting on your story. They're betting on your numbers. If your CAC to LTV ratio is off or your repeat purchases aren't there, revenue-based finance can become a treadmill instead of a turbocharger. That's the risk. On the other side of that is the slow burn, bootstrapping and profitability all the way. We've heard this theme a number of times, and that's the ability to create a model of an e-commerce business where you always have enough profitability and you scale sensibly enough that you can back yourself and fund yourself. Obviously, we all want this model, but perhaps there's an opportunity in front of you that requires initial funds that you don't have, or you're in a tight spot when everything like stock, marketing, even tax backs up and crushes that cash flow. We've heard from people like Adam Boris at Who Was Elijah who reminded us that the power of profitability also doesn't just mean that you can take advantage of opportunities. It allows you to pivot your business as well. In their case, they pulled back from 800 wholesalers to focus on D2C because that's where brand control and high LTV customers lived. That only happened because they had the cash reserves to make it happen. However, we all know that bootstrapping is slower and that e-commerce founders generally were not patient. So in this instance, you trade pace for peace of mind. Sometimes growth capital is what lets you test and learn faster and take advantage of the opportunities in front of you, even if it means sharing ownership or giving some of that profit away. But there is something that is combining both of those paths. Whether you're choosing a revenue-based finance model, whether you're choosing community funding, or you're bootstrapping your business, the common thread is readiness. Justin Ryan at Clogue Capital said it best. If you're serious about getting funding, either now or in the future, you need to make sure that your business is set up, that you have the right business model in place, that you are in a spot where you can actually realize net profitability and that you have systems that are transferable and scalable, and that you have the data available for people to make quick decisions. You need to be able to surface this at any time to get investors on quickly, get that extra funding from your bank, or perhaps get your customers on the journey as well. So if you're an e-commerce founder thinking about scaling or knowing that raising cash might be in your future, whether you're funding for survival, acceleration, or expansion, here are a few things that you need to keep in mind. Number one, you need to know your numbers and stay across them at all times, especially unit economics and gross profit. That is the lifeblood of any business and will make it appealing to anyone, customer, investor, bank, or will allow you to bootstrap. Number two, know your community. They could be your next investors. Understand your customers and their passion for your business and maybe, maybe start that conversation early to see if they would be interested in joining you on that journey. And lastly, know your pace. Capital is fuel. Too much of it or the wrong type can burn you. Don't raise just because everyone else is raising, or you think that scaling growth is the thing that e-commerce founders need to do. Know your pace and be comfortable with that. Introducing investment or extra funding will add stress. You need to make sure you're up for it. All right, that's our playbook on funding and scaling. If you want to swap notes with over 500 other e-commerce professionals and share how you're funding your growth or hear about how others are funding theirs, come and join the Add to Cart community. It is free, it's friendly, and it's full of people who have been there and done it. Head to adducart.com.au to jump in. Catch you next time.