TLDR:
- DTC startups are facing challenges in funding due to fractures in the current market.
- Startups are now considering a mix of credit and equity to fund initiatives like retail expansion and new product lines.
DTC startups are facing funding challenges in the current market. While venture capital and private equity firms have capital to invest, they are more cautious about backing consumer startups. This has led startups to consider a mix of credit and equity to fund their initiatives. The challenge lies in deciding how to finance major opportunities like expansion into chain retailers such as Walmart. In response, startups are turning to asset-based lenders like Dwight and Rosenthal & Rosenthal, as well as SG Credit Partners to secure funding. These lenders offer options like asset-based loans, which provide a revolving line of credit for inventory financing and other business needs.
Startups are becoming more cautious about relying solely on equity financing, as the expectations of VCs can change quickly. By having a mix of credit and equity, startups can weather changes in funding conditions more effectively. This approach also allows startups to utilize investor capital for long-term investments while using credit financing for quarterly expenses. The evolving funding landscape has startups, especially those that raised money during peak valuations, considering down rounds to right-size their operations. Overall, there is a growing awareness among startups to maintain relationships with various investors and debt providers for a healthy mix of equity and credit financing.
