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Driven by macroeconomic factors, local special circumstances, trends in the market, and customer preferences, the venture capital (VC) market has experienced a positive trend in recent years.
Due to the venture capital business’s added value and high return potential, UK entrepreneurs also show a strong preference. In fact, the total capital raised in the country is expected to reach US$ 4.7 billion in 2024.
However, with the VCs aiming to secure more governance and become more selective with their funding, you might be wondering how you can secure a partnership with a reliable venture capital investor.
In this detailed guide, you’ll find all the information pertinent to making an informed decision. You’ll discover all the latest market & trends information, the best options for your e-commerce business, factors that drive investors’ decisions, and more!
So, buckle up your seatbelt and take a deep dive into the world of venture capitalists with us!
Venture Capitalist Investments in E-Commerce: The Trend
The e-commerce industry has been seeing steady growth since its inception and that has caught the attention of many–if not all–venture capitalists. E-commerce businesses, on the other hand, also prefer VC investments due to their large funding options.
The UK has the third-largest e-commerce market, with 49.3 million of its population (68.5 million) shopping online. A 2021 UK report predicts that by 2040 95% of consumers between the ages of 15 and 79 will be participating in online shopping.
Thanks to such reports, VCs are now heavily invested in finding and investing in e-commerce businesses with significant growth potential and a unique value proposition. Between 2010 and 2016, over 2000 deals were made by venture capitalists who invested in the “internet” sector.
In 2018, global venture capital financing for startups saw a 46% increase with a whopping $254 billion in investments into approximately 1,800 startups.
This massive influx in investments, however, in no way means that venture capitalists are not exercising due diligence. VCs have become wary of e-commerce businesses that can’t build a sustainable and profitable business model and, instead, burn through the cash relatively quickly.
Factors That Influence Venture Capitalist Investors’ Decisions
The following is a brief overview of the key considerations a venture capitalist takes into account when evaluating potential investments.
1. Risks
A venture capitalist shares the risk of an e-commerce store, therefore they need to know everything about a startup before making an investment. Here are some questions they may ask:
- Will there be a return and eventual exit?
- Is the fund sufficient to fully meet the opportunity?
- Is this product the right one for today or 10 years from today?
- Would there be any legal or regulatory issues in future?
2. Product & Competition
Venture capitalists are on the lookout for top-notch services or products that have a long-lasting competitive edge. As long as your product or service offers a unique solution to an existing, widespread problem, you’ll easily receive funds.
Here’s what they look for:
- Products that are a lot more economical than similar ones in the market
- Products that are far superior to their alternatives
- Products that are life-changing
- Products that the customers MUST have to solve a problem
3. Market Size
E-commerce stores that target an easily addressable and large market attract VCs. This is primarily because such businesses have a higher chance of growing sales worth millions–if not billions–of dollars, providing great returns on investment.
Moreover, a large market size also ensures a VC has potential ways to exit their investment whenever needed and that the business will become a market leader relatively faster. Here’s what to keep in mind:
- Your business plan should include a detailed market size analysis
- Present the analysis from the “bottom-up” and “top-down”
- Highlight feedback from potential customers
- Present third-party estimates
4. Management
Management is one of the most important factors to consider for VCs before an investment. Their priority is to invest in a capable management team that’s able to execute each aspect of the business plan.
Your management team must comprise individuals who have been a part of planning and executing successful businesses with high investor returns in the past. Here are some things to keep in mind:
- Your e-commerce team should consist of qualified and experienced professionals
OR
- You should showcase a willingness to hire talented managers from outside
Things To Look for When Choosing a Venture Capital Business
You may be wondering what you can do to choose a new investor during your financing round. Don’t worry, we’ve created this checklist to help you look for the perfect pick for your e-commerce store.
1. Character Traits
Your capital investment partner will likely be in business with you for at least a couple of years. Therefore, you must also evaluate their soft skills in addition to their technical expertise. Consider how he’ll play the role of being your advisor and coach and evaluate his honesty and trustworthiness.
2. Follow-on Financing Capacities
It’s crucial to find out how many financial reserves have been allocated to your company for the next financing rounds by the investor. This is crucial for less glory times and as a positive signal for follow-on investors in case bridge financing is required.
3. The Other Partners
You should be able to connect with and know the other partners of your venture capital fund before you sign a deal. You may find partners who might be better suited to be your direct contact for the business or your direct contact may leave, leaving you to build new connections with the remaining partners.
It’s also a good idea to connect with the principals or associates who may be promoted in the upcoming years to board member positions.
4. Industry Knowledge
You should look for venture capitalists with relevant industry experience and expertise because they can help you achieve operational excellence and KPI benchmarking.
5. Comparisons With Other Portfolio Companies
They should have sufficient connections with other founders within the same industry. This is crucial for startup owners looking to learn from their peers.
6. HR Support
A good VC should be able to help find first or second-level position candidates or find recruitment support within the industry. They should also be able to conduct interviews for important positions and advise founders on their hires.
7. Network
Your potential VCs should have good, long-standing connections with other investors. Look for investors who have helped others with follow-on investments or made syndicated investments. They should also have connections with others within the business model or industry that you’re working in.
How to Find & Approach Venture Capitalists in the UK
Before approaching venture capital investors, it’s best to determine which private equity funding would be better suited for your e-commerce business needs. The different types of funding options available include succession funding, product development, and seed funding.
Here are some other things to look for when searching for a VC fund company:
- Their geographical location
- Amount of available finance
- Their quality of support and advice
- Funds targeting the relevant business sector
Making Your Business Investment Ready
You’ll need to provide the following details to ensure your business is investment-ready:
- Directors’ or partners’ profiles
- A 6-month bank statement
- Next year’s profit & loss forecast
- Current performance evidence
- Past two years’ audited accounts
Matching Investment Criteria
Ensure you match the VC’s investment criteria before approaching them. Moreover, keep your business plan updated with all the financial predictions to address the VC’s specific finance-related concerns.
Your business plan should highlight:
- External investment requirements
- Achievable business plans
- Funding needs
Finding & Approaching VC Investors
You can search the directory of members on the British Private Equity and Venture Capital Association (BVCA) website. It’s a useful research tool and platform where they publish annual reports on private equity.
Negotiating a Deal
There are 6 stages to negotiating a venture capital investment deal:
- You present your business plan during the first meetings
- Once the investor is happy with your proposal, you’re offered an initial memorandum by the fund managers
- The next phase involves company valuations to determine investment and equity
- You’ll receive an offer letter from the venture capital investors with the proposed investment and terms
- The due diligence phase encompasses audits by the VCs
- Finally, the terms of the deal are agreed upon and signed off.
Top 30 E-Commerce Venture Capital Investors in 2024
There has been a significant increase in the top venture capital firms growing the overall e-commerce market and investing in this industry over the last decade. The increasing trend in online shopping and its connected convenience has turned many VCs' heads.
So, your chances of finding an investor are higher than ever. But to secure the best investment coupled with quality expertise and experience, you must look into the top choices currently available.
The following are some of the many e-commerce venture capital investors that startup e-commerce ventures can consider to secure their funds.
30. Accomplice
Founders: Christopher Lynch, Jeff Fagnan, Jon Karlen, Ryan Moore
Company Size: 11-50
Headquartered In: Cambridge, Massachusetts, United States
Year Founded: 2015
Accomplice primarily focuses on seed and early-stage ventures within the tech, MarTech, FinTech, RetailTech, and E-commerce industries–among several others. This VC has 360 investments with around 57 exits. Its network and specialities are what give this VC its well-deserved fame.
29. Access Venture Partners
Founders: Brian Wallace, David Gold, Frank Mendicino III, Jay Campion, Kirk Holland
Company Size: 1-10
Headquartered In: Westminster, Colorado, United States
Year Founded: 1999
As a VC firm focusing on early-stage, late-stage, and seed ventures, Access Venture Partners has invested in numerous e-commerce, PropTech, and SaaS companies. Some of its known contributions went to Ascent360, Bonusly, CommercialTribe, Dapix, Hyperia, Red Canary, Resurface, TopFan, TextUs, Wednesday, TapInfluence, ThreatX, Red Canary, and TextUs.
It has made a total of 99 investments with 20 exits as of today. Its popularity comes from its decades of investing and operating expertise, network, and many other resources beyond the invested capital.
28. Accel
Founders: Arthur Patterson, Jim Swartz, Prashanth Prakash, Subrata Mitra
Company Size: 101-250
Headquartered In: Palo Alto, California, United States
Year Founded: 1983
This VC’s primary focus is early-stage, seed, and late-stage ventures in e-commerce, IoT, tech, and SaaS industries. Its portfolio includes over 2,000 investments and 354 exits, which includes a global community of entrepreneurs. Some of its well-known contributions went towards Atlassian, Braintree, Cloudera, DJI, Dropbox, Dropcam, Etsy, Facebook, Flipkart, Lookout Security, MoPub, Qualtrics, Slack, Spotify, Supercell, Vox Media, and others.
27. Academy Investor Network
Founders: Sherman Williams & Emily McMahan
Company Size: 1-10
Headquartered In: New York, New York, United States
Year Founded: 2020
As a multi-stage VC firm, Academy Investor Network has made 2 investments with no known exits. It focuses on numerous industries, including e-commerce AI/ML, and tech. The company primarily focuses on seed ventures and startups.
26. Able Partners
Founders: Amanda Eilian
Company Size: 1-10
Headquartered In: New York, New York, United States
Year Founded: 2016
This VC firm focuses on early-stage ventures in the VC, finance, and financial services industries. Their team includes highly experienced operators and entrepreneurs adept at growth and exit strategies for greater flexibility. Overall, this firm has made 62 investments and 5 exits.
25. ABS Capital Partners
Founders: Don Hebb, Tim Weglicki
Company Size: 11-50
Headquartered In: Baltimore, Maryland, United States
Year Founded: 1990
This VC offers early-stage investments to teach-enabled, healthcare, and education companies around the world. Some of its portfolio companies include IRIS.TV, Purch, deepwatch, and Beep. Its venture fund typically contributes to pre-seed, seed, and series A-D companies. Overall, this VC has made 85 investments and 45 exits since 1990.
24. A* Capital
Founders: Bennett Siegel, Gautam Gupta, and Kevin Hartz
Company Size: 2-10
Headquartered In: San Francisco, California, USA
Year Founded: 2021
Focusing on sustainability and e-commerce, among several other industries, A* Capital is a seed and series A-D investor that has made 23 investments in a relatively short duration and has no known exits till now. Some of its popular contributions include Airbnb, Carta, Faire, Doordash, Dropbox, Gorillas, Gusto, Instacart, Marqeta, Ramp, Square, Uber, Wrapbook, Reddit, and SpaceX.
23. 500 Startups
Founders: Melanie Perkins
Company Size: 1001-5000
Headquartered In: San Francisco, USA
Year Founded: 2010
This VC firm has made 2,802 investments and 337 exits from its contributions toward seed, series A, and series B ventures. It has a global network of investors, mentors, and founders in e-commerce, FinTech, MarTech, SaaS, and many other industries.
22. 500 Global
Founders: Brian Curliss, Christine Tsai, Dave McClure, Matt Wills
Company Size: 101-250
Headquartered In: San Francisco, California, United States
Year Founded: 2010
As a seed and early-stage VC and accelerator firm, 500 Global has made a whopping 3,116 investments from its 31 funds with 334 known exits. Some of the industries it focuses on include the Internet, funding platforms, VC, financial services, and finance.
21. 43North
Founders: Empire State Development and the State of New York
Company Size: 11-50
Headquartered In: Buffalo, New York, United States
Year Founded: 2014
Founded by the Empire State Development and the State of New York, 43North hosts annual startup competitions to cultivate high-growth companies–investing around $5 million each year. This company focuses on seed and early-stage ventures with high revenues, customer traction, and deployable products.
Since its inception, it has made 73 investments with 5 known exits and a typical exchange of 5% equity in each firm. Their investments range from $500K to $1M and include a tax-free operation, incubator workspace, recruiting support, and network access.
20. 3ig Ventures
Founders: Chip Brian
Company Size: 1-10
Headquartered In: New York, New York, United States
Year Founded: 2020
This VC firm focuses mainly on early-stage and seed ventures and has made 8 investments with no known exit till now. In addition to FinTech, it has made significant contributions toward the e-commerce industry, supporting seed, Series A, and Series B firms.
19. 3L Capital
Founders: Dave Leyrer, Shawn Colo
Company Size: 1-10
Headquartered In: Los Angeles, California, United States
Year Founded: 2017
Supporting early-stage and late-stage ventures, this private equity firm has made 46 investments with 4 known exits since its inception. From seed to series A till D, this company has invested in a diverse portfolio which includes both enterprise and consumer businesses.
18. 2048 Ventures
Founders: Alex Iskold, Paul Sethi
Company Size: 1-10
Headquartered In: New York, USA
Year Founded: 2018
This early-stage VC firm is thesis-driven and includes a team of experienced and skilled operators and founders. With its primary focus on technology, it has invested in around 200 startups during pre-seed and seed rounds.
Their investments range from $500K to $2M with a high conviction. The company’s total investments are about 119 with 1 known exit.
17. 1863 Ventures
Founders: Melissa Bradley
Company Size: 1-10
Headquartered In: Washington, District of Columbia, United States
Year Founded: 2018
As an accelerator and VC firm, 1863 Ventures focuses on helping startups scale their business by bridging the gap between equity and entrepreneurship. They take high-potential e-commerce businesses and direct them toward high growth. Its popularity can be linked to its numerous support programs for early-stage and growth-stage businesses.
Overall, this company has made 7 investments with no exit as of yet.
16. 1517 Fund
Founders: Danielle Strachman, Michael Gibson
Company Size: 1-10
Headquartered In: Oakland, California, United States
Year Founded: 2015
Founded in 2015, the 1517 Fund is a Micro VC firm that focuses on early-stage and seed ventures with a high emphasis on tech. Out of their 100 investments, 20 include diversity investments and they’ve exited 4.
15. 14W
Founders: Alex Zubillaga
Company Size: 1-10
Headquartered In: New York, New York, United States
Year Founded: 2010
This private equity and venture capital firm has made 84 investments and around 13 exits. Its primary contributions have gone toward early-stage, seed, and late-stage ventures. Its diverse portfolio of partnerships with numerous global founders is what puts this venture capital firm on the top VCs list.
14. 10x Value Partners
Founders: Christian Schroeder
Company Size: 1-10
Headquartered In: London, England, United Kingdom
Year Founded: 2018
A micro VC company, it primarily focuses on seed and early-stage ventures. 10x Value Partners has made its name as the best early-stage investment company based on blended IRR. It makes very selective investments in firms where they can turn the tables to bring an unfair advantage to the company. Overall, this company has made 33 investments with 1 known exit.
13. 10x Group
Founders: Felix Haas
Company Size: 1-10
Headquartered In: Munich, Bayern, Germany
Year Founded: 2006
Focusing primarily on digital start-ups in Silicon Valley and Europe, the 10x Group has managed to invest in early-stage, seed, and late-stage ventures. It has made 80 investments with 6 exits and 10 diversity investments.
12. 10x Founders
Founders: Claudius Jablonka
Company Size: 11-50
Headquartered In: Munich, Germany
Year Founded: 2020
This venture capital firm has made 300+ investments in early-stage companies. Its popularity comes from its network-driven nature and a community of more than 200 angel investors and entrepreneurs.
11. 10Branch
Founders: Jay Haladay
Company Size: 2-10
Headquartered In: Portland, Oregon
Year Founded: 2015
10Branch brings not only its investments but also its operational excellence to push companies toward deliberate growth. Its investment stages are typically Series B and C for companies in the e-commerce and tech industries. Currently, the company has made 5 investments and 2 exits.
10. New Enterprise Associates
Founders: Chuck Newhall, Frank A. Bonsal, Jr., Richard Kramlich
Company Size: 51-100
Headquartered In: Menlo Park, USA
Year Founded: 1977
An American VC firm, New Enterprise Associates was founded in 1977 and is currently based in Menlo Park, California. Its wide range of investments includes significant contributions to the healthcare, technology, and e-commerce industries.
The investments cover all phases of the business life cycle, which points to the company’s expertise and the strength of its available capital. Since it was founded, the company has made 2012 investments and managed 12 investment funds. Among all the investments made, the company has made its exit from 547.
9. Lerer Hippeau Ventures
Founders: Andrea Hippeau
Company Size: 11-50
Headquartered In: New York City, NY
Year Founded: 2010
A New York-based venture capital firm focusing mainly on the early stage, this company has raised $453.5 million from investments across 8 funds. Some of its many notable investments in e-commerce include those made towards Warby Parker, Soylent, Glossier, Everlane, Chubbies, Casper, and Allbirds.
8. Rocket Internet
Founders: Alexander Samwer, Christopher Strauch, Fabio Tran, Issam Abedin, Jan Wilmking, Jeremy Hodara, Marc Samwer, Michele Ferrario, Navid Hadzaad Javaherian, Nickyl Raithatha, Oliver Samwer, Stefan Jung, Steffen Wulff Petersen, Tito Costa
Company Size: 251-500
Headquartered In: Berlin, Germany
Year Founded: 2007
Rocket Internet is also one of the many venture capital companies with a growing interest in the e-commerce industry in addition to its long-established role in the tech industry. It is known for helping companies expand their presence to create global brands.
This company has made 145 investments and numerous acquisitions. Out of all these investments, it has made its exit from 38.
7. Kima Ventures
Founders: Jeremie Berrebi, Xavier Niel
Company Size: 1-10
Headquartered In: Paris, France
Year Founded: 2010
With its heavy involvement in e-commerce, primarily on seed companies and early-stage funding, Kima Ventures has become one of the lead investors in the industry. Since its inception, the company has made 626 investments in numerous startups.
6. Forerunner Ventures
Founders: Kirsten Green
Company Size: 5-20
Headquartered In: San Francisco, CA, USA
Year Founded: 2010
This venture capital company has invested in numerous e-commerce ventures, including Bonobos, Glossier, Hers, Hims, Jey, Away, and Warby Parker. It has worked with a total of 49 companies and made its exit from 29 businesses. In 2018, the company raised $360 million during a funding round.
5. DN Capital
Founders: Nenad Marovac, Steve Schlenker
Company Size: 11-50
Headquartered In: Menlo Park, USA
Year Founded: 2000
DN Capital’s e-commerce investments have been focused on early-stage businesses and its diverse portfolio includes companies from both sides of the Atlantic Ocean. Its five investment funds have successfully made a series of 258 investments.
4. Greycroft Partners
Founders: Alan Patricof
Company Size: 60
Headquartered In: New York, New York
Year Founded: 2006
Greycroft Partners’ founder is a venture capital pioneer who has invested in a whopping 125 companies despite being relatively newer in the market compared to its competing VC companies. Some of its e-commerce investments include big-name firms, such as Keeps, Hubble Contacts, Goop, Cotopaxi, and 11 Honoré.
3. Social Starts
Founders: William Lohse
Company Size: 11-50
Headquartered In: San Francisco, USA
Year Founded: 2012
Social Starts is another venture capital firm that’s significantly active in the e-commerce investment world. Its numerous investments in e-commerce ventures have primarily been in the seed stage or early stage. Overall, it has made more than 400 investments, owing to its four different investment funds.
2. Kleiner Perkins Caufield & Byers (KPCB)
Founders: Eugene Kleiner, Thomas Perkins, Frank J. Caufield, and Brook Byers
Company Size: 11-50
Headquartered In: Menlo Park, California, U.S.
Year Founded: 1972
Kleiner Perkins Caufield & Byers (KPCB), with their investments in big-name tech companies, such as Twitter, Google, and Amazon, has backed about 900 businesses. The company’s investments have garnered some of the biggest returns in history.
Its investment of $8 million in Amazon alone resulted in a billion-dollar profit, whereas it declared an early stake of $12 million in 1999 in Google.
1. Bessemer Venture Partners
Founders: Henry Phipps Jr.
Company Size: 150-200
Headquartered In: San Francisco, California, U.S.
Year Founded: 1911
A global venture capital firm, Bessemer Venture Partners has a significant focus on e-commerce investments. It has more than a century’s worth of experience investing in successful startups. This venture capital company knows what’s required to scale an e-commerce store. Its investment stages include the early stage and growth stage and it is specifically great for B2B e-commerce businesses.
It has a long history of partnering with entrepreneurs, such as those behind Pinterest, LinkedIn, Yelp, and Shopify, to build category-defining businesses. Bessemer is known for its network of industry connections and extensive operational experience.
3 Common Post-Investment Hurdles for E-Commerce Businesses
The following are some common post-investment hurdles you may need to overcome and prepare for after obtaining funding from e-commerce venture capital or seed investors.
1. Order Fulfilment
It’s vital to have a sustainable and scalable order fulfilment process in place. Here are a few examples of problems that you need to prepare for:
- Stockouts
- Global Scaling
- High shipping costs
- Poor delivery experiences
2. Growth
As mentioned earlier, venture capitalists look for businesses with a sustainable business model, which ensures profitability. Ask yourself the following questions to determine whether you’ll receive funding (or have a chance at going public).
- How will you ensure repeat purchases?
- How will you personalise your brand and create loyalty with customers?
- How can you scale up without having to spend more on Facebook, Google, etc.?
- How will you ensure your e-commerce store has a consistent competitive edge?
- How hard will it be for others to copy what you’re doing?
- Does a consumer segment already love your product?
3. Product Sourcing
Creating or purchasing products is one of the most essential elements of running an e-commerce business. Here are a few things to ensure:
- You have sufficient capital for product sourcing
- There’s enough demand for the product in the market
- The product offers value for money
- The manufacturer is reliable and trustworthy
In Conclusion:
There you have it! We hope this all-encompassing guide on venture capital investors and its underlying facts, trends, to-do’s, and checklists have proved helpful. TooMrkt’s team of experts have helped numerous e-commerce stores turn their ideas into a reality.
From designing business models and websites to helping with product sourcing and marketing strategies, we can be your partner at every step of the way. Our partnership will not only ensure your e-commerce success but also help you stand out amongst other ventures seeking investments from the same VCs as you.
If you need help, consultation, or advice from leading experts, don’t forget to book our demo call!
Frequently Asked Questions
Do I Need a Digital Presence To Secure E-Commerce Investment?
Yes, it’s vital to establish an intuitive and alluring website to garner success and secure an e-commerce investment. Your brand’s digital presence will allow you to showcase your ability to effectively utilise digital platforms for the success of your business and highlight your brand. Having positive online reviews, active and engaging social media profiles, and a well-designed website can significantly impact your attractiveness and credibility in front of investors.
How Is a Venture Capitalist Different From an Angel Investor?
Venture capitalists are companies that typically invest in startups from a pool of investment funds collected from limited partners. On the other hand, an angel investor is an individual who invests their own money in early-stage startups.
Can I Get Venture Capital Without Any Revenue?
As long as you can prove your clear path to profitability, market disruption, and potential for rapid growth, you can attract venture capitalists for e-commerce investments. You’ll need to utilise convincing and persuasion techniques to communicate your strategic plan, market research, and vision.
What Do Venture Capitalists Look for in E-Commerce Businesses?
Venture capitalists usually evaluate an e-commerce business’s team, their capabilities, the scalability of their business models, and the strength of their value proposition. They prefer companies that successfully demonstrate their ability to adapt and innovate in the fast-paced e-commerce world. Moreover, these e-commerce ventures should also showcase a deep understanding of their target market.
How Can I Contact a Venture Capital Investor for Funding?
You must start your search for a venture capital investor with thorough research to align investment strategies. Next, you’ll likely prepare a compelling and concise pitch, highlighting your venture’s uniqueness, market potential, and business model. You can also find venture capitalists through online engagement and networking events.
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