Daniel Lipinski: Funding your eCommerce Marketing

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Daniel Lipinski: Funding your eCommerce Marketing
Marketing can oftentimes be the bit of a business that suffers most with ups and downs in cash flow. But ultimately, this pull back can really stifle a business’s growth. So, how can you continue to run your amazing ad campaigns when budgets are tight? Enter revenue-based financing.

Cash flow inconsistencies are a reality with any growing business, especially in the complex world of eCommerce. Going into the holiday season, you are likely calculating your ad spend and budgeting for inventory ahead of Black Friday. What can you do if the math just isn’t adding up for you?

On last week’s episode of Optily Radio, we had Daniel Lipinski in to discuss funding options for eCommerce startups. Having gone through the tough process of securing investors and applying for loans, he felt the pain founders go through when starting a business. He realized that something needed to change in order to make it easier and faster to fill short-term cash flow gaps. This led him to start Outfund, which is now the UK’s biggest eCommerce investor.

We had a great chat, so you should check out the the full episode below. Otherwise, watch the short teaser clip and keep reading for a summary on the topics we covered off, which include:

  • The benefits of revenue-based financing over other funding options
  • Inconsistency with supply chains 
  • The results of a social spending experiment

Watch

Listen

Who are Daniel and Hilary?

As mentioned above, Daniel Lipinski is the Founder and CEO of Outfund, a revenue-based finance company that specializes in eCommerce businesses. Before that, he was the CEO of ParcelBright, a VC-backed logistics platform which was sold in 2016. 

We were also joined on this episode by Optily’s Finance Directory, Hilary Knox. She is an experienced Chartered Accountant in the finance industry. Hilary’s worked in financial planning, reporting, and analysis for many companies across Ireland and Australia.

What even is revenue-based financing?

This is a pretty new option for funding an early-stage startup, so it might be unfamiliar to many business owners. Basically, you’re not taking out a loan that has accruing interest and is paid back monthly. Rather, there is a fixed fee and your repayments come out as a set percentage of your daily revenues.

This means, when you have a slower week, your repayments are lower. It also means that if it takes a bit longer than expected to repay the initial amount, you’re not accruing tons of interest. The fixed fee for the advance never changes.

The other great things about revenue-based financing are:

  • Application takes about 3 minutes
  • Super quick approval times–24-48 hours
  • Less biased process–the algorithm calculates the risk based on data
  • No personal guarantors needed–no risk to a founder’s home or other assets
  • No equity dilution–founders remain in control of their company

Dealing with supply-chain issues

The initial supply chain shock of the pandemic last year resulted in a sudden surge in shipping costs, along with an overall shortage of inventory due to factory closures. While those issues have been largely resolved in the latter half of 2020, this year is also bringing much uncertainty due to shipping container shortages, the Delta variant, and Brexit complications.

Diversifying suppliers, being able to pivot quickly, and managing customer expectations were among the key ways that Daniel noticed businesses successfully dealing with the crisis. Outfund also provides its clients with support in dealing with suppliers and handling logistics, since their interests align with their clients’ overall success. 

Give people free money and what happens?

In order to see the power of social advertising in action, the Outfund team gave people money to buy products that were advertised to them. Of course, they had to like the products and they needed to be within a certain budget, but the idea was to answer the following question: assuming you have the money, does seeing the ads make you want to buy the products?

The participants had to mark down what ads they were being show and how often. From this information, the Outfund team learned whether the group was being targeted with relevant products and how often they needed to see an ad before buying.

Want more?

Have a listen to the whole episode for more insights from Daniel on funding. And if you’re interested in applying for revenue-based financing and getting optimization software free for 3 months, check out Optily Advance to learn more.

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