8fig Provides Flexible Equity-Free Capital to Help eCommerce Businesses Level Up
The past couple of years may have been difficult for businesses in general, but e-commerce companies saw a windfall of opportunities with most consumers shifting to online transactions. E-commerce is estimated to be 19.6 percent of the total global retail sales in 2021, which is nearly 6 percentage points higher than its 13.8 percent level before the pandemic. This number is projected to rise to 24.5 percent in 2025.
Reaching six-digit sales is not uncommon for online businesses. In the United States, an average e-commerce business can make more than $150,000 in revenues per month after three months of operation and $330,000 monthly after a year. The challenge is how to continue growing and advancing to new levels of profitability in line with the growth of the e-commerce sector.
Expanding a business naturally requires changes. It is not possible to serve double the number of customers with the same level of operation. It is for this reason that the startup 8fig was created.
The 8fig business model
8fig operates as a growth platform for e-commerce sellers, providing the needed funds to scale operations efficiently. It targets e-commerce sellers that are earning more than $100,000 in annual revenues of over $8,500 in monthly receipts over the last three months of operation. 8fig provides funding to sellers on Amazon, Shopify, Walmart, eBay, Wix, BigCommerce, Woocommerce, Squarespace, and various other platforms.
“Having studied the continued shift from offline retail to e-commerce, and the unique challenges small businesses have in accessing capital and financial services, we believe 8fig is uniquely positioned to become the financial system of record and capital partner to e-commerce merchants worldwide,” stated Shiran Shalev of Battery Ventures, which led 8fig’s Seed funding round.
The startup, which won the distinction of being the top lending and financing startup in the 2022 Most Promising FinTech Startups Awards, seeks to democratize online retail by helping e-commerce sellers grow. It stands by its value proposition of providing “continuous capital for continuous growth,” which entails the extension of not just simple financial support but also the goal of achieving an e-commerce seller’s optimum potential through its smart business planning tool. The company guarantees the funding of up to 90 percent of an e-commerce seller’s supply chain costs after a business growth plan is determined.
Supply chain expertise
8fig’s business growth planning tool draws inputs from the e-commerce, finance, and supply chain expertise of the startup’s founders: Yaron Shapira (CEO), Assaf Dagan (CTO), and Roei Yellin (CRO). Shapira and Dagan were previously employed by Mercury Interactive, while Yellin was the COO of Prytek.
The founders came up with a proprietary business growth planning tool that makes it possible to map out the right amount of capital necessary to scale operations across the entire supply chain. This tool is a crucial component in the e-commerce funding 8fig provides, as it facilitates the matching of growing demand and inventory to find out how much is exactly needed to support the growing supply chain of an organization.
Through 8fig’s growth planning tool, businesses can create “lines,” which represent all of the supply chain expenses for a specific batch of products. These expenses, ranging from freight to marketing, can be adjusted to match growth goals and the projected remittance schedule. This emphasis on supply chain planning is important because it shows whether or not an organization has a viable plan for its expansion or venture into other enterprising activities.
The 8fig growth plans
A unique attachment to 8fig’s e-commerce funding support, the growth plans aim to help businesses efficiently manage their supply chain and zero in on their unit economics. These growth plans are generated with the help of artificial intelligence to create reliable sales forecasts and achieve sensible cash flow optimization. Both of these are designed to optimize liquidity to support inventory movements while maximizing revenues and crafting an optimal payment schedule that minimizes cash flow strain.
To emphasize, 8fig provides funding depending on the growth plan a business wants. This entails a long-term relationship between 8fig and the e-commerce business. It is not one-time funding assistance but a continuing business support scheme, which genuinely aims to help businesses while partaking in the resulting increased profits as the e-commerce seller successfully scales up and becomes more profitable.
The importance of flexible and equity-free funding
E-commerce businesses are typically sole proprietorships or partnerships. They are operated by an individual owner or multiple owners who build a business alliance without becoming a corporation or cooperative. As such, equity-tied funding is not familiar, let alone appealing to them. Sole proprietorships or business partnerships usually raise their capital through borrowing or fund infusions from partners. Venture funding and equity investments often have preferential treatment when it comes to profit sharing. Taking equity also raises the possibility of conflicts of interest and the dilution or loss of control.
8fig promises accurate and adaptable funding with advantageous terms compared to high-interest loans and investments that involve equities. It helps businesses achieve hypergrowth without interfering or dictating the way the business is managed. The growth plans are there not to dictate or take over the management of the business but to show the viability of growth goals and determine the right amount of funding needed to achieve targets.
“Commercial loans are traditionally rigid in structure and carry a high cost of capital, a model that is not conducive to e-commerce sellers’ development. Our innovative technology combined with flexible, uncapped capital gives emerging online sellers the line of sight and confidence they need to scale quickly,” says 8fig Co-Founder and CRO Roei Yellin.
Moreover, the requirements are not that stringent. There are no minimums or maximums for the funding that can be obtained from 8fig. What’s important is for the e-commerce business to prove that it has a feasible growth or expansion plan and that it can carry on with this plan. The amount that will be given depends on the needs presented.
Neither a bank nor an investment platform
To be clear, 8fig does not operate as a bank or other similar financial institutions. It is also not an investment or crowdfunding platform. It does not provide seed money for startups. It is a company specifically created to help drive hypergrowth for e-commerce sellers by helping them plan their way into generating higher revenues and providing the funding they need to achieve their growth goals.
8fig specializes in helping e-commerce businesses advance to a higher level. As mentioned, these are online business operations that earned more than $100,000 over the past year. However, not every business with monthly receipts of around $8,500 is eligible. 8fig evaluates applicants based on their performance.
8fig undertakes assessments by asking for secure access to the seller account (Amazon Seller Central, eBay Seller, Shopify Seller, etc) and the bank account of the business that seeks funding. 8fig will not be moving funds or doing changes on these accounts. A secure connection is needed to come up with accurate operational forecasts and risk evaluations. The direct access to the seller and bank accounts provides more accurate scrutiny of how a business is faring and its probability of success with the funding assistance.
For now, 8fig only accepts e-commerce sellers operating in the United States. It does not cater to the needs of brick and mortar and hybrid businesses as well as those that serve customers outside the US. The 8fig website accepts account sign-ups from e-commerce sellers across different platforms, but this does not guarantee that they will be cleared to receive funding. Again, an assessment will be made based on the financial data and business performance of the applicant.
Sustainable and mutually beneficial assistance
An Israeli firm with headquarters in Austin, Texas, 8fig focuses on helping e-commerce businesses grow into eight-figure sellers, as the company’s name suggests. The team behind 8fig is convinced that all e-commerce ventures can reach annual receipts of at least $10,000,000, and they can achieve this by scaling faster and smarter with the help of continuous capital and sensible growth plans.
After completing a $50 million Series A funding round in November last year, 8fig has seen strong client growth that coincides with the sustained growth in the e-commerce sector. The company says it aims to propel 10,000 sellers to eight-figure revenues by 2025.
By guiding e-commerce businesses in adjusting their purchases and remittance schedules according to what can be considered optimum, 8fig enables an efficient supply chain that results in greater sales and better customer service. It is a sustainable scheme through which 8fig benefits from the success of the e-commerce business that avails of its growth plan and funding support.