Knowing where to start in building a digital and e-commerce strategy can be daunting. But because you chose to read this article, I know that doesn’t intimidate you. You’re a brilliant entrepreneur or professional and you know the formula for figuring anything hard out: learn from others, take action, iterate. I have the utmost confidence that you’ll build an utterly impressive digital and e-commerce strategy.
Putting aside our entrepreneurial brilliance for a minute, let’s step into the shoes of a not-quite-as-brilliant, yet seemingly powerful investor whose job is to evaluate and help brands all day long (that’s me).
Let’s look at four reasons why an investor views a strong digital and e-commerce strategy as not just important, but imperative.
1. Tribe loyalty. It demonstrates that the brand has a loyal tribe of followers who don’t just periodically buy their products but seek to engage with the brand on a deeper level. It offers an investor comfort in being able to visually see a brand’s desirability and influence over its consumers.
2. Diversification. It demonstrates that a brand isn’t beholden to the unpredictable decisions of retailers. It demonstrates that the brand has staying power as more consumers shift their purchase dollars online. Since investors are, first and foremost, risk mitigators, this omnichannel diversification reduces risk in their eyes.
3. Margins. Selling direct to consumers should theoretically yield stronger margins than other channels. Yes, investors like margin-accretive channels. ‘Nuff said.
4. Exit scenarios. Even not-quite-as-brilliant-yet-seemingly-powerful investors read the news about digitally strong businesses RXBAR, Dollar Shave Club and others getting acquired for large multiples. With large potential acquirers still trying to figure out digital strategies, smaller brands that have already nailed that part of their business increase in attractiveness, or so investors believe.
That’s great and all, but stepping back into our entrepreneurial brilliance mode, what exactly do investors look for in each of those four areas?
Stay tuned. That’s what we’ll cover next time.
Luke Vernon is a managing partner of Boulder-based Ridgeline Ventures, an investment firm in healthy living companies.
Hear Vernon dive deeper in our upcoming BrandCamp digital summit: Raising Money in the Omnichannel Amazon Age, on Feb. 21.