The Green Sheet Online Edition
December 12, 2022 • 22:12:02
Alternative funding as a means to reach new verticals
Building a business today is both a whole lot easier and much more challenging than ever. Numerous opportunities available to those who want to build a global business on a shoestring never existed before the internet came along. However, this has produced an almost unbelievable amount of competition—pushing small business owners and entrepreneurs to be more creative and strategic to generate real success.
This is a big part of why so many businesses are focused on vertical integration. Vertical integration can help businesses not only better control their costs and supply chain, but also deliver a host of new products and services they might not have been able to offer otherwise. Securing the financing to go vertical, though, can be a challenge. Alternative financing can help. This article offers several alternative funding solutions for small businesses.
Crowdfunding
Crowdfunding is a game-changing solution for small businesses. It enables businesses to go directly to their market, pitch their ideas for vertical integration, and ask for help to fund their approach—and their growth. Businesses that successfully crowdfund can grow their businesses with the kind of security most entrepreneurs in the past never would have imagined. The rub is that the pitch has to resonate with the market. Businesses that go the crowdfunding route must be able to pitch a new vertical and get enough of their market to buy in (literally) to get their new operation off the ground.
Fintech
The financial technology (fintech) space is growing exponentially. Entrepreneurs have fallen in love with fintech operations not only due to the lower barrier of entry to secure funding for launching new verticals, but also because many fintech services mimic traditional financing routes but without the red tape and overhead.
P2P lending
Peer-to-peer (P2P) lending, sometimes called social lending, allows individuals and groups of individuals to invest their own money directly into businesses opening up new verticals in a way that was impossible previously. Likened to a hybrid of crowdfunding, traditional loans and angel investing, hundreds of millions of dollars are in this space for entrepreneurs to access.
Crypto lending
Even though the crypto bubble has popped a bit, crypto remains very much a big part of the alternative finance space. Some entrepreneurs have built new verticals by releasing their own crypto tokens; others have experimented with bitcoin and more established crypto lending platforms.
Ultimately, the crypto space (and decentralized finance in general) is projected to grow. Savvy entrepreneurs would do well to explore crypto opportunities as they become more mainstream.
Building better verticals with alternative funding
Before securing funding to open up new verticals, it’s important to be sure this is the smartest move for your business. Here are a few things to consider before jumping into new markets:
- Understand the new market top to bottom. You must know who your perfect prospect is, who your ideal customer is, what they really want and how to deliver it.
- Verify that opening up this new vertical will create new business building opportunities. Sometimes new verticals look far more attractive than they are simply because they are new and shiny. Confirm that’s not the case before moving forward.
- Stay flexible. Prototype your entrance into a new vertical first. Track results, pivot whenever necessary, and look for new ways to iterate and optimize, securing the right amount of finance to move forward without acquiring unmanageable debt.
Securing alternative funding as a means to reach new verticals is similar to securing traditional funding—with a couple of wrinkles thrown in. Enter with a solid idea of how you’re going to turn debt into profit.
Determine how new verticals will help you competitively, help you win new customers and integrate into your core operation later on. Only then will you be ready to rock ‘n’ roll using alternative funding to help make it happen.
Note: The following resources were used in researching this article:
- https://articles.bplans.com/top-alternative-funding-options/
- https://ramp.com/blog/alternative-funding-options-for-businesses-and-startups
- www.investopedia.com/terms/v/verticalmarket.asp
- https://fitsmallbusiness.com/alternative-funding-for-startups/
Chad Otar is CEO of Lending Valley Inc. For information about the company, please visit
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