Like Main Street small- to medium-sized businesses (SMBs), upcoming consumer brands are continuing to prove their creativity, grit and acumen in the face of a malingering pandemic. Unfortunately, access to financing remains a major hurdle to entrepreneurs passionately pursuing their ideas.
With traditional banks cautious and the venture capital (VC) space a universe unto itself requiring expert knowledge, options for small brands to access working capital have been slim up until recently. However, more startups are seeing big opportunities among nascent brands.
As Karen Webster recently wrote, “There are 31 million SMBs in the U.S. and a lot of new ones that have been birthed over the last two years. Most of them bank with traditional banks — but maybe not for long. Unless, of course, the big banks buy one of them to deliver what they can’t easily enable today.” Working capital tops that list for budding small brands.
Noting the growth of consumer credit options throughout of the pandemic, Anthony Santomo, CEO and founder at Ampla, told Webster that “there hasn’t been that B2B wave yet.”
“There’s a few companies out there making some noise and we appreciate and are grateful for them,” Santomo said, “but there’s a lot more room to grow in the B2B space.”
Estimating B2B lenders currently capture roughly 3% of the total addressable market for SMB working capital of this kind, Santomo said a B2B push is coming.
While many providers offer businesses checking and savings accounts to hold cash, he said, they’re often simply putting a new interface on the same old products. What sets innovators apart is a more customer-centric approach to banking.
“The thing that makes us unique and different is being really good at taking duration risk,” he said. “We’ve proved that over the last couple years. It’s allowed us to stand out in offering a structurally different product than what’s on the market.”
Ampla’s focus on the growth line of credit concept is gaining traction, including attracting capital for its own operation. In December, Ampla raised $40 million in a Series A funding round of co-led by Forerunner Ventures and VMG Partners, with participation from existing investor Core Innovation Capital. It’s raised roughly $330 million since 2019.
Funding is helping Ampla offer non-dilutive loans to small brands “focused between $0 and a $100 million” in revenue, Santomo said.
He continued that oftentimes, “they’ve innovated, and they’re trying to put it a ‘better for you’ product in front of consumers because they’re super passionate about it.”
“Consequently, those are the ones growing the fastest and they need this solution today,” Santomo continued. “They need to outlay cash for inventory and marketing. For us, those are perfect customers. They’re low hanging fruit and have been underserved by any traditional player.
“They don’t want to go raise VC dollars. They’re running lifestyle businesses, dropping money to the bottom line.”
See also: B2B FinTech Investors Target SMB Banking, Business Payments To Talent
The Right Financing Fit Matters
This isn’t to say that Ampla is locked into the SMB space — the platform has several enterprise clients, and more established players use the solution differently than startups, as their needs differ greatly.
“There are a ton of companies on our platform that are VC backed,” Santomo said. “What’s great is we can work in concert with venture capital. When they raise equity, they can also bring on a solution like us on the growth capital/debt side, and now every equity dollar that they’ve raised can go that much further with us, and we are increasing limits over time.”
Some of these brands are started with eventual sale in mind, while other founders have no wish to exit. The platform is designed for both, taking a unique approach to business mindset.
For those without grand dreams of exit schemes, Santomo said, “It’s a different value prop, and right now, there aren’t a lot of solutions.” Traditional venture funding often isn’t a good fit, so they generally have little recourse except high-interest cash advances.
The growth line of capital, conversely, enables Ampla to “use their entire business and look at every revenue channel rather than focusing on just one or two, which is very limiting.”
“We also don’t have the size of business or time in business requirements that a traditional bank would typically impose,” Santomo added. “That’s a huge value prop for us, because again, we’re able to see so [many] more businesses that have been underserved by these legacy players for such a long time.”
Related: Bank-FinTech Tie-Ups Target Businesses’ Working Capital Management
SMB Financing for the Overwhelmed and Underserved
As the pandemic slowly ebbs and commerce stabilizes, the omnichannel environment left in its wake provides fertile ground for new brands, provided they can access money to grow. While funding solutions are proliferating and giving businesses more options, this can also create headaches for SMBs with small teams — and the power of platforms serves as antidote.
“People use the word loosely these days, but we do want to be the financial operating system for these brands,” Santomo said.
Pointing to the fragmentation in banking and payments, Santomo said he even serves small teams of one to four people.
“They’re not the most financially savvy,” he continued. “That’s no fault to them. They’re focused on other priorities that are much bigger. We want to simplify their back office on the financial side, and we want to bring all of those systems back together so that they have a better chance of success — so that we’re increasing their access to capital early, so they’re not giving up so much upside from day one.”
As for larger marketplace plays and growth into other areas, he added: “We pride ourselves on helping the little guy and we’re never going lose touch with that, but at the same time, we are pushing upstream in a pretty aggressive way — and we have some big logos closing.”
Ampla is also focusing on underserved communities, and Santomo told Webster that about 60% of Ampla’s customers are female- or minority-owned businesses.
“That’s not a coincidence,” he said. “Those happen to be the companies that are most neglected by the traditional legacy players. They’re also operators that are coming out with new products and really leading the charge on innovation. We’re super proud about that. It’s a stat that we haven’t really promoted, but it’s an important one.”
See also: 10 Things Will Define the Digital Transformation in 2022
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More