Corporate Finance Division
Retail & C-Commerce Industry Venture Capital
The Retail, Leisure and Consumer sector embraces a broad range of activities, they are each consumer facing and often have other common characteristics.
In the Retail, Leisure and Consumer sector, successful private equity / venture capital investments require specialist expertise. For example the high operational gearing of retail businesses makes structuring bank debt more complex and the unpredictable nature of consumer spending can make forecasting the future performance of a retail and/or consumer product businesses extremely difficult.
Leisure businesses are generally multi-locational, and will usually require a successful roll-out of their concept and/or re-invigoration involving refurbishment of locations in order to achieve growth. Leisure businesses may equally operate in more mature markets in which consolidation is the path to value creation. Yet many Retail, Leisure and Consumer businesses are also highly cash-generative and are able to de-gear relatively quickly if they trade successfully.
Different consumer businesses will require different investment characteristics; some may have a roll-out strategy or see geographic expansion or consolidation as a route to value creation. Others may have product range development or other organic development needs. Our interest and experience is across all such strategies and sub-sectors.
The Shift to Online Retail:
The top 20 VCs have made over 100 investments in marketplaces like Houzz, Flipkart, and Modcloth. Other e-commerce categories like on-demand have also been hot.
Venture capital funding to e-commerce startups passed $11B last year, and has grown 136% in the last four quarters, including Q1’15. With e-commerce-startup investing becoming increasingly competitive and crowded, it’s important to know where the top VCs are putting their money.
E-commerce deal flow for the top 20 smart money VCs has remained steady since 2011. In the four years through 2014, there have been 64 to 78 smart money e-commerce investments per year.
For dollars invested in deals in which smart money participates, Q4’14 hit a multi-year high with a total of $1.3B invested. Q2’15 was the second-biggest quarter with a total of $1B invested in e-commerce startups alongside smart money. Half of this attributed to a $500M Series C investment in ContextLogic (the company behind Wish.com) led by Founders Fund, GGV Capital, and Digital Sky Technologies.
With the shift in retail from "Brick and Mortar" to "online", Nanocap / Microcap Ventures only considers retail partnerships that have strong online e-commerce segments to the business plan.
Fostering Growth without Diluting Equity:
For Retail & E-Commerce companies at critical stages of development, debt can serve as a key financing option to foster growth, with minimal dilution of equity ownership. At Synergy Capital Markets, not only do we understand the industries of our portfolio Retail & E-Commerce companies, but we also understand the growth process - and occasionally the growing pains - they undergo.
When venture debt is used appropriately, we believe entrepreneurs gain the following benefits:
Able to raise capital in a way that benefits the team and the business as a result of the greater flexibility offered by venture debt than traditional forms of debt financing
Have more time between equity rounds to build the business and achieve critical milestones, which creates potential for greater valuation
Retain a larger ownership stake in the company prior to an IPO or other liquidity event
Achieving milestones quickly in many cases also means reaching the IPO stage more rapidly