Discover the latest funding options available for ecommerce merchants in this episode of the Ecommerce Coffee Break Podcast, featuring a discussion with Piotr Pisarz, founder and CEO at weareuncapped.com
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Claus Lauter: Hello and welcome to another episode of the E-Commerce Coffee Break Podcast 2023. Interesting year. Cause a lot of, financial issues there. , banks have a problem. We're talking about recession. Financial matters really matter to a lot of e-commerce merchants. So we wanna dive a little bit more into the topic of how you can fund your business if you want to grow or if you need help with your cash flow.
So therefore I have Piotr Pisarz on the show. He is the founder and CEO of weareuncapped.com and has a huge background when it comes to financials.
He also worked at Google and was a venture capital investor in funds like the End Capital in FinTech Capital. So let's welcome Piero to the show. Hi Piero. How are you today?
Piotr Pisarz: I'm great. Thank you for having me.
Claus Lauter: You're welcome. Piero, tell me a little bit about the situation out in the market. I touched on it.
What's happening? What's the biggest problem right now for e-commerce merchants out there?
Piotr Pisarz: E-commerce businesses are having a bit of a difficult time today, and this is caused by several issues. First of all year ago, year and a half ago, we've seen a huge issues with logistics and.
eCommerce businesses were forced to buy much more inventory than they would normally just because, the cycle to get the goods from China or anywhere in the world to Europe or US were, , so long. Secondly, the people had a lot of disposable income. They were staying home, they were buying out of goods.
And finally, the third issue, what happened recently is, we had a lot of change in the ads algorithm. Apple introduced, the famous iOS tracking thing where it's much harder for the companies like Facebook and Instagram to. Truck users and this made the ads much more inefficient.
So first of all, we have much increased cost of acquisition, lower demands, and more inventory on the hands of, retailers. Automat the perfect storm. Well, they all have a significant cash flow issues. This combined with now with. General issues with the economy makes it a really, really difficult time for a lot of retailers direct to consumer businesses, across the globe.
Claus Lauter: Yeah, we don't wanna scare people away. E-commerce is still a great business, but you need to get your ducks in the row now, having your finance finances sorted out. Very important part, looking at the right KPIs. Now I know, from my own history, going to a bank and asking for money is not the easiest tasks.
Lo luckily enough, nowadays there are other solutions to that. So you came up with a way to help merchants on the financial side of things. Give a bit of an idea where you started and what the idea is.
Piotr Pisarz: We started almost four years ago with a mission to help entrepreneurs have easier access to the capital.
I actually, as you mentioned, I spent several years in a venture capital industry before, and I met hundreds, even thousands of entrepreneurs who are coming to me as a v c. To get money just to buy more inventory, buy more ads. Our business, this is not the best. To, use your equity. You should have a better ways to grow your business.
So we came up with a business model where the e-commerce company can come to uncap, connect us to their data. We integrate directly with our Shopify engineer, magenta. We go to their Google Analytics, to our marketing accounts, to our accounting for banking details, and we quickly analyze the thousands parameters of our business.
Now we can quickly understand how fast you're growing. What are your margins? What's your cost of acquisition? How many customers are coming back? What are your returns? And if you like your business, within 24 hours, we can give you up to several million of pound, euro, dollar to scale your marketing.
Buy more inventory, invest in the team.
Claus Lauter: Okay. I think that's a very good point that you mentioned there. If you go to a traditional bank and you talk to your banker and you tell them what you do, e-commerce business, half of the time they will not even understand what you're talking about. So that makes it very, very difficult to get a credit loan or any kind of money out of them.
What are the KPIs that you're specifically looking for?
Piotr Pisarz: For us, in our high level, what we're really looking at is first of all, the growth of your business. Are you able to scale the business? Most of the companies we fund are still unprofitable, but we want to see the growth trajectory.
We want to make sure, actually when we believe you will be profitable when we spend a lot of time understanding your margins, and we're looking how much are your cost of goods sold? What's your gross margin? What's your CM one? What's your CM two?
We want to understand, how much it costs you for you to acquire a customer. What's your payback period? How many customers are returning? Just so we understand how these benchmarks versus your operating costs and at what point and when can you. Profitable. We do a very detailed modeling. So actually for every customer we actually have our own financial model built automatically where we understand their financials, their cashflow gaps, we understand their seasonality.
We know when will be making money, when will you be burning money? And we prepare the offer, for customer, which actually will make sure that we smooth out your cash flow needs and help you.
Claus Lauter: What kind of scenarios, , are merchants in when they approach you?
Is it always a last minute emergency or is it more long-term planning? How does that work?
Piotr Pisarz: The best clients we have, it's a very long-term planning. It's usually in the phase when they see, okay, my business growing. I would like to now invest million, 2 million, 3 million in a growth over a company, or maybe a hundred thousand.
I actually have this new collection coming out versus new season I need to pay my supplier. In advance, usually into payer suppliers now, and you will get the money back in, , three months, five months, four months. So usually we are not the lender of last resort. We are lender for growth businesses. When they want to grow, and we understand this, we help them plan, we prepare the flexible financing plan for them, but they can draw their money when they need as they need them at a very low, affordable.
Claus Lauter: Okay. Tell me where's the biggest difference in, in simple words, between you, a venture capitalist, a bank, or any other, financial institution?
Piotr Pisarz: Venture capitalist will give you a lot of money by taking part of your company away from you and expecting the return within, know, five, 10 years. It's a different type of partner.
Allowing you to invest in a very risky investment. The banks take the least amount of risk. First of all, they usually have a security often in form of personal guarantee and other charges. They will offer you very, very cheap financing usually. But it's usually available only for the best of the best companies.
I would say 99% of our clients. There is no way we can have a bank financing. And even if they can, it's very limited. We are the specialist lender focused on e-commerce businesses. We really understand e-commerce. All we do is e-commerce, and we can offer the financing tailored to you available very, very quickly.
Also, like the first drawdown will be very, very quick, but also if very you want money from us, again, it'll be very, very quick process Tailored to your needs. We can make sure that very payment is on a structure in a way, but it works for your cash flows, which we expect for
Claus Lauter: you to have.
You said you specialized in e-commerce. Now e-commerce has different areas. You have your Shopify store, you have your SU business. Give me an overview of what kind of businesses within e-commerce you're working with.
Piotr Pisarz: Frankly it's any kind of e-commerce. On one hand, we have small e-commerce store, which are, one person doing Amazon sales with, 50,000 revenue
per month, or even less. I think the lowest, smallest customers selecting 10,000 a month. On the other hand, we have businesses with 50 to hundred million turnover per year. Having, hundreds of people and where we are. A plan of very multi-year strategic plan. These businesses today are planning for about 2024 and they're discussing with us today how we can fund their production this year for the following year.
The small amount merchant probably is like, Hey, I can buy. 20,000 pounds or euro worth of goods, which I can sell with Amazon at a profit. Can you quickly give me the money? So as you can imagine, very, very different types of customers and very different solutions we offer to them.
Claus Lauter: Okay, what are the minimum requirements that are needed to apply?
Piotr Pisarz: Usually for the Amazon merchants, we expect you to have 10,000 sales per month and three months of a history. For the traditional eCommerce companies on Amazon, it's about 50,000 monthly sales and six months of a history. What are the biggest
Claus Lauter: issues that you see with merchants? So basically where do they struggle, the most so that they need money?
Is there any specific that you can specifically that you can
Piotr Pisarz: find? There are two types of companies needing the money. There's company which need the money because they grow fast they have this working capital gap. The faster you grow, the more money you need because there's always this working capital gap.
And whenever there is another type of companies which have problems and then the money because hey, we're struggling. When we see the company struggling, typical use case will be, first of all, two high operating costs. I think it's very often that the companies overgrew, especially in the last two years, they have too many people employed.
They are too inefficient. Actual unit economics are decent, but they never manage to find the way , to operate their company in a lean way. And I think it's very, very efficient. another typical problem is overstocking. We have a lot of clients who unfortunately bought too much of a good and have inventory, which is not rotating.
It doesn't show on your p and l because you don't sell it. It doesn't appear in your p and l. But if you have, a lot of money stuck in the inventory, you can sell. Maybe you can sell it, but it'll take you one year, two years. This is a problem to you. They are really struggling to find a way how to get out of this inventory.
And then finally, there are companies where the margins don't work. Maybe the business, the goods are selling, but they cannot charge enough for this. They have to lower the pricing, the logistic costs are too much, or cost of acquisition is too much and everything would be fine.
But they like this, five, 10, or 15% of a margin. To make the business efficient. Usually it's driven by the inefficient marketing they are trying to scale the marketing grow of a business, but the efficiency of the marketing is plummeting, and it's becoming a problem for them.
For the good companies, usually the only problem is cash flow. Hey, I have my product is selling, I need more money. P please give me 1 million, 2 million, 3 million for the growth. We love these customer.
Claus Lauter: Okay. our listeners have to re-listen the last three minutes that you just said, because in a nutshell, that's what they need to work on.
If you don't have a lean business, if you have too much stock look into it. That's, I think that's a very good general guideline for every entrepreneur, for every business out there. Now you are revenue based. So how does the repayment work? Gimme a bit of an insight.
Piotr Pisarz: Be very honest with you. We actually don't really do much more, revenue based loans anymore.
Revenue based is something that we started with and we still can get it from us. for the listeners, this means that, the loan repayment is tight to your revenue. Let's say we agree that you give us 20% of your revenue now we get 20% of your revenue until YouPay.
The funny thing is, we realized some time ago with the customers much more prepare the fixed repayment schedule. And today, in almost every single case, we just give a client straight amortizing loans. When we agree, Europe pays, let's say 10,000 a month, a hundred thousand a week or whatever it is. And we have this fixed payment schedule which allow the customers to have much more certainty over what will be repaid and.
We're also now launching a new product where we give customers line of credit when they can top up the loan amount up to certain limit, so at every single point of time they can have a hundred to a hundred thousand million or two drawn from us, and basically work on this flexible model with us to have money as they needed.
Claus Lauter: Sometimes if you get money, it might affect your credit score. How does that work with your solution?
Piotr Pisarz: It doesn't affect your credit score. We don't report discussion with us to the credit agencies or even taking volume from us to the credit agencies. So there's absolutely zero impact on the credit score.
Claus Lauter: Okay. Excellent. What kind of timeline? You said, it can go very, very quickly. What's the process? What would be the first step for a merchant to get in contact with?
Piotr Pisarz: Usually they can go to our website, apply for a loan connect the data to us. We'll ask them to schedule the call with our account executives, mainly because we want to understand their needs and tailor the product to them.
Once we get the data from the client, we'll prepare the offer within 24 hours. Obviously
Claus Lauter: if you're a solopreneur, you are on your own. If you have a smaller, medium enterprise, are there other parties involved? I don't know, like the accountant or someone who might help with the
Piotr Pisarz: process? The process is very straightforward and actually doesn't require much work.
We ask for the connection to the accounting data or having accounting data sent to us in one way or another. Most of the founders have this available. If they don't, they can invite the accountants to the process, , or help 'em with it. And we're not asking for much.
We have several cases when the clients approach us in the morning and good funds, this person the evening, so the process can be very, very fast.
Claus Lauter: I'm sure a lot of listeners will love to hear that. Now you have worked with thousands of funders. Are there any cases where you will not fund them or basically that you see a red flag where you would not be
Piotr Pisarz: interested in?
At the end of the day, we are lending business, right? So we have to be selective. We have to find out, in more cases we say no. Yes, we cannot lend to everyone unfortunately. We see a lot of underperforming businesses, especially in the current times, as I mentioned.
Usually the main reasons are poor economics of a business, poor margins, too much operating costs, or sometimes too much debt. if there is too much debt to someone else. We are not valer who can, in most of the cases refinance. There are sometimes, we are happy to pay back the debt of someone else but more often, if not, we meet with the companies really struggling we cannot work together unfortunately.
Claus Lauter: Okay. That's very honest. you don't, You don't wanna fund a, dying business doesn't make sense at all. Exactly. Where can people find out more about you guys?
Piotr Pisarz: I suggest visiting our website. We are on cap.com. Also feel free to just email me directly. My email is p i otr. We are on cap.com. Happy to answer any questions personally. I will put
Claus Lauter: a link in the show notes as always before we leave and our coffee break ends. Give a bit of your personal view on how 2023, looking into the Glass Bowl, how the situation will evolve.
Will e-commerce be on the rise or will it be more flatlining for a while?
Piotr Pisarz: In the long run, I'm very optimistic about e-commerce. E-commerce is a future now we are having a bit of a rough patch generally as an economy, but I think this means that the clients are also thinking, how can I buy goods more efficiently?
Triply, very, they go online because there's much more choice, , available. So I'm a huge believer in the e-commerce, generally speaking, and I think that the well run c. For them, this is the opportunity of a lifetime because many companies which are not efficient and they struggled, are going out of the market the founders, which are able to scale down the operations, think about the economics, be more careful, they will really reap the rewards of the hard work very.
Claus Lauter: in our true words, I think our listeners got far more information out of this interview than just about funding very solid business info there. Peter, thanks so much for your time. Was very interesting and I will put a set links in the show notes and people can reach you directly. Thanks so much for your time.
Piotr Pisarz: Thank you so much for having me.