We spoke with our partners at Ampla, a leading financial platform for consumer brands, to learn how CPGs can better leverage data to raise capital and scale their business profitably.
You have a great product. You’ve found some traction in the marketplace, and you’re gaining distribution with retailers. It’s time to take things to the next level…so what happens next? Chances are, you’ll need to raise capital.
For emerging brands entering this phase of growth, there are multiple routes to getting the cash infusion you need. This is where Ampla comes in, with solutions like lines of credit, banking, bill pay, and more – all tailored toward growing CPG companies.
But to get that money in the bank, you – and your future financiers – will need to know your business inside and out. We spoke with Ampla’s VP of Marketing, Mike Grillo, to learn how data is key to this process, and how Ampla and Crisp together are giving brands greater visibility into their financial health.
Equity or debt? You’ve got options.
Not all CPGs start out the same way: some raise seed rounds through venture capital to get off the ground, while others bootstrap with their own funds. But at some point, additional capital is needed to fuel growth, and brands have choices on the type of funding they can get. As Mike explains, the right choice depends on how you’re looking to use the funds.
For instance, let’s say you’ve found product-market fit and have some revenue momentum (even if that’s just $20-30K a month). You know you need to hire more people and invest in marketing, and double down on product R&D, to truly take your business off the ground. This might be the right time to look at venture capital.
On the other hand, say you have your product assortment in place and a deal with a major retail partner – but now you need to finance a large order of inventory. There are likely months between when you’ve paid for that inventory and when you can expect to see the income from it. That’s where a line of credit is the best fit, giving you flexibility to free up cash flow without giving away equity. But as Mike points out, it’s not an either-or between capital and credit: a successful CPG startup likely has deployed both venture and debt options throughout its growth stage.
Why retail brands are more credit-worthy than they think
When you’ve determined the type of capital you’re looking for, your next step will be to present yourself as an attractive candidate to your funders.
To start, the Ampla team looks for key financial health metrics that show the company is managing their business properly. This doesn’t mean they have to be hyper-profitable from day one, but they need to display a burn rate that makes sense for their company size. As for maturity, over $1M in annual run rate is an ideal starting point, but Ampla clients go up to $200M in revenue.
For Ampla specifically, a key factor in evaluating candidates is a strong omnichannel presence. As Mike points out, it’s hard for companies to achieve major success with DTC alone, due to the limited unit economics. “We really believe the future of consumer brands is omnichannel,” Mike explains. “We’re looking for a meaningful e-commerce presence, wholesale presence, and a solid Amazon strategy – all in all, a well balanced business.”
Not surprisingly, demonstrating this balanced approach requires data from multiple sources. Ampla appreciates the particulars of this in a way that traditional banks don’t, which is what makes them a specialized partner for CPGs. For example, many traditional banks and even newer lenders use a manual underwriting process to vet the business, which may overlook or undervalue certain channels, giving a skewed sense of demand.
“It’s important to look at the whole picture, because some brands might not have meaningful e-comm, but have a great wholesale business, or vice versa,” Mike explains. “Traditional underwriting may miss certain channels, which Ampla believes are increasingly important.”
That’s especially true when traditional banks are not taking the time to conduct in-depth underwriting for a smaller company. Conversely, Ampla connects e-commerce, Quickbooks, and even ad platforms to underwrite based on a more holistic picture of the business. And with Crisp, there’s increased visibility into retail data as well.
Using data for the long haul
Ampla doesn’t just think about data during underwriting. After providing capital, they dynamically ingest monthly data to keep up a consistent picture of the business. This means that as a brand grows, their credit line can increase automatically based on growth trends and seasonality.
Not only that, but Ampla relays this data back to CPG teams in dashboards to help them better understand their own business. “Founders have different levels of financial acumen; some are more product-driven than business-driven,” Mike says. Part of Ampla’s role is helping founders of all types easily get the metrics they need. For example, Ampla tracks key measures of commerce performance such as AOV, gross margin, order growth percentage and how these are impacted by fluctuations in marketing spend, discounting, and promotions. It’s this shared goal of putting business-critical insights into CPG teams’ hands that make Crisp and Ampla a natural fit to partner. With Crisp, retail performance, sales trends, and distribution growth all become parts of a brand’s daily metrics – and can feed into conversations with their funders.
“Brands are typically only getting data when items leave their warehouse and when they are getting paid,” Mike elaborates. “They don’t always have that concept of what sell-through and velocity look like, and those are big drivers of the business.” With better understanding of that data through Crisp, brands can plan inventory, forecast demand, and optimize their product mix. And with Ampla, it also unlocks doors to future growth.