Navigating International Waters: Funding Strategies For Export Startups

One of the first steps in building a global business is to work out specific funding strategies for export startups. The American business and international trade landscape is poised for rapid growth in the export sector, with hundreds of new ventures in flux.

The US government, under the leadership of President Joe Biden, initiated the Make More in America program. The objective here is to fill the gaps in American supply chains and encourage exports by way of Executive Order 14017.

Entrepreneurs thinking of diving into export businesses will find that this is the opportune time. They can access several benefits designed to promote them and offer funding at economical costs.

Read ahead to learn about the best way to test the international market and the best funding sources to tap.

Start by Determining Your Preferred Type of Export Business

Export-oriented startups can be of different types, so founders should start off by determining the one they want to create.

• Free trading or expert merchants – These companies do not necessarily specialize in a specific product or targeted market. They may purchase products from home vendors or manufacture them and sell them to overseas destinations. Such export startups typically have substantial profit margins but also face higher risk factors.
• Distributors: These ventures operate as distributor agents or middlemen. Their job is to build strategic partnerships with domestic manufacturers or sellers and offshore buyers. As an export trading company (ETC), you can choose to handle the logistics by taking control of the goods and dispatching them. Revenues typically come from commissions and markups on the export prices.
• Export managers: If you choose to start an Export Management Company or EMC, you’ll manage the trade operations for domestic companies. Your startup will cover operations like hiring distributors, organizing logistics, and managing shipping. Assisting with marketing and advertising is also part of the services you offer. Essentially, such ventures are service-based and streamline processes like banking, insurance, freight forwarding, and any other services.
• Direct to customer: This business model is ideal for startups developing and selling digital products to offshore locations.

Before choosing the export business category, founders should evaluate their areas of expertise and personal preferences. The ratio of profit to risk they can comfortably carry also influences their choices.

Most importantly, you’ll explore the available funding strategies for export startups you can access. Also, look into the training and assistance with building the company infrastructure that investors and incubators can provide.

Determine Your Preferred Product or Service Niche

The most crucial step in building your global business is similar to any other startup–the product. A compelling pitch deck outlines these factors in detail and will determine the funding you can raise.

• The particular problem you can solve and the ideal product to match the need.
• The suitability of the product for a global audience and the targeted market.
• The target market and if there is an existing demand for the product.
• Possibility of creating demand with aggressive marketing and advertising strategies
• The potential for reaching global markets and their growth prospects
• Competition levels, both from other foreign sellers and domestic manufacturers and suppliers
• Economic conditions and political stability in the country that can influence the long-term potential for sales and profits.
• Trade relations your country has with the targeted foreign country and the possibility of red tape from the bureaucracy that can hamper business. Check their lists of permitted products.
• The tenure for which founders intend to run the company before making an exit.

The market analysis reports you create should not just compile data about ongoing trends but also projections. Savvy entrepreneurs should keep their finger on the pulse of the market to quickly identify changing trends.

Adapting with strategic pivots is the only way to stay relevant and sustain the startup. That’s one of the criteria investors focus on when considering funding the venture.

Work Out the Logistics and Packaging Requirements

An export startup needs a unique business structure that factors in several nuances, such as:

• You’ll research the product import regulations in the targeted market locations. Different countries have specific requirements and conditions for the products they permit. Make sure you comply with their regulations before initiating export. Skipping this step could result in serious delays that could add up the costs and eat into your profits.
• Check the packaging needs of the products you intend to export. Add up the costs for any special packaging materials or labeling requirements per the country’s regulations. The packaging you select should be able to sustain any unexpected delays in logistics. Also, work out the additional costs arising from the delays in delivery.
• When selecting the product for export, factor in the shipping, freight, and handling costs. Some products that are bulky, fragile, or high-value may need careful handling and added insurance coverage. Compact, lightweight merchandise is conversely easier to pack and transport.

Investors examining your business structure need to see that you have your bases covered when it comes to logistics. Being prepped for potential setbacks indicates efficient risk management that they are sure to appreciate. That’s one of the best funding strategies for export startups.

Keep in mind that in fundraising, storytelling is everything. In this regard, for a winning pitch deck to help you here, take a look at the template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.

Remember to unlock the pitch deck template that is being used by founders around the world to raise millions below.

Estimate Product Pricing

Viable product pricing is always the ultimate factor that can make or break sales. Customers need value for their money, but they’re unlikely to purchase imported products unless the pricing makes sense to them.

When determining the pricing, factor in all the overheads you’re likely to incur. Add the costs to the per-unit pricing and then match it with local products. If the pricing is too high, customers are unlikely to pick your brand over local merchandise.

But, if the pricing is too low, customers may be wary of the quality. To navigate this problem, make sure to source your products from reputable manufacturers and vendors, whether local or foreign. Check with them for conditions like high order minimums and hidden costs that can influence the final billing.

This is where efficient local market analysis plays an important role. Selecting the right products and pricing them competitively can make the ultimate difference in your export startup’s long-term success.

Funding strategies for expert startups are reliant on the pricing structure and the ability to execute sales profitably.

Manage the Paperwork

Compliance with local regulations and registration requirements for export startups includes several moving parts that you’ll navigate. Trust in an expert advisor to direct you through managing the documentation.

Start by registering the venture with the relevant local, state, and national authorities. Next, on your agenda is acquiring the necessary licenses depending on the products you intend to trade. Certain items may also require certifications, so do your due diligence.

A good place to start your research is the Bureau of Industry and Security. Or the U.S. Department of State’s Directorate of Defense Trade Controls. Although most products don’t require licensing for export, you may need permission for items that qualify for military and commercial uses.

Licensing requirements typically depend on the product’s technical features, its destination, the end user, and the purpose of use. You can check the Commerce Control List (CCL) for the right categorization of the products earmarked for export.

The manufacturer or vendor should also be able to provide you with the information. Or, confirm with the Bureau of Industry and Security. Also, prepare other documents like pro forma invoice, commercial invoice, bill of lading, packing list, Air waybill, and certificate of origin.

If the total value of the shipment is higher than $2,500, you’ll execute and file the Electronic Export Information Filing with the Automated Export System. However, if you’re exporting products to Canada or U.S. territories, this filing is not necessary.

Investors exploring your startup as a viable funding opportunity will want to confirm that you have the mandatory paperwork sorted.

Create Robust Marketing Strategies Complete with an Online Presence

When trying to capture global markets, you’ll need aggressive advertising strategies, and the first place to start is online. Make sure you’ve allocated adequate spending on branding and building a robust online presence.

Create social media accounts to create a buzz for your products and open communication lines with the audience. You can initiate these strategies well before the product lands in the market. A great advertising strategy helps you grow a customer base and offer top-notch customer service.

Make sure to develop a compelling website that acts as the digital storefront of the company. Your website will not only attract customer interest but also indicate its viability to potential investors. Adding contact information and mission and vision pages brings out the company’s identity and gains visibility.

Deploy digital marketing campaigns to reach a global audience. Talk about the product features, competitive pricing, and the value it offers. Focus on the needs you’re serving and publish in-depth and upgraded industry information to establish your brand as an authority.

Approaches like these are not just effective for the products you’re currently selling. But build a reputable brand identity for any future products you develop and offer.

Building digital customer engagement has relatively low Customer Acquisition Costs (CAC). And, the data you compile is an effective indication of the potential market share you can capture. Such metrics look great on a pitch deck when you’re working out funding strategies for export startups.

Funding Strategies for Export Startups – Estimating the Ask

A compelling fundraising strategy culminates in the asking amount. While building an export venture is relatively low-cost, you can expect to need an initial capital of anywhere from $5,000 to $25,000 and above.

As for the expected revenues, experts estimate annual gross revenues from $30,000 to $200,000. If your venture is yet to start earning revenues, you’ll present industry projections in the pitch deck to entice investors.

Need more information about how to raise startup capital for your business? Check out this video I have created.

U.S. Small Business Administration Loans

A great starting point to execute funding strategies for export startups is to reach out to the U.S. Small Business Administration. This apex organization has several programs to back upcoming new ventures and works with the EXIM Bank at U.S. Export Assistance Centers.

You can take advantage of loan guarantees to access export loans. Here are some of the options available to entrepreneurs:

• Export Express lenders need not get prior approval from the SBA to underwrite loans. As a result, you can get applications approved within 36 hours for amounts of up to $500,000.
• Export Working Capital loans are available to founders even if they have yet to finalize an export sale or contract. These loans can be up to $5M with turnaround times of 5 to 10 business days. Accessing these loans allows small business owners to negotiate for better export payment terms more aggressively.
• International Trade loans can be a maximum of $5M in total financing. The loans include a combination of working capital financing, fixed asset purchases, and debt refinancing. The SBA provides a guarantee of a maximum of 90% of the total loan amount.
• Business development financing programs offer funding to build the infrastructure for export ventures.
• Export Working Capital financing is available to entrepreneurs to purchase inventory, goods, and services needed to support their product sales.
• Project Financing is more suitable for large-scale companies.
• EXIM’s Minority and Women-Owned Business Division (MWOB) supports startups driven by women, specially abled individuals, veterans, and members of the LGBTQ+ community.

Several commercial banks offer you loan products to start a new company. Do your research to find the best sources for the type of export business you want to start.

The Takeaway!

The US has a robust business ecosystem conducive to starting a new export-oriented company. Whether you intend to create and sell physical or digital products and services, getting funding is easily done.

The tips above can help you to reach out to investors focused on supporting companies targeting global markets. These funding strategies for expert startups enable founders to establish and scale their ventures quickly.

Why restrict your horizons to local and national markets when global markets are poised for capture?

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