Once a brand establishes some traction in the market, whether regional or national, with $1 to $5 million in sales, financial institutions are often willing to offer roughly $750,000 to $2 million in capital in exchange for 15 to 25 percent of equity in your company.
“A” Round financing can be used to accelerate growth into new retailers. This financing sets the stage for the expansion of the brand, which should help get products into national accounts where retailers rely on major distributors for certain categories. During this phase, capital should be used to build a dynamic sales force, in-store promotions, operational expansion and improved marketing.
Investors offering “A” Round financing typically require that certain mileposts be met:
A product with clear differentiating features (product value, packaging, use, etc.)Sales of at least $1 million or three consecutive months with sales of $100,000 per month
A gross margin of 40 percent or higher
Listings with major distributors
Horizontal growth of at least 4,000 doors (or retail outlets)
A defined marketing plan with at least 15 to 20 percent of revenue committed to programs and promotions
Summary
- For brands with $1 to $5 million in sales
- Entrepreneurs can expect to give up 15 to 25 percent equity
- Focus is on accelerating growth into new retailers