Startup founders face one of the hardest challenges of their life as they look to simultaneously grow their business and raise funding from investors.
A fledgling entrepreneur may meet with and pitch to dozens – perhaps hundreds – of VCs as they seek to sell their vision.
Finding the perfect investment partner is difficult. Taking rejection after rejection after rejection may be even harder. However one of the UK’s most respected scaleup entrepreneurs, OnBuy CEO Cas Paton, says you must persevere if you believe in your business.
In just five years, Paton has built an online marketplace of 10,000 retailers and trusted brands offering more than 36 million products. Billed as an ethical alternative to Amazon – as it does not compete with its sellers – OnBuy is undoubtedly a British success story; yet the VCs were unmoved by its potential in the early days.
“Looking back to when I first started planning the business, I was warned against starting OnBuy from the very beginning,” Paton says. “Investors in the venture capital world all thought it was impossible, starting out in an industry sector dominated by goliath brands.”
The CEO tells TechBlast that one of these investors later “reached out and admitted that they were so wrong”.
He adds: “It just goes to show you that investors are not entrepreneurs. They are not the visionaries; they are just the backers.
“You will get a lot more no’s than yes’s – rejection is something you do have to get used to as an entrepreneur, for many reasons. Luckily, you only need one yes in a hundred no’s to really fly… keep hunting those yes’s! They matter a lot more than the no’s.”
Having achieved record growth figures in its first three years, Poole-based OnBuy was dubbed the largest UK-owned marketplace in 2019 and last year was second on our sister publication BusinessCloud’s 100 eCommerce Trailblazers ranking.
“Startup entrepreneurs should be prepared for a lot of work in the fundraising space,” Paton continues. “Prepare a solid business plan, have a great vision and prepare for the hardest work of your life. These are all essential parts of getting off the ground at speed.
“We were lucky that we were self-funded for the first two years in building out the platform. From there, it was angels; I was the sole fundraiser, which is very time consuming.
“It is hugely challenging for any founder to run the business and fundraise. I felt like we fundraised for about three years straight!
“Once we hit VCs, that didn’t stop. We raised money in January 2020, June 2020 and then July 2021. But July took a lot of legwork and prep – probably nine months – for a huge £35m raise.
“The company has nevertheless grown considerably; it is no longer just down to me, but our CFO, a finance team, a whole board, and other NEDs.
“Only now have we really had time to stop fundraising. Being able to finally focus on the business is very exciting for me.”
Recalling how it was in the beginning, he adds: “We’ve come so far in such a short period of time. Five years ago, we opened OnBuy for retailers and customers, and we had none of either.
“We knew it would be hard going to get the business moving, but marketplaces are incredibly difficult to start gaining traction, as you open your doors with nothing to sell, and no traffic to offer the retailers, in order to incentivise them to sell.
“But I look back now and pinch myself. Beyond sales and reach, we’ve expanded our team 10x, with over 100 roles still to be filled.”
Of course, the journey has not been plain sailing: for example, a payments partner proved to be a hurdle which OnBuy had to overcome.
“We originally launched powered by Stripe, as a key connectivity for all our retailers, but it really caused us significant business pain and we had to drop it very quickly and move to PayPal,” he admits. “That was an enormous change for our company at a really crucial part of our growth.
“It was a lot more hard work, and a huge challenge, but we grew 10x in the 12 months following the change. That’s how to turn a point of pain into a huge success.”
Last year, COVID-19 lockdown doubled OnBuy’s sales overnight as it sought to protect retailers from other marketplaces focusing specifically on ‘COVID essentials’.
“Other marketplaces dedicated efforts to COVID-related products, capitalising on the demand. Many retailers were struggling to get sales, and we gave them a new route to more customers. As a result, we grew our product count by millions, and ultimately gave our customers more choice, resulting in more sales, and finished the year with a stronger business,” says Paton.
Despite online retail sales dropping dramatically across the industry in the last year, OnBuy’s sales are continuing to soar.
“We’ve experienced overwhelming success and grown at an outstanding pace – it’s clear to see that there’s an appetite for choice in the eCommerce landscape and that an alternative marketplace was indeed what people wanted,” adds Paton.
“We’re delighted to have hit our five-year milestone, but our focus now is to improve our product and continue to grow our community.
“It’s been five years of hard work – which has seen good times and challenges. I wouldn’t be here if it weren’t for my motivated team and we’re all excited to continue on this journey together.”