Arlen: David Koifman is the Head of Growth at Kickfurther.com, which helps growing Consumer Packaged Goods businesses to grow faster by raising cash for their inventory. Kickfurther’s unique crowd-financing experience enables businesses that are selling through any combination of direct-to-consumer, online, wholesale, or retail channels to raise capital. Programs are customized for each client to align production, sales, and cash-flows with their Kickfurther timelines.
David: Thanks for having me.
Arlen: Yeah, not a problem. Yeah. I’m really excited to kind of dig deep into this area because as we mentioned prior to the recording. Every business. Then of course, eCommerce businesses alike are always interested in funding and raising capital specifically for for inventory, because I know it is a pain point for businesses.
So this is definitely an area that we hadn’t touched on before, so I think it will be refreshing for our listeners. But before we get into the topic of today, why don’t you tell us a little bit about your background and specifically how you got into what you’re doing today?
David: Cool. So yeah, I’ve been in the startup world for the last seven years now.
I actually started out my career working in marketing and advertising, and then just happened to land at a another Boulder based. Financial technology startup kind of Rose through the ranks from employee number six to leading a a large accounts team with 65 employees. And then, you know, after four years there, it was time to move on to the next exciting thing and kick further came up and I met with our CEO, Sean.
He told me his story and it really resonated with me and asked me to join the team and kind of. Go through the process that I had gone through in my previous employer and build a sales organization, and it’s just been awesome. So I’ve been been with the team here at kick further for the last two years in a bit, and we’d been growing really fast and solving a really significant problem for businesses that are selling physical goods.
The majority of them are doing some form of eCommerce and some of them are also doing some wholesale sales. So we’re really addressing that cashflow problem from the perspective of the business rather than as a lender.
Arlen: Well. That’s awesome. That’s definitely a different spin on things. Like you said, you’re addressing it from the business point of view, not as a lender.
And that’s a little bit different of course. And so one of the things that I think most eCommerce businesses can relate to, and I think any business in general, can relate to, is cashflow and issues with cashflow. Because if you don’t have the cashflow but affects everything, you can’t market your business, thus you can’t bring in.
More customers and you can’t grow. And then also it’s really kind of a trickle down effect. D then you can’t, for any customers that you do get, then you’re not able to fulfill the orders because your inventory is limited. So it really affects everything. And so what do you see, you know, and this is something, like I said, that affects all businesses, but what do you see are some of the main reasons that specifically e-commerce brands face cashflow issues at various stages of their business?
David: think that the biggest problem to to cashflow is growth, and so it’s the best problem to have, but it’s also could be the most detrimental. I’ve had a lot of clients say to me that they’ve had to turn down large opportunities or are running out of stock of inventory that they’re selling on Amazon or on their website just because they.
The demand is so high and they don’t have the funds available when they need to place orders with their suppliers so that they have the next round of inventory in time. So fast growth is the biggest issue. And then a product business has this whole other world of expense tied to inventory that many other businesses don’t have.
So, you know, they still need to pay rent and pay their staff and pay for marketing, but then they also need to pay inventory, which could be. 30% of what their revenue is, and that’s a substantial cost.
Arlen: Right. Definitely. And one of the things that I’m, I’m a huge fan of the show shark tank. And so I’m always looking at these different businesses that kind of pitch their pitch to the sharks in that show.
And I’ve seen different followup articles where a lot of businesses and with something like that. That is definitely puts businesses in a position where they can get rapid growth. So if you’re, you’re on a nationally televised show and you know, you’re reaching millions and millions of people and you have a product that’s a consumer based product that you know, requires fulfillment, then I can definitely see.
See how cash flow could be a problem. So like you said, it’s a good fast growth is definitely a good thing, but it can also be a bad thing. Unfortunately, I’ve, I’ve actually read kind of some horror stories of even some businesses that they had really explosive growth but just could not handle it because of the cashflow.
They couldn’t fulfill orders in an agency. They had to kind of shut it down. Unfortunately. And this does happen so. With the model that your team is going after or actually your team actually provides rather, how actually does it work? Cause I know the concept is basically crowd financing. So why don’t you tell us a little bit about the model.
David: Yeah, absolutely. And just one more thing to add to your previous question. I think the growth thing is particularly detrimental to a business when it’s early stage growth. When you have five, 10 years of of proven growth under your belt, then you’re much more bankable with traditional financing options.
But what distinguishes us as we look at supply chain, and we look at the last 12 months versus five years or 10 years, we enable access to funding through our. Marketplace model that I’ll go into in just a second with larger amounts than, you know, like a bank line of credit would at this point, and much lower cost than like a cabbage or an on deck that are also in the space funding smaller to medium sized businesses.
So just to go into how it works is basically a physical goods company. Anybody who produces something that is non perishable and not like a weapon or alcohol can come to us and say, we need some money for our next production run. Or, Hey, we just used everything we have in the bank to produce our inventory and.
We need some cashflow. So what we would do is go through a basic vetting process where we look at the businesses, previous years, tax return, financials, that kind of thing, and then ask them some questions about their supply chain and their sales planning, and put together a deal that will reflect what their needs are in terms of capital to pay for that inventory.
And then structure paybacks that would be tied to when they actually anticipate selling that particular inventory. So every tick for further deal is tied to a set of inventory. So let’s say you’re an eCommerce company and you’re placing a hundred thousand dollar order with your supplier in China, you need maybe 30% to put down now the remainder in 30 days.
Then you have. A month on the water, and then you’re going to sell that inventory over the course of the subsequent four months. That’s a six month deal that we’ve put together for $100,000 where the payments for the business to pay back start three months in after their inventory has already landed in their warehouse and after they’ve sold through some of it, and then those payments will actually be reflective of the actual sales.
So the idea is the business. Receives the money to pay for their production, and then once they start receiving cash flows from the sales of that same inventory, then they start issuing paybacks to
Arlen: us. That’s definitely a unique model and as you stated at the beginning, it, it has the businesses process in mind because as you know.
And those types of situations there, the business is going to need time to make those sales in order to get the cash to pay that back. It’s not something that they would be in a position to pay back immediately. And so you guys understand the, the whole process and are definitely able to work with the businesses and those types of situations.
So that’s definitely awesome. You know, I know at the beginning we really, we mentioned that. Cashflow issues affect all types of businesses, of course, and comes up every during various phases of the actual business. But, you know, what are some other reasons that could cause cashflow issues? And are there any specific from your experience or any specific marketing strategies that a business can implement early to prevent these types of issues?
David: I mean, honestly, I think, you know, from a marketing standpoint, I think the better you are at marketing, but the more you’re going to dig yourself into this issue and need to address it, so the better you are at marketing, the more your, your demand for your product is going to increase other things that would trigger this kind of cash flow issue.
Would be new product releases. You know, some of our clients are, they start with one product, they do really well with it, and then they have a, another product that maybe the same kind of customer base would, would be interested in. And so there’s research and development costs, and then there’s production costs for something that you, you don’t have revenues coming in from yet.
So then you’re going to have this additional cost of new inventory for a new product that you’re releasing as well.
Arlen: I can definitely see what you’re saying as far as if you’ve got like a whole rock star marketing team and then it’s pushing the product out there, then you’re bound to really face those issues.
So I can definitely see that. I goes in as far as a new particular product launch and they, let’s say a lot of, I know a lot of businesses can possibly encounter this during the holiday season where there’s a natural spike in orders, and I can definitely see. How cash flow can be tight at that time. In your experience with the businesses that you deal with, is that kind of a key time for businesses?
Are they usually trying to prep for holiday seasons or, and is your model something that they, they use to kind of ease the pain, I guess you could say during those times when they know they’re going to get an influx of orders.
David: Absolutely. I mean, Q3 is our biggest quarter, and that’s reflective of businesses buying inventory for Q four so we do deals in Q three for a business to have the money to pay their suppliers so that their stuff comes in on time for the Christmas sales and black Friday and all that.
And I think the best advice that I can give. To a business owner who is experiencing growth or anticipates experiencing growth is to be proactive and find out what your options are, and I’m not spanking furthers the best solution for everybody. We’d love to be able to help as many as we can, but just knowing what your options are out there.
How much you’ll have access to and how long it’ll take for that to be available. Sometimes it takes many months to go through the process with a bank to get a line of credit, and then you’re, you may be very disappointed with how much you’re actually eligible for because they use a traditional risking model for your eligibility amount, and it could be a fraction of what you need to pay your suppliers to have enough inventory for that.
That Christmas rush. So yeah, I think being proactive is the biggest thing and whatever solution you choose, and it might be multiple solutions, it’s good to really determine what the amounts are and potentially do test deals before you need them. Just again, get your feet wet.
Arlen: Gotcha. One of the things that I was curious as far as from your standpoint and you working with KYCC further, cause essentially would you guys.
Excuse me. I know a lot of what you do is of course, provide financing and funding, but with a lot of your internal marketing efforts. What are some of the things that have brought you guys success as far as getting the messaging out there? But are there any particular channels that have worked for you guys over others?
David: Far and away, the biggest indicator of our success is happy customers. Our clients who do funding deals with us come back and average of four times, which means that this solution solved their problem and it was cost effective enough for them to use it again and again and again. So referral business has been.
It’s significant for us. We’ve also recently been on the trade show circuit, so we go to trade shows where there are a lot of customers or potential customers with goods that they’re selling and growing fast, and that’s a good opportunity to talk directly to owners and digital marketing. Of course, we have a really strong marketing director that’s running that channel for us, but I think making customers happy is the best way to grow fast.
Arlen: That’s really good to hear and especially since, you know, you guys, of course, are in the B to B space. A lot of times when we talk about, of course, I’ve talked about affiliate and referral marketing before and going viral viral marketing on the podcast before, and that’s of course a subject that’s near and dear to my heart.
Being the cofounder of of OmniSTAR affiliate software. We know a lot about it, and a lot of times you would think that. As far as word of mouth referrals in a space that you guys are in, that wouldn’t be such a really kind of large area for you. But again, it just kind of goes to show that word of mouth marketing is definitely kind of here to stay and you definitely want to want to do things too.
To really leverage that. And then kind of on top of that, my kind of next question is, do you guys, since word of mouth marketing is really huge for you guys. When you have happy customers, they’re going to tell their other friend business owners and a word really spreads. Do you guys incentivize your customers for doing that?
For sending referrals? You guys have any type of referral program in place.
David: We do have a referral program. I would say the majority of our referrals do not come through the referral program. It just comes tight knit community of, of business owners who are all sharing ideas and taking risks together. And you mentioned shark tank before.
We have a lot of clients that are graduates of shark tank and maybe they took a deal from the sharks. Maybe they didn’t, but they are now part of a community of businesses that you know that they have forums where. Private forums where they talk to each other and they share ideas. And I have people coming to me all the time and saying, Hey, this business owner was talking about how you guys really helped them grow, and I’d love to learn more about us working with you as well.
Same goes for Amazon sellers and Shopify sellers, and so there’s a number of different private discussion forums that obviously, you know, vendors like kick further are not a part of, but we actually get a lot of business through conversations like that.
Arlen: That’s great. I always tell the business owners that I talk to an ongoing basis that even if you don’t have a formalized referral program in place, if you’re doing good work, you’re providing a good product or service.
People are going to talk and tell others. You know they’re going to tell their friends. And so it’s like if you don’t have anything formalized in place, you can still kind of bet on the fact that a large majority of your business is really . Coming from referrals, even if you don’t even realize it or not.
So that’s why I always encouraged businesses to put something formal in place because that’s going to give people an extra and an extra extra incentive to spread the word to others. We
David: do have a formal program in place, and if anybody who’s listening today believes that this may be a good opportunity for their network, we’d be happy to, to speak directly and set something up.
Arlen: That’s awesome. Now, with the businesses that you’ve worked with. Can you share some case studies of any maybe specific commerce brands that were able to. I guess you could say kind of resurrect themselves as far as a resurrector cashflow, rather through crowd financing.
David: We have a client who is actually going to be coming back for their fifth deal probably in the next couple of weeks called cinema mood.
A do a mini projector that’s portable and you can use it camping or. For your kids at home. They were graduates of an accelerator called HAX I’m sure a lot of people are familiar with, and they, they were growing really fast and came to us when I think maybe one of their first orders came through one of the major retailers and we funded a deal for them.
Those order sizes increase pretty significantly if the retailer sells it well. So. Now they’re coming back for, for their fifth deal with us. And I believe when we engaged, they were under 2 million in revenue, and they don’t quote me on this, but I think they more than doubled since, since we’ve engaged with them in just over a year.
So I think that they’re, they’re business owners would attest to, you know, take further funding being a significant. Contributor to their ability to fulfill those orders, but they’re also doing a lot of eCommerce sales, both on Amazon and on their website. Just maintaining all that demand and being able to produce something like, you know, an electronic, like a projector generally are produced overseas, and there’s.
Quite a bit of time involved from when you have to pay your suppliers until you actually receive it at your warehouse and then deliver it to your buyers. And then if you’re doing a wholesale deal, then you have payment terms with that buyer. So that could stretch out to six months, sometimes more for that entire process where you have that cash flow pinch.
Arlen: Yeah. It’s very interesting because it seems like a lot of the brands out there, it can really make a tremendous difference. And I think one of the things that you hit early on is that the difference between doing something like this is it’s available to allow a larger spectrum of people from our companies, some startups that don’t have a whole history of, of business, um, years under their belt where the traditional lending and financing really.
Wouldn’t work for them. So that’s definitely a great option. As we prepare to wrap things up for today, what are some quick, I guess you could say do’s and don’ts when it comes to crowd financing that you can share for people that are kind of a novice to this right now?
David: So I think, you know, from a crowd financing standpoint, the model that we operate is unique to only us.
So the do’s and don’ts would be specific to working with KYCC further. I think the biggest. Don’t is don’t wait until it’s. Critical in life or death to explore this type of solution. Understand what your limits are, what your options are long before you need it. So you’re the best prepared. And it’s different from crowd funding, like a Kickstarter, Indiegogo, and then you don’t need to put together other, and I know you mentioned this in our intro, but you don’t need to put together some kind of high cost, high production value video to attract.
Our users. Our users are already very active. So what you’re putting together is some bullet points and maybe some copy and paste content from your existing marketing materials to a very business savvy community of users who understand the landscape and what your business. And it’s also that community can be really helpful in your growth.
And that’s not, you know, something that we’re selling, but it’s just a byproduct of our funding programs is rather than having, you know, one point of contact at a bank that’s giving you your loan and then you never, there’s no ancillary benefits to that 10,000 people who are subscribed to our new deal notifications receive an email.
Business and the products that you’re selling and could potentially jump in and say, Hey, I have a distribution partner that might be interested in selling this, or I know a lot about this space and I actually want to provide you private investment. So we’ve seen a lot of relationships like that come together out of pick further and we absolutely support making introductions of that nature because we believe that, you know, any, any resources that we can bring to our businesses are going to help them and ultimately trickle down.
Arlen: Okay, great. Yeah, that’s interesting. And so in a sense, your, those ancillary benefits are really, you’re giving these businesses that are in a tight situation, access to really a larger network where, especially if they’re in the startup mode and they don’t have that many business relationships. I can see how that can be very key.
Especially at that time. So yeah, great stuff, David. Um, I really appreciate you coming onto the eCommerce marketing podcast and breaking down what it is that you guys do. And also a little bit about the success that you guys have had through just word of mouth marketing, which I’m definitely really reiterate what I’ve talked about on many podcasts before as to how word of mouth marketing really is here to stay.
And it’s something that any business can embrace, whether you’re B to B, B to C, you know, no matter where you’re at, it’s something that you have to. To leverage for your growth. Now, um, you know, as we prepare to close things out, I always like to switch gears here at the end so our audience can get to know you a little bit better.
So what is one fun fact that you can let our audience know about you?
David: One fun fact about me, let’s see. Well, I live in Boulder, Colorado, which is where one of our two offices is. The other one is in Buffalo, New York. And in my free time, I like to do a lot of outdoorsy stuff, a lot of skiing and mountain biking, and that’s kind of how I balance out my life and the world of financial technology and startup with some recreation.
Arlen: That’s awesome. David. Yeah, Boulder Cardo Allos is a great place. I know in the, in the summer you can do the mountain biking, the winter, the skiing, I have been there myself. I’ve done a little bit of skiing. So a very scenic area. Yeah, definitely. So it’s a, it’s awesome that you take advantage of the outdoors.
I don’t know. Honestly, I don’t know too many people that live in Boulder, Colorado that say they don’t like the outdoors. So if you do like the outdoors, that’s definitely the place to be. Well, it’s been a pleasure speaking to you, David, again, and before I let you go, why don’t you let our listeners know the best way for them to contact you if they want to pick your brain anymore about what it is that you guys do.
David: absolutely. Anybody is welcome to email me directly. My email address is [email protected] and feel free to add me on LinkedIn, but yeah, email is probably the best way to reach me right away. Thanks so much for having me, Arlen. It’s a pleasure.
Arlen: Not a problem, David, and thank you of course for joining us today on the eCommerce marketing podcast.
Head of growth at Kickfurther