Ethropy Financed A Clothing Startup
The Power Petite, Seattle's First Children's Consignment Store Financed with Crypto
Seattle has experienced tremendous growth over the past two decades as Amazon, Microsoft, Starbucks, Costco, RedFin, Zillow, Alaska Airlines, etc have expanded. Google and Facebook have now opened significant office space and drawn from the tech talent.
Young professionals have created a huge amount of wealth (King County is ranked 10th, nationally, in number of millionaire households), and there’s currently plenty of blue ocean for new businesses here. Seattle has never been a fashion powerhouse, but my wife sees a major gap in the luxury clothing vertical, and is building a kids consignment business and brand. Introducing, the Power Petite!
The Power Petite Business needs (use of funds):
Every business requires startup capital before generating enough revenue to break even and sustain. The owner will be doing all of the work herself, and based on her projections from sales via e-commerce and in-store, she expects to be profitable by month 4.
Security deposit on brick and mortar space
Three months’ rent on a commercial property
Furniture, Point of Sale software, legal/accounting/admin, miscellaneous, inventory, cash
Total need = $25,000
Business Financing Options:
Small business loans are popular for first time business owners. The bank requires thorough due diligence to lend money because that implies risk, especially for a new entrepreneur without any references besides personal credit. This means entrepreneurs must fill out an arduous application, go through a full background/credit check, and disclose assets/collateral in case a borrower defaults or the business fails (and a credit collector can come after them). Finally, in the event a bank approves the loan, the terms are brutal for new companies as they pay fees and very high interest. This is by far the highest cost of capital for any venture, and can be crushing especially for businesses that have much higher costs than revenue early on.
Angel investors are eager to fund new businesses and can offer valuable connections or advice. In exchange for their capital and assistance, VCs/angels are entitled to a stake in the business (% of shares or profits). Giving up ownership and control is a costly tradeoff when entrepreneurs are trying to execute a vision they crafted. VCs also require a thorough business plan, including financial forecasts for cash flows, competitive analysis, a pitch deck/delivery, and all of these require a time investment from entrepreneurs who just want to work!
Personal loans can be attractive for new business owners because loan terms can be negotiated between the parties, and since they are unsecured, put the risk on the lender. Fortunately, the risk of defaulting is worth taking when my wife is the borrower and the business is going to be a roaring success. Also, a 0% loan without any term limit for repayment is a pretty great deal for a new business.
The lowest cost and most time efficient way to get financing is through option 3, a personal loan. I offered to supply startup capital, as a 0% interest loan, drafted a promissory note, and started the money transfer process.
The money would be coming from stablecoins that were earned by Ethropy during the success of Titan Moon Fund.
Transferring money via a business that deals in crypto is not easy. Getting a business checking account through the crypto exchange KYC and AML process takes weeks. I am STILL waiting for Gemini to get back to me and I started the process nearly two months ago.
Fortuitously, a fellow Blueberry (GMX’s NFT community) reached out to me on Twitter about a new digital bank called Series Financial. I had a brief, but very informative exchange with the CEO and team, and decided to test out their services. It took about 30 seconds to set up a business checking account. I noticed there was no way to onboard the stablecoins, so the Series team offered to get me set up through Coinbase Custody. This is currently manual, but very white glove, and the team will be building out a self-service portal for crypt<>fiat on and off-ramps.
Series provided me with a USDC deposit address, would then swap the USDC to fiat (USD), and transfer the money to The Power Petite’s Business Checking account at Chase.
Tl;dr the process was:
USDC Stablecoins withdrawn from Convex
USDC sent to a Coinbase custody ERC20 address (hot wallet) managed by Series Fi
Series Fi swapped USDC to USD (fiat money) via Coinbase custody
Series Fi transferred the money to The Power Petite’s Chase bank account
This whole process took 1 business day
What does all of this mean?
It means the lines between crypto and real life/e-commerce and funding are being blurred at a rapid pace. There are innovators making money in web3, infrastructure providers, like Coinbase and Series Fi, that are seeing the trend towards Digitalization rapidly progress, and brick & mortar businesses who are open to working with the web3 community.
The next steps we’ll likely see are more DAOs making strategic investments in large operating companies outside web3. Some DAOs, like Bankless, have partnered with clothing companies to sell merchandise. I expect far bigger deals to happen in the coming years, though, as we are still in the early days of DAO investments.
I am very excited for the Power Petite to launch. I have a mission to set up crypto payments for either the online business or in person, and would very much appreciate any information about incorporating this.
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