You may use this picture as an example: You’re awakened in the middle of the night with a brilliant idea to build an app. As the following life-changing software, you want to release it on the App Store or Google Play Store. Then you discover that you’ll need money to make it happen. Investors are always looking for ways to put their money where their mouth is by investing in something they believe will succeed. It’s feasible, but it’ll take some effort. You’ll be ready to meet investors and begin the process of bringing your concept into reality after reading this ultimate guide to funding your mobile app.
Getting Ready to Find Investors for Your Mobile App
Before you pitch your startup or app concept to investors, there’s a lot of work. Because investors want to know that you’ve given this notion serious consideration, having just a vague idea isn’t sufficient. They want to see that you’ve conducted market research comparing it to competitors or how it intends to achieve success. There are several things on a list of dos and don’ts before presenting your business idea to investors.
Understanding Your App’s Niche
Smartphones have been on the market for a while, and it appears like there’s an app for everything. Investors are wary of investing in a concept that already exists. You must do your homework and learn more about your app’s competitive environment. Check out what other apps and firms offer to see if they meet your needs. To make sure your concept isn’t just copy-and-paste from another firm’s product, check out services offered by other businesses in the same company (and other industries).
Investors will want to know that your concept is innovative and that it’ll be a regular occurrence in our lives. Find out what problem your app solves. Consider the following questions: “What problem am I addressing?” and “Compared to what, exactly, is this software unique and different?” These are some of the queries that investors may ask you. They want to make sure the cash they’re putting into your business will return with interest.
It would be best to do your homework to understand your app better. Investors don’t want to invest in a vague concept. They’re looking for specifics about the audience, the problem being addressed, and the features of your application; there are many more. It’s critical to narrow down your app concept to satisfy investors with their investment.
Make your app stand out.
Now that you know what your app does, it’s time to start branding it. Having a logo or a domain for your app indicates to investors that you are serious about developing an app and have given it a lot of thought. Branding helps investors imagine your concept rather than leaving it in an uncertain state. At the heart of every company is its branding; when unsure, fall back on branding. This is also true for your app concept since its branding will serve as the basis for the rest of the development process. Whether it’s a domain, a website, or a mockup of the app itself, brand your app so investors can visualize your concept to understand better what you’re selling to them.
The Elevator Pitch
Investors are busy, and before they have time to pencil you in their calendar, you must be prepared with an elevator pitch. Your startup’s elevator pitch is critical for getting in front of investors, much like a job fair personal elevator pitch.
An elevator pitch is a one-line summary of your app that you can deliver to potential investors as soon as they arrive. Your elevator pitch is how you describe your app in a few words and phrases. You’re going to a business meeting, so you take the lift to the top floor. As soon as someone enters the elevator, you strike up a conversation with them. You have 30 seconds before the elevator door opens, and you step out for your appointment. In those last 30 seconds, you must be able to describe your app concept and the features and purpose of your software. This is the bait for setting up another meeting during which you may go further into your app and other specifics about the development process.
If you can’t do so within 30 seconds, you’ll have to go back and do some more study. You must be able to explain your app enough to catch investors’ attention while not wasting their time. After they’re interested, you have a little more time ahead of you to sit down and talk about more detailed specifics like budget demands, functionality, and so on.
Make a pitch deck
You’ve handed your elevator pitch to an investor, and they’re ready to hear more. You’ll need a pitch deck for your meeting with the investor(s). A pitch deck is a presentation that shows how your app works in greater depth. The Shark Tank television program is an excellent example of how this pitch session should unfold. Don’t overstuff your pitch deck with fluff so that essential features of your app are hidden. The typical PowerPoint or slideshow presentation for a pitch deck is usually formatted, but don’t use the exact script you’ll use in your meeting. This is an opportunity to display graphs, statistics, branding, and other visuals to illustrate what you’re saying. After all, if the investors can read and would have requested a transcription if they didn’t want to meet with you in person, why bother?
Take a look at Uber’s pitch deck from 2008.
Create a Demo or MVP
Creating a demo or MVP of your app is similar to branding in that it allows investors to picture something. Building an MVP demonstrates your commitment to making this software the next big thing. It also gives investors the chance to examine and interact with your concept rather than hear you talk about it. A demo of your app can be either a flat mockup or one you’ve already released. You run the danger of problems and crashes surfacing if you give an interactive demo experience. Investors will be astounded that you’ve put this much effort into launching your app, no matter what road you take.
Brainic is a software and product development firm that can help you bring your app to life by developing an MVP before taking it to investors.
What Are The Funding Rounds?
You’re almost ready to pitch investors if you’ve worked out any kinks in your app concept. There are several funding rounds that most startups or businesses go through, and it’s vital to understand what they all entail. You’ll contact a variety of investors who have distinct objectives for where their money should go with each funding round. Funding rounds allow your app or business to progress from one stage to the next as new features are added.
The pre-seed round is the first significant phase in raising startup funds. This is when your concept is still developing and hasn’t materialized yet. Because the majority of investing comes from friends and family and your own money, this round is considered an informal one. You’re selling a potential idea and seeking investments in the founders (you) during this stage. In the pre-seed round, it’s common for investors to provide funds for recruiting a team, developing an MVP, and gaining early traction to see if there’s demand or a need for your concept. Overall investments in the pre-seed round are generally around $200 thousand or less. Don’t let this scare you away; it’s only the start of the journey.
Things get exciting, and startups begin to earn the money they need to achieve their objectives. Your firm isn’t yet fully operational in the early stage because you’re still working on perfecting your product or service. You’re seeking funding to conduct further research on your product, start testing the product-market fit, establish operational hiring demands, and develop the product. Overall investments in this round may range from $10 thousand to $2 million because it’s focused on company growth in its early stages. Angel investors, early-stage venture capitalists, and startup incubators who believe in your startup potential and are prepared to take a chance are known as seed investors.
You’re having success if you’ve made it this far in a Series A round of funding. Making it to Series A generally implies that you’ve demonstrated some proof of concept, set your brand’s or product’s primary goal, and shown evidence of product-market fit. This is when you start to focus on developing your company and product in earnest. Series A money allows you to devote more time and energy to growing your business and product for scalability while also focusing on marketing. The average Series A investment is between $2 million and $15 million, with venture capital firms, “super” angel investors, and family offices making up most investments.
Series B, C, etc.
Getting to Series B and beyond is a significant achievement for your company. Series B is all about expanding and enhancing your business’s success, ranging from international expansion to staff growth. Because your marketing is active, your product development is constant, and your consumers are engaged and staying with you, your firm has already made significant progress (if it hasn’t already). Series B investments average $24.9 million from venture capitalists and possible corporate investors. After Series B, any additional funding rounds are focused on going public with your business, seeking industry acquisitions, or entering new markets.
Types Of Funding For Your App
Now that you’ve expanded on your concept and better understand the financing process, it’s time to contact investors. “Investor” is a broad term covering various people interested in funding your app. They’re called investors because they’re investing money and holding a stake in your project, whether family and friends or venture capitalists. They believe your concept has a good chance of succeeding; therefore, they want to be involved in its success. So let’s look at the many sorts of investors you might come across.
Angel or Seed Funding
Seed or Angel (or seed) funding is an investment that comes when the app is still in the concept phase. Because you’re asking for money for something that hasn’t been built yet, angel funding is more difficult to obtain. For investors to be willing to put their money down, you must provide a compelling argument why your concept is worth investing in. Make sure you’ve done your homework and are prepared to address any question because this is a huge risk they’ll have to consider. Investors will be more likely to back you if they believe what you’re pitching is a new concept that will significantly impact the industry (and that they’ll see a significant return on their investment).
Many of the most famous and well-known companies get venture capital funding for their businesses. This does take time. You generally have to be operational on the ground to receive venture capital financing, although this is not always the case. This indicates that your application has validity and a clear future trajectory. Because they want a fast return on their investment, you’ll need to have a compelling pitch and be ready to have your ideas molded by investors who want a quick return on their money. They believe in your concept, but they’ll want to make a few adjustments so that it can succeed fast. Remember, getting venture capitalist funding takes time; it might happen early on in your product’s existence or later on after you’ve established some traction.
Bootstrapping is a form of startup funding that’s quite simple. You can start with your own money, job revenue, existing investments, or any other source of personal funds. If at all feasible, use your own money to begin. The one significant benefit of bootstrapping is that it allows you complete control and ownership of the software and process. With your cash, you can, at the very least, create a prototype to validate your concept. Bootstrapping is sometimes enough to let an app succeed; on other occasions, it’s an excellent method to get your feet wet before approaching investors.
Technology has advanced, and crowdfunding has evolved into a popular method of financing that sometimes results in staggering gains. Crowdfunding is a type of fundraising conducted online through collaborative efforts. Depending on your route, it may appear differently than donation-based crowdfunding. There are three significant kinds of crowdfunding: donation-based, reward-based, and investment-based.
Donation-based funding is relatively straightforward. Users can use sites like GoFundMe to raise money to deal with personal difficulties. It’s a collaborative effort to raise funds entirely online, whether for natural disasters relief, cancer treatments, or house fire assistance. The basic idea of donation-based fundraising is that contributors do not expect anything.
Reward-based crowdfunding is another method of financing that has been gaining popularity over the last several years. Entrepreneurs, inventors, and even filmmakers typically use crowdfunding to raise cash for their development and production efforts. Donors are given a reward in return for their donation, whether it’s early access to an app, a free product, or having your name in the credits of a movie. Reward-based funding differs from donation-based in that it is focused on providing something of value in exchange for a donor’s money.
The third form of crowdfunding is equity (or investment) financing. Entrepreneurs use the sale of securities (shares, debt, revenue share, etc.) in their company to raise capital in the form of investment funding. Are sounds familiar, doesn’t it? In investment funding, the entrepreneur raising the money has complete control over what they may sell and how much they are willing to offer. The investors’ task is simple: invest and earn a return.
App contests are held worldwide, usually by business incubators such as Y Combinator. While these competitions are highly competitive, they allow entrepreneurs to pitch their concepts to investors and company executives. Investors and venture capitalists generally judge these contests. App contest prize money is similar to angel investment since app contest prizes are used to finance an idea. Even if you don’t win the leading award, this opportunity allows you to introduce your concept to investors and potentially form networks with them for the future.
Getting initial funding for your app may also be obtained by focusing on the people you already know. Friends and family are an excellent source of cash, but networking beyond your immediate circle is recommended. Consider weak internal ties (professors, past coworkers, bosses, etc.) to see if they can assist you or, better yet, who they know. One of these weak internal ties probably knows someone who can help or knows someone who could make a recommendation. When you use your connections, it’s all about networking and who you know that might be able to assist you in bringing your app to life.
What To Do Once Your App Is Funded
What happens after you’ve received investment money? Since there’s always room for improvement with your app, there isn’t usually a stopping point. Continue to enhance your app and gain more followers as you continue to develop; continue to seek user feedback and investors’ input as you go further. Throughout the various funding rounds, you’ll reach milestones to advance to the next round and meet more prominent investors. You may add extra features or further improve your software with more cash.
It’s a process to turn your app from concept to reality. It isn’t simple, but you can achieve success if you’re prepared to put in the effort. You may continue to improve your app, and with the aid of a mobile app development company, it might reach new heights of popularity.