If you already have an mobile app idea in your mind, you are very likely to be eager to get started with it. Aye, you must get it rolling as time to market is very important once you have validated your business concept. A recent report by Technavio found that the mobile app market is expected to grow by $497.09 billion with a CAGR of 21% during the post Covid world 2020-2024. The report suggests that there is a positive impact of Covid-19 on the mobile app market.
Infographics Source: Businesswire
To transform your app idea from paper to an actual mobile app, the best option is likely to be to hire a mobile app development company, unless your best friend is an amazing coder. Be it in-house development or outsourcing, mobile app development is a proposition that requires significant investment. While depending on the app specifics and the feature sets, the cost of mobile app development varies. Generally, the mobile app development cost ranges between $15,000 to $80,000. It can go beyond the higher value depending on the app complexity and features.
Not just the app development cost, there will be many other overheads such as user acquisition and marketing, hiring, and other operational expenses. All of it means that if you do not have a significant amount of funds to self-finance your project, you will instead need to raise capital to build and operate your mobile app. So, how do you go about getting mobile app funding? What are the steps to seek funding for an app?
A general answer to these questions is that you gain mobile app funding the same as you would get funds for any other business or startup. You can raise capital from your business contacts or investors. People need to believe that your app idea can generate ROI (return on investment) and is worth investing in. Some mobile apps raise millions of dollars of capital even before pre-development, whilst others struggle to get investment even once the application is live. However, apps getting million-dollar capital investments usually pitch with a clickable prototype of the app. These prototypes clarify the app idea to the investors by illustrating the app functionalities. Click here to know how to build interactive mobile design prototypes.
How to Find Initial Funding For Your App Startup?
Most of the times when people think about raising mobile app funding for their startup, they immediately jump to venture capitalists. It is obvious as “Venture Capital Investments” is a very popular term. Venture capitalists make some of the biggest investments and are seen as the “big fish” in the startup funding world. So, venture capitalists is the obvious option, but what are the other options you can look at?
1. Friends and Family
Unless you come from a moneyed background, you can raise small-scale investments from friends and family (F&F). These initial investments will usually be small in value and the investors will either seek ROI or just hold blind faith in your idea because they know you.
Many entrepreneurs are very quick to dismiss the F&F mobile app funding option as they don’t want to opt for small investments. But these small-scale F&F investments can be a credible source of initial capital to kick start your app idea. In fact, raising even a few thousand dollars can help you test and validate your app idea.
Crowdfunding is another option for funding a mobile app. There are crowdfunding websites such as Indiegogo and Kickstarter that are a proven method to raise capital for mobile apps. Since their inception, tech crowdfunding campaigns have been consistently raising millions of dollars of capital for businesses.
Not only just investment, but there are other benefits of attracting mobile app funding via crowdfunding. One such benefit is that crowdfunding also validates your app idea. With crowdfunding, you reach a large number of people that are very likely to pledge money to your mobile app idea, if your idea makes sense. This not only helps in raising funds, but also proves that your app idea is worth investing in. A large number of people trusting your app idea means that there is a validated demand for whatever you’re trying to do. Furthermore, you can cultivate your community of investors to be your early adopters.
Although F&F and crowdfunding are great options for your mobile app funding, they come with their own limitations such as lack of heavy investments, business support and guidance. Therefore if you want to raise heavy initial capital to get your app developed by an IT outsourcing company, you will need to get in touch with professional investors. But, where do you find them?
How Do You Find Professional Investors for Your Startup?
Even if you want institutional money for your mobile app funding, your own network is the best place to begin with. Think back to your past colleagues, bosses, college professors. You can even contact your alumni association. Trust me, there are always corporate connections in your circle. You, ay find someone who can introduce you to some institutional investors. Having a mutual connection between you and the investor increases your chances of getting heavy investment.
Another place to attract institutional investment is contests. Some companies, organisations, startup incubators, and even reality shows such as Shark Tank, conduct pitch contests for business ideas. The winners get prizes in the form of capital investment. However, these contests are very competitive and winning them will require you to put a significant level of effort. If your business concept is realistic and productive enough to provide the investor with an early and decent amount of ROI, you have a chance to win it.
As the final advice to the initial funding hunt, you cannot limit your investment lookout to just private investors. Be bold and clear about the fact that you’re seeking investment for your mobile app. Announce it to your connections on social networks, even include a statement like “looking for investment for my innovative app idea” in your email signature. You are right when you think that you don’t want to annoy people, but there is nothing wrong in letting them know about what you are doing. It might turn into a great opportunity for them.
Five Steps That Prepare You to Find Investors
Now, when you know where to pitch your app idea, it’s time to perform the backstage activities before pitching your app idea to the investors. Do remember that the baseline idea you had isn’t gonna be enough, because the investors want to make sure that you really are serious about the idea and have sufficiently researched your target market. They will want to see how the app will perform with respect to its competitors. Also, your pitch should include the revenue stream. Here is a to-do list of five steps to prepare your investment pitch:
1. Know Your Market Niche
In current times, it seems like there is an app for almost everything. Investors are less likely to infuse their money in an app idea which already has been implemented by other companies/startups.
You will have convinced investors that your app idea will make a significant difference in your niche. For this, you should figure out the specific problems your app solves or any need that it meets. The investors will be asking you questions such as “What additional thing your app offers to the users as compared to ___?”. Be prepared with realistic answers to such questions.
Most importantly, it is crucial for you to master your own idea. Investors are less likely to fund an ordinary general business idea, so you should gain a better grasp of your app. You will have to enlighten the investors with the specifics of who the target audience is, what issues the app will solve, and what specific feature the app will incorporate. Investors will also ask about the app development lifecycle and which features the initial versions include.
2. Tune Up Your Branding
An app idea with well-thought branding looks professional. It becomes very easy to pitch an app prototype with tuned branding to the investors, in comparison to a vague idea. This gives investors confidence that you have got everything in place. To every startup client, we always recommend having the app domain name, app and website mockup, and branding essentials such as Logo and colour pallets. An out of the box innovative app idea is great to have but people will only know that you’re serious about it when you put in a little extra effort.
Your app branding will act as a foundation for the rest of the app development process. It will help investors visualise your app idea to gain a better understanding of whatever you are pitching to them.
3. Develop an Outstanding Elevator Pitch
Investors have a very busy schedule. Therefore, before stepping into their calendar, you should have your elevator pitch ready. Similar to your individual elevator pitch for a job fair, your mobile app startup pitch will be a key to impressing your potential investors.
Let’s have a quick glance at what your elevator pitch should look like. In your app elevator pitch, you are supposed to describe the app idea briefly but precisely. You might think, why brief? The answer lies in the name itself, “Elevator Pitch”. For instance, you are going for a business meeting and take an elevator all the way up to the 22nd floor. You see a potential investor stepping into the same elevator and you want to pitch your idea right away. Now you have around 20-30 seconds before the potential investor reaches its destination floor and walks out of the elevator. In this time, you should be able to describe your app idea very precisely. This conversation may lead to another meeting where you can go in-depth about your business plan and app functionalities.
Again, 30 seconds is the benchmark for your app elevator pitch, if you cannot do it, do some more research and write it again. Investors have a busy schedule and they avoid wasting their time. So, consider your first 30 seconds as a hook to get investment.
4. Learn Investment Basics
Did you know that there are specific investment stages for different types of funding? When you’re asking people to invest, you should know the basics of investment. You should know the type of capital you would need for your app idea. When you’re just starting out and don’t have the app built, you’ll need seed or pre-seed investment.
We suggest that you set realistic expectations for the investments gained. It is clear that no-one will invest tens or hundreds of millions of dollars for a premature app idea that hasn’t proved a revenue stream. Therefore, in the pre-seed or seed round, you probably are asking the investors for a hundred thousand dollars. In case you’re lucky, you can get a million, but your concept needs to be extremely strong for this.
5. Pitch with an App MVP or Prototype
Pitching with an app prototype or demo makes your pitch very practical;. When you pitch with a prototype, your potential investors won’t just be listening to your app idea, but they will also be visualising the idea they will be investing in. Therefore, make sure that you hire a great app developer to create clickable prototypes or app demos for your mobile app.
Seed and Pre-seed fundings are often the make or break for a startup app idea. Many startups fail due to lack of idea clarity and materialisation, even if they have a great business idea. We’ve worked with many startups that have been funded well in their Seed funding rounds. So, make sure your pitch is tightly wound and impressive enough to bring in healthy cash flow.