Having an idea for the development of a mobile application is not enough. The capital to create it seems to be crucial, as financial resources are frequently the most difficult obstacle that an entrepreneur has to face.
A revolutionary idea can only be implemented if adequate funds are available. In most cases, building an initial version of your software will cost tens of thousands of dollars or more.
In this article, we will show you how to raise funding from different sources to drive your application to success.
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What are the Funding Options for App Development
The mobile industry is developing dynamically, which means that there are many ways to raise significant funds for your application. Below are some options to consider when you have your own mobile app idea.
Bootstrapping is financing a business idea from your own savings and personal funds. In many cases, using the money you have instead of borrowing or hoarding is a great and risk-free approach because you don't go into debt to start with. In fact, many entrepreneurs operate in this way until their business is profitable.
If you have savings to cover app development costs without putting too much strain on your life, this is definitely one of the best solutions.
Private investors are people and organizations that believe in a given application idea and decide to invest their own money in a selected business in the hope of a return on investment by enabling the company's development process.
#App Funding Contests
Every year, there are a number of competitions where the main prize is funding, but some also offer mentoring for the duration of the project's development. Business angels or industry leaders organize the competitions.
Participating in a competition, on the other hand, can be a valuable experience and a way to draw attention to your idea even if you don't win first place. Many investors who are interested in your idea can offer their financial assistance after the competition is over
People in our personal network tend to believe in our potential and support us when we decide to take a risky new path, so approaching them is worthwhile because they can be a reliable source of funding.
Financing an idea for a mobile application through a personal network is usually possible with smaller and less expensive projects.
#Business Angel Investors
An Angel Investor is a wealthy private investor who funds small business ventures, particularly in the IT industry, in exchange for equity. Angel investment is open to providing smaller amounts over a longer period of time. Before contacting a business angel, prepare an appropriate presentation, a refined business plan and a proof of app idea viability.
#Venture Capital (VC)
Venture Capital Funding is a form of private equity and a type of financing that investors provide to start-ups and small businesses that have long-term growth potential, are rapidly expanding, and appear ready to expand further.
It is typically provided by wealthy investors - venture capitalists, investment banks, and other financial institutions. The best way to meet VCs is through other entrepreneurs or investors introducing themselves, so if you've decided to seek VC funding, use your contacts and their networks to see who you can talk to.
Crowdfunding is a fundraising method that allows you to raise funds directly from a large number of people through various types of online, crowdfunding platforms like: GoFundMe, IndieGoGo, or Kickstarter, where anyone can offer funds for your project. There are four main types of crowdfunding that we can distinguish: donation, reward, equity, and debt crowdfunding.
Donation crowdfunding - involves no financial return to investors or donors.
Rewards crowdfunding - involves individuals who contribute money in exchange for a type of reward. Usually, the award is closely related to the product or service offered.
Equity crowdfunding - allows the donor to exchange a cash contribution for equity shares.
Debt crowdfunding - involves borrowing money from donors, and in return, companies agree to repay their lenders.
The last option to finance the mobile app development is a bank loan, which is the least preferred option. The bank loan is intended for financing short-term operations. It is safer to take a loan when your business is growing, not when you are at the very beginning of this idea creation journey.
How many funding stages are?
Pre-seed financing is one of the initial stages of funding in which investors provide capital to a mobile app startup in exchange for shares in the company. Because so many early-stage startups seek funding, the number of companies that receive it is relatively small.
Seed Funding is the official financing of a company in exchange for an equity stake. He helps the company in the field of market research and product development, as well as supports recruitment processes.
At the series A stage, the company requires an external investor, but has its own regular income channels, has a good business model and acquires new consumers on an ongoing basis. The main goal at this stage of financing is to improve the offer and generate a larger customer base.
The post-development stage helps in analyzing the market and finding a place where the company can potentially expand its sales/marketing activities etc. They support the startup at this stage is already profitable.
At this point, the company has achieved extraordinary success. This financial stage is desired and sought after for the acquisition of other businesses or the introduction of new products/services/global expansion.
#Initial Public Offerings (IPOs)
IPOs are the most advanced stage for a company in which a private company lists its shares. Thanks, to this financial stage, it raises large sums of money to propel the company to new markets while also ensuring the company's transparency.
All Necessary Steps to Get Your App Funded
#Build a Minimum Viable Product (MVP)
The minimum viable product (MVP) is the basic version of the project with key functionalities. It checks the validity of the concept and shows a selected group of users and investors an idea for an application.
In the early days of app development, it's important to be flexible and deliver the MVP quickly, so you can develop it and implement major upgrades on an ongoing basis, while also testing your app.
In order to develop a complete version of your application, you need a team of professional software engineers, build a vision and the entire process of iteration of the project.
#Establish a Brand
To attract investors and users for your application, you need to define the product brand. Therefore, the resources that should be specified at the beginning of developing the idea and project are the domain, application name, logo, color palette, font, social resources (header or content templates). To learn more about the Future of Visual Language, read our article about icon design trends.
At this stage, you should benchmark your competitors and analyze their strengths and weaknesses.
#Create a List of Potential Investors to raise money
Creating a list of potential investors necessitates extensive research. Friends, family, and people who already trust you should be your first source of potential investors.
Consider the people you know who are related to other successful people or former business associates.
Local meetings are a great way to meet like-minded entrepreneurs or those who fit your ideal client or investor profile. City conferences or workshops, for example, can be great networking opportunities.
#Preapre a Pitch to attract investors
When preparing your presentation, remember to include key points about the project. The pitch should clearly communicate the value of your product, identify your main customer and target market. Be sure to include the following information:
application name and logo
introduce all the team and contact details
transparent explanation of the concept
what is the problem with the application, and how does the app solve it?
the market of key competitors
product features and their strengths
basic financial data (efficient, planned revenue, etc.)
#Present Deck to Investors
Now that you've refined your presentation, it's time to present it to investors and prepare to answer a variety of questions and objections.
The presentation should meet several requirements, including it should last less than 10 minutes and include the most important information at the beginning with a maximum of 20 slides at the end to give the investor enough time for questions and answers.
Types of Apps Most Likely to Get Funding
Not all apps are created equal. Application development is already the largest investment category. We can distinguish 3 types of applications that most often tech startups and other technology companies receive money from co-financing for development.
FinTech Apps are software applications that connect customers to the tools provided by technology to access, track, and facilitate their finances. 2018 was a record year for FinTech funding, with $41.7 billion invested in 788 transactions.
Blockchain Apps are decentralized applications that run on a distributed ledger. This type of application is much safer than traditional applications because the data in it is spread over many nodes, which makes it much harder for hackers to access them, they are also much faster and more efficient.
Cybersecurity Apps support authentication using network and cloud security technologies. Since 2013, venture capital investment in cybersecurity startups has increased by 300%.
You should have a good understanding of the options available at the start of your adventure with developing an idea and obtaining financing for more money. If you have read this article, you are aware that there are numerous methods of financing applications available today, each with its own set of benefits and drawbacks.
Consider your needs and goals before deciding on the best option for you and your tech startup.
Got any project in mind?
Railwaymen is equipped with the know-how and resources needed to turn your amazing idea into a well-designed, customized app that will satisfy your requirements. Get in touch with us to learn more about ways to get funding for app development.
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