A complete guide to help you find app investors, develop your idea and get funding for an app.
Mobile Apps are expected to be at the forefront of the businesses success in 2020 with mobile app investors waiting restlessly for the next big thing. The improvements in the technological landscape and the post-corona manoeuvres will only enhance the reach and impact of the App development industry. User application touchpoints have shown a rise in user frequency and differences in modalities of consumption. Expansion in device types, artificial intelligence, audio-visual integration and other technological innovations are indicators of mobile apps being a crucial factor in business development in future.
So, if you have a burning business idea which you think can be the next big thing and seeking mobile app startup funding, it may be the right time to do something about it. And by something, we mean a lot. In this article, you will get to know how to find investors for an app idea and how to pitch an app idea!
Many apps are launched every year and the majority of them fail at the funding stage. Funding is when an app investor gives you the money you need to make your app a reality and in return expects a share in the profit you will make with your app. Honestly, it takes a lot of preparation on your part before you can pitch your idea in front of a potential mobile app investor and secure the startup funding for your app. Let’s take a look at some of the factors you need to nail down before you can pitch an app idea.
Before finding the answer to the question “how to get investors for an app”? it is important to understand the ideology of an investor. Investors are seasoned businessmen with a keen eye for growth potential and like every other business venture, they too are motivated by profit. It’s vital to understand that you are asking for a partnership with the potential investor where your idea will collaborate with their money to get the ultimate result. Hence it's crucial to gain the trust of the investors. The more work and effort you will put in your idea, the easier it will be to impress the potential investors. Lastly, collaborate with app development companies who can provide professional help and years of experience, which you may be lacking at the moment. Mobile app investors rely more on startups backed by professional help. Here are a few factors you can cover to get an ahead start.
Smartphones are one of the most popular gadgets around for a few years now with penetration in even the most sparse sections of society. Hence, app developers have already taken the liberty of developing apps for almost everything and everyone. App stores are flooded with similar apps among whom, only a handful can meet the expectations. As a result, It becomes crucial for you to define the niche of your app.
Realistically, to be a success, an app must provide a solution to people’s everyday problems. Hence, before asking “how to get investors for your business” ask yourself “what problems my app is solving”? This is the basis of classification of your app which will make it stand out. Once you get this answer, you can easily identify the target audience who are going to be benefited by your app. Investors don't want to support a generic idea, instead, they want to know the specifics of your target audience like their domicile, age, gender, maximum interaction hours, spending behaviour etc. These matrices will give you a better understanding of your target audience and will convince your investors about your commitment to success. Thorough research of the target audience and the market will take you a long way ahead in the game.
As mentioned earlier, investors are seeking profitable partnerships with intentions of multiplying their money with the help of your app. Hence, it is vital to have a clear vision regarding the utility and usage of your app. It is equally important to share the vision with the potential investors as well. Be clear on how your app is better than the competition and what value it adds in the existing market. As the final objective of the investors is to gain a high return on their investment, sharing an elaborate monetization strategy will enhance your chances of securing investment for your mobile app.
Branding is an age-old business practice known to be doing wonders for creating an identity and distinction of a company. Branding is a true representation of the business and showcases how you wish the audience to perceive it. Which makes It vital for app entrepreneurs to learn the importance of branding for an app’s growth. Once you are clear about the niche and audience of your app, how to brand your app should be the next thing on your mind.
Branding lies in the core of every business and it is true for mobile apps business as well. Whenever in doubt, fall back on branding and mobile app investors know that too. Branding is the foundation of the entire developmental process. Hence establishing a good branding strategy, coming up with a logo, theme, mock-up-app etc. will help the investors visualize your ambitious project rather than just listening to what you have to say.
Ok, so what is an elevator pitch?
Investors are busy people and getting an appointment with one is not as may seem. They will listen to you only if they are interested in your plan and see potential in its growth. Now, imagine you are in an elevator and a potential investor walks in. He is going on the top floor and now you have 30 seconds to talk to this guy. Your goal here is to make an appointment with him so that you can talk to him in detail about every aspect of your app. But before that, you have to make him interested in what you have to say. These 30 seconds will come in handy here and will be called your “elevator pitch”. You should be able to describe your app, it’s features and the problem it solves to make him interested in knowing more. If he sees the potential in your idea and your commitment, which you have only 30 seconds to prove, you will have a real meeting with this investor.
Work on your elevator pitch. Practice explaining the important points of your app in 30 seconds. If you can't explain the exoskeleton on which the developments have to be made in 30 seconds, you need to do more research and bring clarity in your vision. Nail your elevator pitch and seek the opportunity to use it. Once you secure an appointment with the investors, you will be able to explain the details, share your vision and answer all the questions your investors may have.
After your stint in the elevator, or wherever it was, now you have secured a professional meeting with the investor. “Pitch Decks”, what they are usually called, created using slides like PowerPoint but are not limited to it, are shown in these meetings. This is the opportunity to explain all the features of your app, show the graphs, stats and numbers. You can explain the functionality, how the problem is being solved and how will you monetize the entire scheme. Investors will be looking for your predictions and the timeline you mention and examine them with the preparations you have done in presenting your pitch. It will be a real test of your commitment and fooling an investor is usually not an option. You can show the logo, colour-scheme and maybe even a mock-up version or your app. Show the visual, the transcripts and let the investor experience what you have to offer. Create a demo or Minimum Viable Product (MVP) which will make your app tangible for investors rather than just an idea. Once you impress them here, getting them in an in-person discussion with you will not be a problem anymore.
After knowing about some of the vital preparations you need to do to get a realistic chance of representing your idea, now is the time to make yourself aware of the different stages of funding. Funding is not a singular event, in most cases. It is conducted on various stages of the app development and by various sources. Each stage has different characteristics and it is important to know them. The general rule is the earlier it is in the life of the app, the more risk it possesses and hence the funding amount will be limited. With each passing stage, the risk will drop and the amount of funding will rise. Naturally, there are differences and exceptions but something drastically different happens rarely. Here is the detailed description of what happens in different funding rounds.
The first stage of gaining capital, pre-seed is the stage when your app is just a floating idea and nothing substantial has been done yet. There is nothing to visualize or experience. This early-stage demands extensive research on your part. You will be using your funds and will be asking for help from friends and family. Most of the spendings will be done on creating a founding team, underlying potential investors, creating demos or MVP, conducting research and collecting data, gaining some early traction and trying to find the utility of your app.
It is the second stage where the focus will be on the initial growth of your business. Your mobile app startup is not operational yet and you're still working on improving the product. You are seeking money for further development of the product, extending the workforce and test market-product compatibility. As it is an early stage, investors who are willing to take higher risks, typically angel investors, early-stage venture capitalists, and startup incubators are going to respond to this stage of funding.
Reaching this stage of investment indicates that you are on your way to success. At this point, you have established the market-product compatibility and have clearly defined the objective behind your brand. This is a crucial stage for the growth of the business and capitalising on the traction you have generated is the key here. The focus should be on optimizing your business, scalability and marketing of your product. Venture capital firms, “super” angel investors, and family offices are the usual Series-A investors.
Reaching series B and further means that your product has resonated with the people and has gained acceptance. This stage focuses on continuing on the success you have made and keep improving your product. The brand has been established and people are aware of what you have to offer. Now you have to take your app from a mobile app startup funding stage to mid-sized business. This stage may involve globalization efforts, expansion of the team, the inclusion of specialities, expanding the services offered, etc. Further in the life cycle, funds will be used for business acquisitions, partnerships, upgrading branding levels, engaging with new markets with constant product development and up-gradation.
After gaining fair knowledge on how to go on with your startup idea and various stages of its funding, now it’s time to familiarize yourself with investors, the next stage of how to get funding for an app. There are different types of investors for apps which you will find at different stages of development. “Investor” is an umbrella term covering different individuals who are investing in your idea. Whether they are family members, friends or venture capitalists, if they have a stake in your idea, they are your investors. They have faith in your idea and want to see your venture succeed, which will give a return on the investment they have made. Let's take a look at different types of investors you may find.
As the name suggests, this type of funding is done at the inception stage, where the app is still just an idea. As there isn’t anything tangible to show and most of the idea is floating, finding a seed investor is difficult. Investors are yet not sure of the usability of your app and only you can convince them to see something which isn't there yet. Extensive research is required here on your part where you can answer almost any question investors can ask to make sure that they get the return on investment they are looking for. Understand that you are asking investors to take a gamble on you with their money. So, make sure you have done your homework and have analysed all aspects of your concept thoroughly.
This is one of the common routes most entrepreneurs take to find investors for app ideas. It is a time-taking process and demands you to take your idea on the ground with your money and carry on with the real-time operations. It gives certainty to the investor that you have understood the business-structure, tested the market and have achieved a comparatively stable position. Venture capitalists will take your running idea and fuse the necessary funds you need to take your project to the next stage. Needless to say, the investors are willing to fund an app only when they see a considerable return on investments and that too fast. Hence, they may ask you to tweak the plan to get early access to the returns. It is a time taking process with an element of surprise associated with it. You can find a venture capitalist in the early stage of your app or maybe after a few years of execution.
Bootstrapping is another word for funding your muse. It’s a simple concept where you start your venture with your own money and savings. This is one of the most recommended ways of starting a project as it gives you all the freedom you need in the early stage of your venture where you are defining the ideology and objective of your company. In some cases, bootstrapping has proved to be everything an idea needed to become successful and other times it can put you in front of potential investors with all the necessary tools you will need.
One of the latest methods of funding, which has become possible due to the advent of technology, crowdfunding your app can be a great way to get an ahead start. Crowdfunding is a type of fundraising where collaborative efforts are made via the internet and other networks to raise the money. There are three main types of crowdfunding-
Bank loans are another popular way of funding a venture. You can avail startup business loans if you have a complete business plan and your credit score allows it. Bank will analyse your business plan, see your blueprints and figure out the worth of your enterprise. From there it is up to you, either you can take a loan according to the valuation of your company or you can get the working capital loan to run your daily operations. Those who were failed by the venture capitalists can get the answer to the question “How to raise money for an app?” by visiting their trusted bank.
There are several app contests which take place many times a year in different parts of the world. These contests are looking for potential developers and their products who can provide solutions to the budding problems. Though very competitive, these events provide excellent opportunities to present your idea in front of investors and create a network that can further help you in your cause.
As rightly said, charity begins at home, going through your contacts for seeking investment is always a good idea. Family and friends can help get initial mobile app funds and also can reach out to their network. Old bosses, coworkers, old professors, etc. can also get you connected to people who can help.
After all, networking is a vital tool every businessman should master to be successful.
Simple things to remember while understanding how to get investors.
Show futuristic vision - As an app developer, you must be clear about the place your app holds in the future and what purpose it will serve. You will have to anticipate the future and create something which fits there. It's noteworthy that investors support apps which are long-lasting and have utility in the days to come.
Find the right investor - To know the types of investors and what roles do they play comes handy while finding your mobile app funds. Different stages of app development hold different levels of risks, hence attract only a certain kind of investors. It's important to know the difference and act accordingly.
Attend events, exhibitions and reach out to online communities - Networking is crucial for any business model and app development is no different. Better networking leads to new opportunities for you to present your idea in front of a larger crowd including users and investors. Any chance of networking and publicity is a great chance. Attend events, showcase your idea, give demos, talk to peers and compare to competitions.
Though developing an app and making it a success is a much larger concept and usually takes up years to materialize, taking educated steps, analysing your strengths and weaknesses will help you in looking for investors. During the initial stages of your idea, ask yourself as many questions as you can, develop your app idea, conduct research and put your heart in it. Make sure that you have a great app idea, not just an alteration of something already in existence. When you know it is unique and provides a solution to real-life problems, it won't be difficult for you to get on with it. There isn’t a key to find investors for your business, rather it is an evolving process. The more homework you do, the better prospects you have of becoming a success. The best way to find investors for your business idea is to take on the challenge and give your best. If you will firmly believe in yourself, others will too.
Aparna is a growth specialist with handsful knowledge in business development. She values marketing as key a driver for sales, keeping up with the latest in the Mobile App industry. Her getting things done attitude makes her a magnet for the trickiest of tasks. In free times, which are few and far between, you can catch up with her at a game of Fussball.
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