You came with a brilliant app idea and quite reasonably, you are feeling excited about it. Now you want to shape the idea into the actual app based on this idea. But then you faced the question, wherefrom funds will come? How to get funding for an app startup?
Yes, too many great app ideas are just kept silent and never pursued with an execution plan simply because of the difficulties of funding. On the other hand, the development cost tends to increase and you cannot compromise on user experience standards to maintain a lower cost of development.
This is exactly when the idea of fundraising for your app project comes to you. Yes, raising funds for app development is quite a lucrative proposition, provided you have a clear idea about the multiple avenues that you can use and the fundamentals of making a sound proposal that attracts the attention of the investors.
Here throughout this post, we are going to explain different mobile app fundraising options and the way to go about it.
This is a very common and widely accepted fundraising campaign that most startups prefer. This allows raiding funds in several rounds and each round comes with a higher value than the previous one.
The series of fundraising happens through five stages, designated alphabetically as series A, B, C, D, and E. Each of these stages is appropriate for specific fundraising needs and targets a particular bracket of fund value. Let’s describe each stage one by one.
- Series A is the stage when a startup just tries to raise the initial fund to shape the idea that is still at its budding stage. This stage typically targets fundraising between $10 million to $15 million.
- Series B as the next stage takes care of fundraising when the startup has already come with the basic product and reached out to its audience. The typical fundraising target of this stage varies between $7 million to $10 million.
- Series C is the stage when a startup wants to reach out to new markets and build newer products for its target audience. The typical fundraising target for this stage is between $100 million to $120 million.
- Series E and Series D are two stages that only a handful of companies opt for in their fundraising initiative. These two stages are more about optimizing financial solvency before going to the public.
Any startup thinking about how to raise money for an app idea, this comes to a widely popular and effective method. Through collective efforts involving the peers, family members, friends and acquaintances, customers, and the investors or donators in online fundraising platforms.
This process allows for raising funds involving individuals from different backgrounds and social strata. Besides raising funds for their projects, crowdfunding also helps in introducing a project to the wider audience.
Mostly a mobile app startup simply approaches banks or financial institutions for loans to invest in their new projects. Getting loans is a very effective way to establish a strong footing for their project with no worries for the required fund.
By taking loans they can also have a fixed liability that can be managed in a systematic and planner manner. Though often small business startup loans are less than adequate for what they require for a project, it is a very assured means of raising funds.
Getting funds from large companies through venture capital investment is a popular option to get the project rolling. Well, venture capitalists making an investment in a startup can either acquire the farm or can be the investing partner.
This option in spite of its huge potential to raise big money at a quick time has its own drawbacks as well. Venture Capital is a good choice based on whether you want to engage in a partnership with a big brand or just want to go on your own.
Getting funds from angel investors is a popular choice among startups. Angel investors in spite of being high net worth individuals decide to invest small funds into startup projects.
Generally, Angel investors looking for app ideas decide to make an investment based on the prospect of the project and the opportunity of generating revenue for their investment in the short and long term. You can opt for multiple angel investors or can meet your fundraising target with investment from one.
How To Go About Your Fundraising Campaign? Steps To Consider
In spite of so many channels and avenues that can successfully be utilized for mobile app fundraising, it is not done with the drop of a hat. It needs very consolidated and well-organized efforts combining various aspects.
Here we provide the key steps and most effective and time-tested steps to raise funds for your app startup.
- Come With a Solid App Idea
The first and foremost thing is coming with a full-proof app idea that really looks great as far as a business prospect is considered.
Just put yourself in the shoes of the investors and ask, why the investors should at all be interested in your app? What unique specialties does it offer to customers that can make it popular? What problem does it solve and how unique is the solution?
When the app idea comes as a unique and relevant solution to one or multiple problems, it is definitely going to have an audience, market opportunities, and interests of investors.
To brainstorm the ideas based on the popular and well-appreciated notions, visit various web sources showcasing mobile app success stories.
- Focus on Creating an MVP App First
Instead of building a fully-fledged app, it is more effective for starting your journey with a Minimum Viable Product (MVP) approach. This will allow a mobile app development company to build a basic and elementary app focused on solving the key problem and will have bare minimum features. This will help you draw the attention of the investors before you can actually come with more value additions based on the feedback of investors and users.
- Create an Effective Elevator Pitch
You need to pitch the app idea and its value propositions in an attractive and engaging manner. The elevator pitch showcasing the product as an investment-worthy project needs to be perfected in a concise manner and provide a short and effective summary that instantly draws their attention. Since investors are busy people, you need to be very concise and specific.
- Understanding The Market
When approaching investors you should have a strong command on the competition and the specific attributes of the target audience. Since your investors are going to consider the competitive SC one of your products, you need to offer them your value proposition and competitive edge of the app.
- Pivot Till You Find The Right Fit
An entrepreneur should be practiced more than optimistic. When it comes to answering how to raise funding, the one thing you will have to note is that you may not hear a yes every time and that is okay. Some investors may reject your idea for their reasons and sometimes you’ll have to turn down the offer if you get the right value for your product. Make sure you note down the reasons to fill any loopholes in the plan and be prepared for the next time.
Finally, as a new entrant in the app business, you must not think that getting the required fund for a project is an easy job. Expect hearing “No” from many, understand their rationale, and eventually, you will have a better understanding of how things are going to work. So hold on to your patience and knock investors until you get your fund.