How to Get Your App Funded in 2020 (App Funding Guide)
App funding is challenging but if done in the right manner, it benefits both the parties, the app owner and the investors.
Have you ever heard a conversation that does not have an app usage terminology in it? Probably no. Living in the world of digitization it is merely impossible to talk without addressing online payments, shopping, e-bills, and stuff. According to Sensor Tower, the global app revenue reached $50 billion in the first half of 2020 with an increase in CAGR by 23%. This surely states that the users are inclining more and more towards the app world.
Now, obviously, with the increasing users and adopters, there is an increase in online business ideas. Being a newbie, you might think about how will you succeed in the business? Where will you get enough app funding to keep up with your business and expansion? How to draft a business plan like Uber, Spotify, Tinder? Sit back and relax. We are here to answer the burning question of money and where will it flow for your startup app idea.
- 4 Questions you need to ask before approaching someone for fundings
- Who will invest in my mobile app idea?
- Why should one be interested to fund my online business app
- How much money will I actually need to make my app successful?
- What are the available funding options?
- How to find investors for my mobile app?
- How to prepare for an investor meeting?
Are you having a great app idea?
The one which can probably give a revolutionary change in people’s lifestyles like GrubHub, Bumble, and more?
Are you afraid of the market and the pitching methodology for fundings? Don’t worry as we have got you covered. Being in the mobile apps development business over a decade we have come across many apps who were barely able to stand the competition because of their poor ideation and no further business plan for fundings.
Thus, it is very much necessary for you to think beyond feature curation. Investors around the world are no longer ready to invest cash and resources in a project where they have to wait for access or you can also say it as where they do not see any point of profit coming in at regular intervals. So before jumping into the whole app funding idea and financing, let’s just get the possibility into your head and get the basics right.
The very first thing before coming to a conclusion to get funding apps is to ask yourself a certain question. Herein we have narrowed down some of them for you.
4 Questions You Need to Ask Before Approaching Someone for Fundings
Question 1. Who will invest in my mobile app idea?
You are in a competitive marketing space where every day there are thousands of applications deployed on the app stores. So, before you promise anything on the numbers, without confidence or overconfidence about your idea, study the facts and investments of goliaths like Uber.
There are two kinds of possibilities you’ll need to consider in mind when it comes to vision, ideas, and potential investors to make a deal.
- Your idea has the power to draw the investors towards the product
Uber had a unique app development concept at the stage that an individual can book a ride through his smartphone and avoid hailing a ride and mistakes with the wave of his hand. This attracted Silicon Valley to invest cash and resources in Uber by summer 2015, with the fact of total funding of 10 billion dollar. Other app investors that contributed to the deal’s funding were Fidelity Investments, Jeff Bezos of Amazon, Goldman Sachs, Blackrock, Lone Pine Capital, hedge funds as well as private billionaires in fields.
- You go and sell your idea to the investors with utmost faith in your thinking
Spotify app, the revolution in the music streaming industry is a freemium model that earns money through advertisements and fundings. But it is still not able to lure venture capitalists (VCs) like Google Ventures because of its biggest competition Apple music (iOS). It is still struggling with its idea and investors’ approach but is stable with the buzz revenue of hundreds of tens of thousands of millions in the form of advertising royalty.
So, you must understand that your mobile apps have to have a backup in the form of such freemium models and things that can churn some revenue and keep yourself moving till you get big investments for your app development.
Both of these tactics will bring you, investors, sooner or later with apt funding for your app. But, the crust of this is your “app idea.” Prepare a modular structure choice with all the possibilities of profit-making and growth with or without the investment from the fundraiser, so that you have all the roads that will take you towards the online success of your business.
Question 2. Why should one be interested to fund my online business app?
In this era, everything is about finance and financial stability. There is no barter system running in the economy that balances out the business equations. It is a vicious cycle, wherein a company or person needs a ton of money to get customers but it also needs customers to get money.
When you decide upon a mobile app idea, then there comes a decision for needs to figure out the sectors or people who might get influenced by the business idea. Let’s go step by step with your app idea that will help in knowing the interested angel investors.
Step 1. Know Your App’s Niche
No investor will invest in an existing idea. Make sure you study your competitors and marketplace to stay in a free of risks environment. Be sure about your offerings, in-app features, UI/UX design, and tool. There should be a kind of connection to lure investors. Ask a question to yourself like which problem and error are solved by my app? What is the unique selling point (USP) of my app? How is my app different from the others in this service genre? These are the generalized number of questions asked by many investors and will help you analyze your own thinking for a while. Work on your specifics because investors are not looking for haywire answers. You should know your targeted consumers, what features your app includes, and other small details of your app. So, narrow down your app idea to turn into reality and earn the investor’s assurance and trust in the funded apps rounds service making relationships smooth.
Step 2. Branding the App
Branding makes your app realistic. No founders or CEOs will rely only on average words and the place timeline version, so you must create your logo, online domain, and start some online activities. Investors are not your colleagues and friends and family who will hear you blabber the idea and appreciate it. They want proof and an up-and-running plan of action of your app startup. If you want to pitch venture capitalists, this is a great way or you can say a tool. Make a mockup of the website or app – so that things become easy for the investors, users, or for someone who has the potential to visualize your idea, place, understand the minute features and functionalities and eventually help them to put hands-on trust with the consent.
Step 3. Work on Your Elevator Pitch
A vision of startup funding for your app and software is critical, so you are supposed to prepare a quick brief about your app idea. Investors do not have a whole day of times to listen to your plan. Prepare a short speech of something less than a minute summing up your whole idea for projects. It should consist of the crux, punch line, problem and limitations elimination, key feature integration, and a vague plan of future goals.
As examples, imagine an interviewer asking the question in order to describe yourself in three words, you will respond to this as accurately as possible. Same goes with your app size and software, so prepare a gist about things as an “elevator pitch” and get your investors hooked up to it. If you are not able to precisely state the nature of your app project then you must go back and do proper research on it. Elevator pitch is a small speech that helps you to reach the angel investors list for projects. If you are on that list, the networks of angels are interested in knowing about you and your app products. Thus, this pitch works as the first impression is the last impression of your application.
Step 4. Prepare a Pitch Deck
After your elevator pitch gets selected and is on the list, you need nothing but to start prepping up for a pitch deck. This is similar to a PowerPoint presentation or a slideshow representing some more key factors about your great idea and market research did precisely to fund your mobile app. You are not supposed to put the exact script that you will probably use for further meetings with investors. This is an ideal chance for you to show some graphs, statistics, and make your online business more viable for investors. They can also have an in-person discussion with you after looking at your presentation which will make it more interactive for both.
Step 5. Create an MVP
If you do not want your apps for funding to fail miserably, it is very much necessary for you to make a minimum viable product (MVP) or prototype before launching it full-fledged in the market as well as approaching any angel investors. It will help you in savings of sources and visually help early adopters and users understand the working flow of the mobile app. Moreover, it lets you find a road where there are glitches in the early stage of apps in the online world to take you to the next level. To get funding and further partnerships and mentorship with the venture capital firms, MVP always helps in bringing out the best your mobile app has ever had. No matter which way and sources you take, the investors will set the funding amount looking at the efforts you have put in making the app.
We at Space-O have also made it easy for everyone to understand the mere concept of MVP by just gathering the specifics for you in our blog posts- What is the Minimum Viable Product? How to Plan, Build, and Improve MVP for Your Business? This will surely help you in knowing and setting your funding goals much better than the other app entrepreneur or app companies.
Want to validate your mobile app idea? Discuss it with us.
Question 3. How much money will I actually need to make my app successful?
This is a burning question before starting any of the above tactics. How much will you quote for your app? For anything that starts with a funding process to go smoothly, you need to have an approximate idea of the funding amount you want to meet for the future expansion of your application level. It might happen that the assumptions are much far away than the actual amount.
If you fund your app with more money, then you are likely to give away your venture capital firms to the investor. And if you quote less amount you will not be able to achieve your goals and will not even be able to bear expenses. You have to work hard and figure out the estimated cost of developing a mobile app with specific functionalities and user-friendly navigation. Your end funding goal is to justify the approximate amount in front of the investor.
You can also ask yourself a question range like,
- How much money will I require to create an app or software?
- How much money will I want to lure the majority of audience and talent acquisition?
- How much money will I want to maintain the mobile app once it is deployed on the app store?
These will push you towards making a couple of decisions for mobile app development agency and know the exact job costing of iterations in industries. As we know, the maximum amount will go into making an app and the rest will be settled down among others.
Even if you are funding your own app through friends and family and even getting colleagues to support, then also you need to have the mere idea of the money. In this way, companies will eventually be able to keep track of the money and organize future planning beforehand.
Finally after studying the cost, and figuring out your pitch deck, it’s time for you to think about the available funding options for your application idea.
Question 4. What are the available funding options?
Seed funding or angel investors are very hard to please as they enter at the idea stage of the app. The seed stage does not require much control which allows the company or person to function at its own will. These angel investors just need proper strategies related to income and return on investment (ROI), and one of a kind idea that can revolutionize the existing online world and nothing else in case. As nothing materialistic representation of your business can be seen, the only way to lure them is by a successful idea that can work realistically in the coming future. Make sure that you have done enough market research to answer each and every question asked by them in a polite tone via email, phone or another communication medium.
This is the most convenient part and easy way of funding for app companies other than seed funding or angel investors because you are your own boss. There is no one to rely on or share your profits-loss with. Bootstrapping role is also easily done with the help of friends and family. Initially, if you are capable enough to fund your own app startups then with such a start you might not even need outside investors in the future when you will earn money from the online business. But organizations can always go for investment loans and tools that are proportional to burn rate as a backup plan part for your app.
With collaborative effort on platforms, one can raise funds for its app. There are three types of crowdfunding ways of interest like donation, reward-based, and investment funding. These are done online or through sources of the social media contest, accelerators, or incubators. It can also work as a barter system to restaurant owners and risk cases where you can give a reward or share of the business for expenses. This technique is easy compared to the other fundings for companies.
In donation, the donor and founder do not expect any reward or benefits in return. While in reward-based tactics, one is bound to provide some perks like a free product, names in the credits, access to the app, and more. Investment funding is one of the chances where the angel investor will invest an amount of resources for the sake of gaining a good return on investment (ROI).
This is the most common trend and known investment technique. The banks lend you the loan on credit and keep your assets on a guarantee for evidence. Plus, these days startups are well supported by the government and banks with a reasonable price of interests, so there are fewer problems while developing software. For example, there are dozens of types of financial institutions, group network aspects, or individuals who give you the opportunity by offering funds and assets and a loan for the debt to the app startups. Thus, you have a high chance of gaining investment in terms of loan here. If you are financially stable then the loans are a good option for anyone.
Now, when you consider a way for fundings for the app and sites like kickstarter, you also need to understand the reason for structured rounds that are heard by professionals. These will majorly help you in funding for your mobile app development.
How to Find Investors For My Mobile App?
Many of you, newbies, will be confused about networking of investors and the rounds, so herein we have simplified all aspects of interest that you’ll need to consider for sites.
This round is at a very early seed stage where your idea is not materialized yet. You have to constantly sell your idea and ask for fundings. Such fundings are usually used in making MVP, laying a team foundation of developers, and increasing the traction to see whether they need or support the idea or not. This money will give you chances to enter the market at a very small scale but you will get an idea of being rejected or accepted by the online user’s world. Here are some steps which will help you in gaining seed fundings.
- Justify your idea, process and rules without any finances of burn rate
- Approach your potential buyers before meeting the seed stage investor
- Bootstrap during that time period for email marketing campaign or advice and feedback from beta testers
- Introduce yourself to investors with proper data, track record and proof points places
- Pitch deck that answers a question in a one-on-one interview with speed or even with articulated accelerator programs.
It is similar to a seed stage but is more formal. In this round outside investors, staff, incubators and accelerators can buy common stock in the company. The only common thing between both rounds of seed stage and angel stage is pitching the idea. Here the investor will be straightforward in tallying their cash and resources for investments and costs with the return on investment (ROI) of your app business. Thus, you will have to win him over the argument and reason as to why your idea is worthy of his investment. In the seed round the investor will not take much charge of the profits and losses but with Angel round, you’ll need to prove every single functionality and the benefit of it to him.
If you have reached this far, it means that you have got your clarity of concept and have already been in market contests for a while seeing the success of the product. You are now at a stage where focusing on product growth matters to you a lot. The series A funds help in achieving the scalability of the product pitches and organizing the business optimistically. This round can approximately bring you $2 million to $15 million, and if you get through some typical venture capitalist (VCs) then you might as well be able to bag home a huge amount of venture capital funding.
Series B, C, D
After series A it is all about expanding your business in a new direction or growing globally, for which you will need bigger investments. Series B round can actually get you an overall investment of 25million dollar from a potential investor and entrepreneur. Followed by Series B other rounds like Series C, D, E, etc. investors usually go for public appearances with your venture capital firms or look for acquisitions in other companies or even expanding their business in new market services.
If you have got these stages straight into your heads, you will be able to crack the mobile apps development funding of 2020 whether you go for series c or b or d. Before ending the article, let’s have a quick look at how to attend the investor meeting so that you avoid any setbacks, woof-ups or even upsides. It will also help you in the last minute preparations and give you the best results.
Want to know your app development cost? Get in touch with our experts.
How to Prepare For an Investor Meeting?
- Research your investor: The common mistake done by the app startup is approaching any investor they come across on the ground. This can actually waste your time in the early stage, you need to find a specific angel investor or venture capitalist (VCs) who specializes in your kind of business. Do not bump into any random stranger who is least interested in your app ideas. Do proper research on them through public crowdfunding platforms like social media, articles, and more. Know their current portfolio and develop an understanding of their investment, brand, investing, success, failure. You can also reach out to the companies they have invested in the past and know about their working patterns.
- Write your elevator pitch and business plan: A gist about your business has to be summarized well. They will look forward to your executive speech which should consist of an understanding of the market size, demographics, your future goals. You must also mention the value edition of your application in your target audience’s lives (if any) and how it is different from your competitors. Now coming to the business plan, make the potential investor understand several milestones that you are likely to achieve with his money. You should portray a realistic return on investment in the meeting with investors where he can rely on your facts and figures. Do not bluff because it won’t help you in generating future investments.
- Practice your presentation: To avoid any mishap in process, it is necessary for you to practice your presentation on paper as well as the speech following it. A confident presentation makes a lot of difference. Do not exceed it more than 30 minutes, make sure you are not speaking the exact same words written on the slide but actually explaining them through your verbal representation. Let the question be welcomed in between the presentation and do not rattle yourself away from them or even from creativity in any situation.
- Estimate and explain how much money will you need: A man who is investing in your business plan, has all rights to know about the bifurcation of money, it might also happen that he can help you save some with his experience. Avoid asking for less money, directly break-down actual costs, and make them understand its vital importance. Projections and shares should be fair, and a reasonable split that should favor both the parties equally including your businesses for validation purposes.
- Take a Q&A round with the audience: When you are done with an exchange of presentation, story or speech, open yourself to a number of questions from their side. So, you can resolve any confusion or query right at the moment. It may also happen that you go into self-analyzing your own thoughts and search presentation. But it will be a brain-storming and attention session for both. It will also allow investors to pass suggestions, feedback, information, projections, reviews, guidance or advice on the revenue category which you should take in a positive way and improve your product opportunities accordingly.
How do mobile apps get funding?
- Funding contests and app contests
- Strategic business partners and Angel investor
- Bank Loans
How to find investors for mobile app?
There are two successful tactics that will help you in course to find a suitable investor. One is the websites like Funded.com, Angel Investment Network, and more. Also, there are special meets for entrepreneurs and investors to discuss a way to get funding options and revenue. It is kind of setting a nationwide app startup funding stage, that you can also attend with your startup app product ideas and goal.
What are the funding rounds?
- Seed round
- Angel round
- Series A
- Series B, C, D, etc.
How many users do you need to get funding?
If you are aiming for $1m-$10m than you must have a minimum of 1,00,000 users. This will help you in finding appropriate investors and they will be equally interested to know about your online brand. Thus, you have to justify your fundings with the engagement in your application.
How do you start an app with no money?
- Outsource your app development project
- Raise your venture capital
- Pitch your app developer with an equity split
- Make your proof-of-concept
- App contests and funding contests
There is always room for improvement.
This saying goes apt with the apps. Once you fund your app, your work does not end there. You will have to strive for better and launch new features, functionalities to maintain the engagement and grow for better investment and funding options. You will be able to attend more rounds and achieve the milestones to make it to the next round and bigger investors.
Of course, for this, the pre-requirement that you’ll need is an experienced app development company like us. Space-O Technologies will help you right from your mind-blowing idea generation to the app deployment stage to even marketing strategy to offering app maintenance for a certain period of time which is a way to get investments in real-time for the site.
We offer full-fledged services from native app development to web developments. From Uber clone apps to laundry app solutions we have been striving to make app revolution in almost every service genre possible. If you have any query or confusion regarding funding app, venture capital, crowdfunding platforms, funding campaign, app development costs, you can discuss it with us. Let us know your requirement through our contact us form and one of our sales representatives will consult you soon. The consultation is absolutely free.
This page was last edited on September 28th, 2020, at 11:39 AM.