Pathway To Get Funding For Your Mobile App Startup
App Builder Appy Pie, December 11: You have a brilliant app idea and we are excited! The economic and technological environment today supports all kinds of startups, especially the kinds that have a brilliant idea at the core of it and a clear process flow to achieve it. However, having an idea is not enough to launch an app, there is a lot more to it than having a great concept and when you start the process of actually converting it into an app, the real world hits you.
Since you have a golden idea that you wish to convert into an app, there must be some preliminary research you might have engaged in. One of the first things that hits a newbie is the kind of cost that is involved to get your app developed. And, if you are like most of the startups, you are probably looking for ways in which you could fund your app.
Pretty much like any other business under the sun, you can’t possibly launch it without any money in your kitty. If you are planning to make some money with your app, you need to start treating it like a hardcore business. While it isn’t entirely impossible to develop an app without raising money, but it is a lot easier when you have some money raised up for it.
Now that you are seriously thinking about raising some money for yourself, there is definitely a need for you to understand the whole process before getting engaged actively in garnering funds for the app you are going to build.
Why Is It That You Need Funding?
The first thing you need to do is determine clearly, what is it that you need the money for? It is natural for a startup to think about too much too soon. At the start of it all, you are more likely to just have an untested hypothesis at your disposal. At this stage you might be high on confidence about being able to convert your idea into a multi-million dollar venture and have strong insights and prospective customer interviews to support it. But the fact remains that it is going to remain an untested hypothesis till the customers actually sign up, pay for it and use it on a frequent basis.
It is wise to set your goal in a realistic manner and focus initially only on building something that your customer can get in their hands. At this time examine deeply and identify what is it exactly that you are going to need the money for by breaking the whole thing down into smaller segments. For example your app development would need some money, so will your marketing plan to get some traction.
Who Is It That Gets The Funding?
It is important that you understand what kind of people or ideas manage to get funds at a conceptual stage. They are usually those who have a strong background of successful ventures or a history of founding or running some other companies in the industry. These people also usually have a strong network and relationships with investors which have shaped up during the several years of interaction and engagement. These are probably the only ones on whom the investors would be ready to take a risk even with just a concept or an untested hypothesis that we earlier told you about. For the rest of the majority which forms the entrepreneurial population, this is where we suggest you begin.
What Is It That You Can Do?
Before beginning your journey to get an investor interested in funding your mobile app startup, why don’t you take a beat and think whether it is possible to launch your app without it. There are majorly two aspects of launching your mobile app startup that need money at the initial stages – product development and marketing.
Identify the smallest possible product to build initially and deem it as the core value that the product you build would have on offer. Develop a skeletal model with just the bare essentials in terms of features and functionalities that would help the users get a feel of the product and get hooked to it. At this level, you would not really need big funds and you can either dig up your savings here, or get some funds from friends and family.
Ads might be the most clear cut and popular, also effective medium for marketing but there is huge price tag attached to it. However, there are lesser known, yet effective ways to gain some traction for your app at the initial level without having to spend a fortune. At this level recognize the power of social media, build a curated community consisting of potential customers at the very beginning. Use this community, engage with them, and build your brand up through the relationships you forge in the community. This community would essentially be a community of engaged users’ pool for you to test your idea on and can become your potential customers.
Utilize social media to its full potential and keep yourself connected to the potential customer base by sharing updates, anecdotes, or other relevant and engaging content while introducing a strong call to action that would use a document or a webinar to connect the customers with the core offerings of your product. At this stage bring in the whole audience into the community you may have created. The next step is to try and get some mentions in the press before the actual launch. It is a good idea to engage regularly with the media and answer media queries while supplying them with relevant quotes for the appropriate product space. It is important that you identify yourself as the Founder, <name of your startup> while providing them with a link to your landing page. This entire process wouldn’t even cost you a dime.
How Is It That You Can Raise Investor Money?
This is serious, treat it that way. You have an app idea you believe in, you have talked about it, researched it and feel that it is the right time to go looking for investors to help you launch the app. This step is actually one of the most crucial parts which consists of a series of steps that would help you approach the issue of funding in a systematic manner. The future of your app, the money it will make, and finally the money you would make, depends on this part of the whole process.
A Deep & Thorough Market Research
At this stage, you need to delve deeper and conduct a deeper market study. There are a lot of people who have tried looking for funding without this step and ignored the basic thing that if you do not have a good idea of the market you are getting into, you wouldn’t be taken seriously, nor would you be able to garner any funds. This is an area where you need to get an expertise and identify the following factors while conducting the market research.
- Identification Of Trends
- Analysis Of Prices
- Competitive Analysis
- Market Analysis
- Target Market Analysis
- SWOT Analysis
- Marketing Plans
- Location Analysis
- Domestic/International Competitors
This might look easy but is far more complicated than you’d think and would definitely take some time, if done right. One of the issues with this process is that the benefits are not really visible immediately. It is important to have a clear idea of the competitive landscape that you are going to be a part of so that you can define exactly where your app is going to be coming in and what are the gaps that it will be filling. The competitive study need not be restricted just to the apps, but all kinds of solutions that might exist to address the problem that you may be providing solutions to. Study these solutions and find your own uncontested market to develop your very own app v1.0
Evolve The Brand
Yes, branding is as important in the initial days as at the peak of your brand’s life cycle, in fact maybe a lot more important initially. Many entrepreneurs and startups have ignored this aspect and relied only on the programming aspects to work towards the success of their app. This can be a grave mistake. It’s true that programming is important, but you need to acknowledge the fact that there might be many other apps that are working in the same arena and solving the same problems as you do. It is your branding that would determine whether the customers choose your app or theirs. A strong branding results in a loyal customer base and a loyal customer base goes a long way in helping you increase your profits and lower the costs. The investors you are going to approach would be well aware of the advantages that come with a strong branding and when you have a brand to back your app idea, it is going to create a favorable scenario for you by increasing potential investors’ interest. When you have taken the initiative and effort to create a branding, have a domain name, at least a placeholder landing page and a well-designed brand identity consisting of a logo, you gain trust of the investors. It makes you look a lot more legit, and encourages the investors to consider risking the investment. You are basically asking an investor to give you, a practical stranger a lot of their hard earned money in lieu of a long term possibility of getting returns on it.
Find & Target The Right Kind Of Investors
It is important that you do not take the investment process lightly. An investor is putting in their money while expecting a return or a profit of some manner, it is definitely not done with the intent of charity. This means that they would expect you to stick to the plan or pitch that you present in front of them, after they have decided to give you the money. Ask yourself a couple of important questions before you set out on the quest.
- What stage of the development process do you currently stand in?
- Which investment round are you in?
The farther you have come in the development stage, the more appealing you would look to the investor and this is probably why the majority of the funding garnered by an organization is in the middle stages. If you are hasty in approaching the investors it might go two ways – the investor might not have an interest at all due to the premature status or they might make you an offer but not structured in your favor. In the first scenario you might have moved in too early and closed off the doors for a possible opportunity that might have been favorable to you at the later stages of development. In the second scenario, you might get an offer where the money offered is not much, but they might ask for a large equity portion in your company. This is an arguably tough conundrum for most where you are not in a position to say no to the money that you are being offered, but you don’t want to give away too much of the equity shares.
Now that you know when to approach the investors, it is time to find the right investors for you. But how do you accomplish that? This will depend a lot on where you stand on the timeline for development and which round of funding you are seeking. It is important to understand
- The differences between angel investors and venture capitalists
- The type of involvement your investors would want to have in your app
- The amount of equity you are willing to give up
The investors you are seeking might be of the variety that just give you the money and stay quiet, waiting to see how things pan out for you and only come questioning as and when decided upon. On the other hand, the investor might be interested in becoming a strategic partner who would offer you advice from time to time and participate in crucial decision-making. The scenario would have a lot to do with the amount of equity you decide to part with and you should take that decision wisely. In case you decide to give away too much of equity, you would lose your position as a majority stakeholder and would not have a final say in the company matters. This is a situation you must avoid in the initial stages of development for your app. Hence the kind of investor you need depends completely on the way you want to proceed with your app.
Prepare A Killer Elevator Pitch
With all the steps of preparation that you have taken, you should be able to convey the idea and your business plan in a quick pitch to the investors. This is one of those steps that are taken lightly at times and leads to a great setback for startups. Your background work has been compiled by now into a thick folder or maybe even two, but as a first pitch, it is not going to work. At this time, what you need is a killer elevator pitch – a pitch that you can deliver in the time you might get with the investors on an elevator ride. To develop a perfect pitch keep in mind the following:
- Introduce yourself and the company first
- Give them a super short app synopsis
- Convey a crisp goal
- Offer realistic, yet optimistic projections for the next couple of years
- State the specific areas where you would use the investment
- Convey when the investor can expect a return
- Close it with a crisp thank you and invite them to ask questions
The idea is to get the investor interested in what you have to say in under two minutes and if you manage to do so, they are sure to ask you further questions.
Compile A Solid Pitch Deck
So you have got the investor’s attention and are now on your way to meet the investors. Traditionally a well laid out and detailed business plan was needed at this level. However, these days the trend has changed drastically and all you need is a well compiled short and crisp pitch deck to convince your investors. The deck you present should again be tight and crisp. The length of it varies depending on who you ask, while Guy Kawasaki says it should be 10 slides and 20 minutes, Fred Wilson would like you to stick to six, three, or none! What might help is going through the investment decks of companies that have managed to raise money successfully and then draw inspiration from other examples available online.
Create An Interactive Demo
So you have the chance to present your app idea to the investors and have their undivided attention. It is quite possible that you do not have the app ready to be presented to them, or it might still have bugs. In such scenarios it is a great idea to have an interactive demo laid out to be presented to the investors. An interactive demo that doesn’t need a code and gives the investors a look and feel of the real app in an interactive manner might give you the coveted brownie points and improve your chances of garnering the funds.
Prep & Practice
Whether it is a Hollywood actor, a motivational speaker, a political leader, or even a presenter, they put in a whole lot of effort into the final delivery of their piece. It takes multiple efforts to hone their speech, design the slides and practice delivering the piece that they are preparing for. The pitch probably means as much, if not more, to you. It is important that you know your material back and forth and have the capability to deliver the whole pitch without having to refer to any material or the slides if need be. Prepare yourself for the questions that might come your way, be ready with answers, and have a plan to approach the questions that you might not have answers to. It might be a good idea at this point to consult some reading or video material on public speaking to help you communicate better and leave a lasting and positive impression on the investors you are courting.
Learn From The Rejections
It won’t always be a rosy world, there would be mistakes, there would be slip-ups, and there most definitely would be some rejections too. Your pitches won’t always be successful. With time you would learn more about the app industry and the specific industry you are foraying in and this will help you perfect your pitch and presentation. There would also be times when you have done everything right, but it is the investor who might not have an interest in the whole idea. It is important to understand that rejection is OK. In fact it is a rich treasure trove that would help you learn a lot! At the end of every rejection, make it a practice to sit down and identify the reasons for it. Work on the reasons, rectify them, and with renewed enthusiasm get ready to pitch again. There might even be scenarios where the investors would even encourage to reach them at a later time or to keep them updated with your progress.
One thing common about the entrepreneurs who have been able to garner some sizeable investments for their app ideas is that they have put in even their own money at the initial stages. The fact that they have the confidence in their idea to put in their own money is sure to invoke the investors’ interest and confidence. If you have a great app idea, then these steps are sure to help you garner some serious funding by generating an interest in the investors. So, get started now!