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This is how you get your app funded
If you’re building an app and you have high ambitions, you probably want to see it become a monster hit like Snapchat or Angry Birds. However, building a hit doesn’t come cheap. If you can’t fork out the cash yourself and you’re sure that your app will be a hit you should explore investment options. This can be a real hassle given the fierce competition there is today. You read stories in the media about Snapchat receiving $200 million in funding for a valuation of $15 billion and even the app that only says “Yo” got $1 million a couple of days after it was launched. It makes you wonder: “Isn’t there anyone that wants to invest maybe just a couple of thousand in my app?”. The short answer is, there is. However, you will need to look in the right places and convince the right people.
Before you do anything, it is always good to see how far you can make it on your own. There’s nothing an investor loves more than seeing traction on a simple prototype for example. This can mean you have to bootstrap your way to a launchable product, a minimum viable product to speak in Eric Ries’ terms. Bootstrapping means you bring down your costs to the absolute minimum and spend your little cash wisely. It also means being creative with the means you have at your disposal. If you’re in dire need of an extra hand (or hands) to code for example why not have a chat with a professor or teacher from your local college or university to get your project approved as an internship? Many students are eager to get practical experience and a mentor to guide them. Or if you happen to own an apartment you can copy what this guy did, fund your app with AirBnB. Just scrape the resources together, push that app on the market and get your message out (for free).
Crowdfunding can be a very lucrative deal to get your app funded. In recent years the amount of crowdfunding websites has grown tremendously and today there are even sites specifically for mobile apps like AppBackr and AppFunder. Usually, a simple reward like a t-shirt is sufficient to give in return to your backers, the rest of the money is all yours to spend. Naturally, there are rules but they are quite favorable. One disadvantage is that your app has to compete with other apps before they even exist. Getting noticed is the challenge here and marketing can take up a lot of time.
Seed funding generally occurs when development is in a very early stage and risks are high. Angel investors, friends and family, and also crowdfunding are typical sources for seed funding. What separates this type of financing from venture capital is the early stage in which these funds come in and the relatively low amount of investment (usually in the tens of thousands of dollars). There are also many foundations and other non-profit organizations that support small businesses with soft loans to get started. In addition, some countries have government programs to support entrepreneurs. Make sure you do your research on these programs, contests, and grants in your community to get all the low hanging fruit you can get!
Bank loans and credit cards
Banks are not your typical investors in mobile apps, especially not in an early stage. They often demand a solid business plan and want to see positive cash flow fast. Also, interest rates can be quite high. This is especially the case with credit cards, which is probably the most expensive way you can finance your company’s startup costs and is therefore only recommended as your very last resort.
Arguably the most elusive form of getting funded is through venture capital. Venture capitalists are professional investors that see hundreds of business ideas on a weekly basis and know exactly how to find any weaknesses in your business plan. As mentioned, showing traction is an essential part of convincing these guys to shell out cash on your app. A strong growth plan and an all-star founding team also increase your odds and there’s the art of pitching to wrap it all in a single convincing story. However, if you are one of the lucky few that makes it, the payout is often large. Not only do you get considerable financial resources, often VCs bring in their network and skills to help you succeed. One of the most important activities when it comes to obtaining funding is networking. As always, there is power in numbers and meeting a variety of people is key. From venture capitalists to your cousin’s boyfriend with money, there only needs to be one that believes in you. So get out there and get your idea in front of people.