5 Ways App Developers Get Funding

There are thousands of great app ideas every day, but few last long enough to become a reality. App developers are great at coming up with plans for applications that meet certain needs, but without proper funding, the idea cannot evolve. Finding ways to make this happen is essential for success.

App developers get funding through:

• Investors
• Partnerships
• Crowdfunding
• Loans
• Funding contests

App developers find success when they prepare to make the funding request, fleshing out their idea and creating a solid plan to share with investors. By identifying where they are in the funding stage and visiting the right places, a developer should have no problem overcoming the financial hurdle.

What App Developers Do Before Requesting Funds

Before a developer starts to ask for money, they need to:

• Determine how much they need
• Solidify their ideas
• Confirm the value of their ideas
• Construct an effective elevator pitch
• Research the market
• Develop an interactive demo

These may not all be achievable, but doing as much groundwork as possible increases the chances of funding their app idea. If a developer can prove the app is needed and that they have a plan to sell it, investors are less likely to pass over the idea.

How do most small businesses get funding?

Calculating Needed Funds

Before you can ask for money, you need to determine how much you need. Walking in without a number is a surefire way to deter any interest in the app. It shows you have not thought through your plan, and proves to investors that you lack the business drive to push the idea.

You are also more likely to overestimate, increasing what you give away in exchange for funding. This chips away at your shares, rights, and profits.

Take a look at the average cost for an app similar to yours, then determine how much you can cover. Establish how much you need:

• To build the app
• To market the app
• To cover post-launch services

You can also plan for potential expansion, but make sure you establish your base app first.

Solidifying Ideas

If you haven’t already, create a detailed explanation of the application, including:

• Features
• Design
• Community need

Your ideas can come in any form, including graphics, outlines, and mockup designs. Just make sure you explain your vision as thoroughly as possible.

Confirming Value

Value is what sets applications apart. Many apps available do not solve any real problems. While this works for genres such as gaming, it often leads to short-lived success and minimal profits.

By tying your application to a specific need, you can confirm its value. Proving your app solves problems establishes its sustainability, and it dispels any doubts about the investment.

Market Research

Your market research should cover:

• Target audience
• Competitors
• Supporting stakeholders
• Government regulations

Make sure you understand who your app is intended to serve and who your competition is. You can learn more about what your audience needs and learn from mistakes the competition made to develop a sturdier application.

Perfecting an Elevator Pitch

Even if you communicate well, practice explaining your idea in a 30 second elevator pitch. This should be:

• Concise
• Informative
• Entertaining

You need to convey as much information as possible in a short window, but you need to take care not to overindulge on facts. Perfecting the elevator pitch gives you an edge over others who underestimate its value.

Developing an Interactive Demo

Ideas are great, but if you can manage to create a short demo then potential clients can get a feel for what your app is about. This may not be a full power application, but it lets them know you have the framework in place.

Do not put too much pressure on this if it is unattainable. Reach as far as you can without overextending, and focus on the information you can provide from your current position.

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The Stages of Funding

There are 3 basic stages of funding:

• The seed round
• The angel round
• The series

You can repeat the last stage as often as needed, but understanding where you are in your funding journey helps you identify the best places to search.

Seed Round

The seed round is where you need to fund basic actions, and it usually includes investment from your inner circle.

The majority of the funding in the seed round comes from yourself, friends, and family.

Angel Round

Your angel round is more formal. This is where you expand further into your network to secure more serious investments essential to the development of your application.

Most investors are outsiders who believe in your idea, and you need to develop a plan to convince them.

Series A (B, C, D, etc.)

You can move through this stage of funding multiple times. This is the first step in your larger-scale venture, and it occurs when you  need more funds.

These series work to develop your app to its full potential, and you can always revisit this stage as inspiration strikes.

Where to Get Funding

Apart from bootstrapping and funding development on your own, you can fund your app by:

• Securing investors
• Establishing partnerships
• Crowdfunding
• Getting a loan
• Winning a funding contest

Each method fits a different situation, and it comes at a unique cost. You can employ any blend that meets what you are willing to trade and what you need to fund your app development.

Investors

Investors come in two general forms.

Angel investors usually will not ask for much in exchange, and you can retain more control and freedom by working with one. You can usually find them through personal connections or on sites such as AngelList or the Angel Investment Network.

Venture capitalists often provide more funding, but they ask for more in exchange. On top of the funds, you can also learn a lot from a venture capitalist interested in developing your application. Check out Funded for more investors.

Partnerships

If you have a friend, family member, or coworker who can handle a partnership, this can be one of the best ways to develop your app. It splits development costs between the two of you, and it helps you create a more rounded design.

Partnerships are not for everyone; make sure you can cooperate with anyone you choose for a partnership, and keep in mind that close relationships do not always translate to business compatibility.

Crowdfunding

Crowdfunding websites such as IndieGoGo can allow you to keep control while still gathering funds.

As long as you can capture public attention and convince them of your app’s worth, crowdfunding lets you finance app development without business meetings and endless professional development.

Most crowdfunding campaigns require you to exchange rewards with investors, and you can design different tiers of rewards to encourage larger donations.

Loans

Loans are the most popular method of funding business ventures because they require minimal hassle. The method for securing a loan is straightforward, regardless of where you get your loan from.

Examples of loans you can use include:

• Personal loans
• Collateral-based loans
• Business loans
• SBA loans

You still need to convince the lender of the value of their investment, but the focus should be more on your ability to repay. Banks and financial institutions do not get a cut of your business, and they only worry about getting the money back.

While credit and current salary also come into play, you can look at collateral-based loans as needed. SBA loans also offer lenders a guarantee of their money, and they are a great choice for any app developer’s small business.

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Funding Contests

If you have a solid plan for your application, look into funding contests offered. These competitions usually let you pitch your app to a board of investors, and you have the chance to win a cash reward at the end.

Some contests require you to complete a series of challenges, while others force you to rely on a single pitch. The prize money usually comes with little to no requirements, although certain competitions may be a gateway for venture capitalists to witness your ideas.

Frequenlty Asked Questions

Which apps are easiest to secure funding for?

Apps that solve a problem are most likely to secure funding. While games are a great source of entertainment, the market is oversaturated and there is no outright need. Lifestyle and productivity apps that can change a person’s life are likely to attract investors.

When should you get funding for app development?

Try to push off the search for funding for as long as possible. The sooner you get someone else involved, the more control they will want and the more you will owe them. You might find that you do not need additional funding, or you may only need it in a later stage.

Can you fund your own app development?

If you can afford to fund the development of your app, this might be a better option. Make sure you do not invest all your funds into one idea, but this is the best way to keep the app true to your vision and preserve your ownership.

To learn more on how to plan your own app developer business click here!

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