Mobile apps are certainly a viable business idea in today’s world. Just browse through the app stores and you’ll find a lot of top-tier apps that are earning millions of dollars on a daily basis. You also might believe that your own app idea has what it takes to make it to the top, but is your idea enough to get the ball rolling in the right direction? Not quite.
Taking an app idea from its concept stage to the final launch stage and from there to running it as a business entity will require a lot of money. However, most entrepreneurs are short on cash, so what’s the next logical place to raise money? It’s easy, find an investor.
There are a lot of investors out there who can fund your idea endlessly if they see potential in it. From Facebook to Uber to Airbnb, every great app idea rode on the cash cushion provided by its investors till the time it reached profitability.
Investors can fund your idea too, but you can’t just turn up to an investor’s door asking for money one day. To acquire the right kind of funding, you need to understand the right way to pitch your app idea to investors.
This guide has been compiled to help you understand exactly this.
Here, we have outlined the complete process of getting investors for your mobile app idea, starting from the preparation stage to the kinds of funding rounds as well as the types of funding you can ask for.
The Preparation Stage — Things To Do Before Pitching Your Mobile App To Investors
A simple app idea, no matter how revolutionary, lucrative, or disruptive it sounds, isn’t enough when you pitch to investors. Just think of it this way. If you were an investor, would you agree towards funding an idea for millions of dollars if the entrepreneur hadn’t come prepared with some basic groundwork? Probably not and that’s exactly what you need to understand.
A serious amount of work is required on your end to ensure that your app idea appears worthy enough for investors to get interested in it. What investors want to see through this preparation and groundwork on your end is whether your idea has what it takes to succeed amongst the competition.
They want to see the exact roadmap you have in mind to take your app idea from its initial stages right down to profitability.
If you figure all this out, you will increase your chances of getting investors on board for your app idea.
To help you out in this process, we have prepared a checklist on the things you need to accomplish in the preparation stage before pitching your mobile app idea to investors:
- Analyze Your App’s Niche
- Branding & Visualizing Your App Idea
- Creating A Unique Elevator Pitch
- Building A Pitch Deck
- Building An App Prototype Or MVP
Analyze Your App’s Niche:
The Google Play Store has more than 2.8 million apps while the Apple App Store has more than 2.2 million apps. This adds up to a whopping 5 million apps on both these app stores. There’s an app to serve almost every single purpose imaginable. From lifestyle apps to gaming apps to even personal wardrobe assistant apps, the app stores are flooded. So if you believe that your app idea is unique and has never been done before, you need to be really sure about it as investors as highly unlikely to say yes to an app idea that’s already been done to death.
Research your app’s niche and check out who your competitors are and what their exact service model is. Also, you will need to research on their monetization strategies as well as their revenue growth over the years.
The investors are going to ask you really difficult questions like “What problem will your app help solve?” “Do you know what your competitive landscape is?” “How can you be sure that users will like your app and use it like you envision them to” “How can you prove that your app is unique from that being offered by your competitors?”
Before going to investors, you need to brainstorm all such possible questions and then find out credible, well research answers for each them. Investors have a zero-sum approach i.e. invest money in something, get the business venture to multiply the amount. This is where you need to prove to them that they are not funding a generic app idea. You need to show them that you know the audience you are targeting, what special features your app will have, what your monetization strategies will be among other similar aspects so that they can become confident that your app idea is worth investing in.
Branding & Visualizing Your App Idea:
Branding helps provide life to your app idea. Without it, things look vague. Starting your branding process is simple. You can begin by creating the logo, purchasing a domain name, building mockups of your app screens, etc. Having all this branding material at hand will not just make your app idea more presentable but it will also signify to app investors that you really are digging into making your app idea a viable success.
Without branding, you won’t be able to kick off your development process since everything at this stage will revolve around how exactly you want to present your app to audiences.
Branding aids in visualization, thus making it easy for investors to understand what the app will appear like once it’s finished.
Creating A Unique Elevator Pitch:
An elevator pitch can be understood as an extremely short synopsis, summary, or brief that provides a quick overview of your idea in a way that makes it engaging enough to pique the interest of the other individual.
Investors don’t generally have a lot of time so you really need to have an elevator pitch for your app idea before you go and meet them. A great elevator pitch can instantaneously help you out in getting the investor’s initial attention.
To give you some background of why it’s called an elevator pitch, imagine that you come across an investor as you board an elevator in your office building. The elevator is going to the 25 thfloor and you have just got 30 seconds till you reach there. It’s in those 30 seconds that you need to get the actual idea of your app across to the investor. This should include all the main and important parts including the app’s purpose, its core features and how exactly does it solve an issue users are facing. Only if you succeed in getting this pitch across, will you get another chance to meet with the investor to provide it with a full-fledged presentation on the details of the app.
The key here is to get them interested without wasting their time. Develop your elevator pitch and if you can’t tone it down effectively to 30 seconds, then you need to continue refining it until you get it right.
Building A Pitch Deck:
Once the investor gets hooked on to your app idea through your elevator pitch, he/she is going to grant you a proper meeting in order to hear your idea out in full detail. For this meeting, you need a pitch deck.
If you don’t know what a pitch deck is yet, then you can consider it as a presentation that’s quite brief usually no more than 15 slides, through which you can get investor(s) to understand what your business plan entails. A pitch deck can be made using Keynote, Prezi or even PowerPoint.
We did a podcast with Jose Caya, the founder or Slidebean, and a man who is an expert at creating the right pitch decks, so if you really want to get into the details, then you should hear it out.
If you want to have an idea of how does a pitch meeting goes or what questions are asked during it, then you need to watch the popular TV Show “Shark Tank”, where entrepreneurs come in and pitch their ideas to investors.
However, you will need to avoid one common pitfall when making your pitch deck as this can drastically reduce your chances of using it as an effective tool during the pitch meeting.
Do not use the exact same things in the pitch deck that you will say in the meeting. The pitch deck needs to have as much important visual information as possible like audience segmentation graphs, branding collateral, relevant figures or stats etc. Do not make the mistake of reading off the pitch deck as the investors can do that themselves.
To give you an understanding of what a top pitch deck should look like, here are some great pitch decks made by brands over the years:
Building An App Prototype Or MVP:
Having something tangible during the pitch meeting will really help your cause, that’s why you need to create either an app prototype or a Minimum Viable Product or (MVP). When you get an app prototype developed for a meeting with the investors, it signifies to them just how much you have invested into the idea yourself and how serious you are about it.
The App prototype provides the investors with an interactive demo experience, allowing them to get hands-on with your idea rather than just hearing about it. It helps visualize how exactly does everything that you say translates into a fully functioning product.
You can also use design mockups but they are not interactive.
At Tekrevol, our mobile app development team can develop the perfect mobile app prototype or MVP for your app idea which you can then easily pitch to investors.
The Different Rounds Of Funding:
Now that you have prepared yourself for pitching your app idea to investors, it’s now time to actually meet them. Funding is not just of one type as there are different rounds involved. Each of these funding rounds will offer different levels of funding and meeting with a different set of investors. Pitching the right kind of investors whose goals for investment match the kind of funding you require to depend entirely on you understanding the different rounds of funding.
The best way to understand this process is to envision it as a series of milestones that you need to pass through as you work your way up with your app idea.
The Pre-Seed Round Of Funding:
This is the first stage of funding where you actually start raising investments for your app idea. The investors in this round will generally come in from your close circles as you leverage your own professional and personal network. Your friends, family or business partners are the ideal people you can pitch as investors for your app idea at this stage.
Your success at this investment stage will help you materialize your app idea by providing you with the necessary capital to create an MVP, research about app idea’s ability to earn, pay your co-founders or early employees.
The investments you need to target in the pre-seed round of funding are generally around $200,000. This is enough to cover your requirements at this stage.
The Seed Round Of Funding:
The funding required to fuel the initial growth of your startup app idea is gathered in this stage. Here, the money you will acquire will be diverted towards helping you further refine your app idea in order to get it close to being market-ready.
What you are looking for is getting the required amount of money that can help you determine the app’s market compatibility, what additional features does it require along with covering for any additional startup operational costs like hiring developers.
The investment figure you are looking for can vary depending upon how complex your app idea is, so the range here is between $15,000 up to $3 million.
As there is a high amount of risk involved with your idea at the moment, you will require those investors that are willing to put in their money despite it. For this, you need to pitch to what we term as angel investors or early-stage venture capitalists as they are the ones most likely to invest in your idea at this point in time.
The Series A Round Of Funding:
The Series A round of funding is reserved for only those app ideas that had the potential to actually get their proof of concept and product-market fit validated. If you are looking for Series A funding, then your product certainly has both of these factors and is halfway to the mark of being a major success.
The funding you need in the Series A round of funding is to be channeled towards helping you scale your startup app idea as well as supplement your branding and marketing efforts.
The amount you require here is going to be big, in the range of around $3 — $15 million, so you will need to find the right kind of investors for it. Venture capital firms along with bigger angel investors is who you need to target to secure such a huge investment.
The Series B, C Rounds Of Funding:
A startup app idea that came this far is certainly on the path towards success and now the next round of funding will go towards consolidating and building upon that success.
From increasing your app’s global footprint to bringing in a new team of top executives, the investment can fuel multiple different types of expansion plans. Your app idea is now being lapped up by users and they are using it on a consistent basis, a cash stream is building up and the product is now well established. $24.9 million is the average amount that most startups raise at this stage but there is no upper limit to how much you can pitch for to venture capitalists or even corporate partners since they are the only ones with pockets deep enough to fund you at this stage.
With this funding round, you can also plan to go public through getting listed on the stock market along with even looking to acquire potentially valuable and aligned startups.
Types Of Funding You Can Opt For Your Mobile App Project:
By now, your app idea will be much more refined and presentable. You will also be aware of the different rounds of the funding process. Now, it’s time to move on to finding the right kind of investors.
An Investor can be any individual who is willing to finance your app project in varying degrees. This can include anyone ranging from people belonging to your close circles like friends or family to professional investors like venture capital firms or angel investors. Investors understand the scope of your app idea and how it can become a success later on so they want to have a stake in it.
The various different types of investors you can find for your app project are as follows:
Angel Investors Or Seed Funding:
An Angel Investor is generally an individual who has a high net worth and is willing to buy an equity in a new startup. This equity is bought so that the startup can get the required financial investment it needs to succeed.
Finding an Angel Investor is often quite complex and hard. There are multiple reasons for this. Firstly, when you go towards finding angel investors, your app idea has not fully materialized so whatever you have, is in the form of a concept.
Secondly, since it’s the investor’s own money that they would have to invest, you have to be very convincing on how exactly this investment will benefit them. For this to happen, you need to do proper homework so that you have proper, logical answers to each question that they might pose.
Angel Investors are generally concerned about getting a significant ROI on your app, so ensure that you put in all your efforts to assure them that they will certainly realize this goal.
Venture capitalists only show interest in startup ideas that seem to give off the feeling that they have high growth potential. The funding is offered in return for a stake in the startup. Some of the most renowned startups out there funded themselves through venture capital. Venture capital firms are the best way for any startup to access the equities market easily.
If you want to get funding from venture capitalists, you can’t go in with a raw idea as it will just be shunned. You have to show that your app idea has potential and you have already achieved a semblance of stability in your journey.
Venture capitalists expect a fast return on investment so they might ask you to make a few modifications to either the app itself, its growth or revenue model or any other aspect in order to realize this aim of theirs. So be ready for that if you pitch for funding to venture capitalists.
Bootstrapping is the type of funding process that doesn’t require any sort of external input or support. It’s primarily about self-starting your idea and taking it to the next stage.
In more simple terms, bootstrapping your app idea would mean to leverage your own personal funds to power the initial stages of your project. This can include your savings, any stock you might have or other personal resources.
In Bootstrapping, you need don’t to cede control of any aspect of your app idea to anybody since no one except you has a stake in it.
While the number of funds you can generate on your own might not be too much, you still can get a few important things done with them like creating a prototype of your app in order to make it ready for the next stage of funding.
At its simplest, Crowdfunding can be termed as the process where a large number of people try and fund a certain project by contributing very little amounts of money on their own, usually without getting a stake in the project.
Crowdfunding has become one of the most popular routes for raising investment capital for promising and innovative ideas and ventures across the world.
If you are willing to finance your app idea through crowdfunding, then you need to be familiar with the different types of funding available in this space.
The first one among them and probably the most popular is donation-based funding. In this form of crowdfunding, the donors don’t get any sort of equity in return for providing the idea with their funding.
This type of crowdfunding became popular with the success of websites like GoFundMe.com, where most people used to raise funds for their personal reasons like healthcare support, education support, etc.
You can use this form of crowdfunding for your app idea but it won’t generally suit your niche and the results might not be too good either.
The next type of crowdfunding is reward-based funding. Here, you also don’t offer any sort of equity in the app idea or startup itself to the donors but instead, offer with them certain rewards like early access to the new app or lifetime access to the app’s premium features. Sites like Kickstarter.com are among the most popular spaces where such funds can be raised easily.
The last type of crowdfunding is investment funding. This type of crowdfunding is characterized by the sale of securities belonging to the startup. But this isn’t similar to venture capital, since here, the owner retains all the authority over the app idea, the type of securities being offered and their equity percentage.
Here are the five best sites if you are looking for crowdfunding for startups:
This type of funding became popular with the creation of business incubators and startup accelators across the world. Business incubators are places where startups or potential entrepreneurs can come in, develop their idea, get mentorship and support and finally run in a competition, the winner of which will receive a high amount of funding.
Business incubators are now being run by top educational institutions, corporate forums etc. These contests are extremely competitive so in addition to having a chance to get funding for your app idea, you will get a lot of exposure in terms of what strategies other startups are deploying, what kind of investors are there etc.
Even if you don’t win, you will certainly learn a lot and diversify your network which can benefit you later on.
Here are the top 10 business incubators in the world that you can pitch your app idea to:
App Development Company Financing:
While not a lot of app development companies offer this facility, some do, like us. Tekrevol offers app startup owners with the facility of offering bank based financing for their app project. This funding generally includes the total cost of developing your app. The financing is done through bank partnerships and you can know the full details of this engagement by talking to our representative.
The Next Stage After You Have Secured Funding For Your App:
Securing the right amount of funding is a continuous, ongoing process and it shouldn’t stop till the time your app has achieved self-sustainability i.e. it can support its growth and expansion through its own earning streams.
The best apps are the ones that continue to evolve along with custom expectations by including new features and updates, so don’t stop after your app has been developed.
As you progress through the various stages of app development through leveraging the funding you secure from investors, ensure that you are adding new value to your app idea and refining it.
Creating an app is certainly a very lucrative business these days if you get things right. The process is definitely quite complex but it is certainly achievable so work hard and keep putting in the right amount of effort. There is no reason why your app can’t succeed if everything is in place.
Hire a mobile app development company to develop your app for you as you keep on building the strategic components of you app and you will surely succeed.
Originally published at https://www.tekrevol.com on October 7, 2020.