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12 minutes read

App Funding: How to Raise Funds to Develop Your Mobile App Idea

By Robert Kazmi
By Robert Kazmi
All Industries
12 minutes read

Having a great mobile app idea is not enough to make it come true; you need app funding. Plenty of people come up with great app ideas daily, but when it comes to execution and development, only a few can make it to the market.

One of the most difficult stages of the mobile app development process is getting funding. There are several effective ways to secure funding for an app, but there are few resources that explain effective ways to get funding. 

At Koombea, we have a lot of people who contact us regarding mobile app startup funding-related matters. The most common query most people have is how to find funding for app development.

Because we want to help your mobile app come to life, we have put together this list of techniques and ideas to help you secure funding for your app. There are many ways to get seed funding for app startups, but these are the ones we consider to be not only necessary but also realistic.

Depending on your ambitions some recommendations should be prioritized over others, but that is something that only you can decide as you determine how much funding a mobile app and business idea require.

How to Get Funding for an App Idea

Before we explore some of the most effective tips and strategies you can use to secure app funding, you have to understand that most angel investors and venture capital firms are looking for more than an app idea with a minimum viable product (MVP).

In addition to a great app idea, you need to prove that you have a solid business plan backed by market research. Friends and family might be willing to use their own money to help fund your app idea, but if you are interested in securing venture capital funding, you must prepare a detailed business strategy and model to pair with your app idea.

While developing your mobile app idea, create a business plan as well. This business plan could be as simple as charging customers to download your application, or it could be a service-based model like Uber or Airbnb, where customers pay for a service.

Regardless of the direction you want to take with your application, you need to know how it will potentially generate revenue before seeking seed funding from established investors. You will find that securing funding for an app is far easier when you have a solid business plan backed by market research.

Let’s take a closer look at some ways you can raise money to build mobile apps. However, before we explore the various ways you can get funding, make sure you prepare an elevator pitch.

Prepare an Elevator Pitch

This should be at the top of your to-do list. An elevator pitch is a way of explaining to your audience what your concept is succinctly so that anyone can understand it in a short time.

By itself, it won’t get you the necessary funding, but if you don’t have one you are going to have a hard time. In other words, it is necessary but not enough to have one. Remember that potential funders will judge your idea based on what you tell them, so spend all the energy you can on this. 

There is no one-size-fits-all format. However, this can be decided based on the audience you are trying to address. For example, presenting your elevator pitch to venture capitalists differs significantly from presenting your pitch to your family or friends. Ultimately, your creativity will help you determine which approach fits the situation best.

A good elevator pitch should: explain what your product or service is, why it matters, for whom it matters, what problem it solves, why your idea is better than others, and how it will actually solve the problem. Failing to do so will result in potential failure. 

We have already discussed the importance of having a business plan for your mobile app. The elevator pitch is how you will sell your ideas to potential investors. Your pitch should be detailed but succinct.

If it takes you longer than the length of an elevator ride to describe your idea, you need to work on shortening your pitch to its most essential points. Obviously, you likely will not be pitching your idea in an elevator, but this time frame has proven to be the most effective.

Let’s be honest. If you cannot detail your idea clearly and succinctly, investors will not have faith that you have a good idea or even fully understand what your idea or business plan is. Perfecting your elevator pitch should be a top priority once you have a solid idea for an app and business.

So how do you begin to fund your app? Let’s examine the most common ways entrepreneurs get funding to pursue app development.

app elevator pitch

Ask in Your Network

Most people tend to discard this option without really considering it. Asking friends and family for money can be uncomfortable. However, we strongly suggest reaching out to the people closest to you to see if they will help fund your app.

You should do this before contacting big players. Venture capitalists will have much higher expectations for their money than your family and friends. You might think that they don’t want to invest in your app development project, but you may be surprised by the response you get.

Some people might be interested in investing, or they might even know about someone who is. If nothing works out with them it will still serve as an opportunity to prepare and practice your elevator pitch, so don’t think of this as a waste of time. 

For many startups and app ideas, this is a common way to start getting funded. While you might not feel totally comfortable going to the people closest to you to get funding, it really is not a bad idea. Of all the people in the world, the ones closest to you want you to succeed the most.

In addition, whether they end up giving you money or not, they can offer valuable advice and insight to help you hone your pitch and business idea. Family and friends will likely give you far more time and space to explain your ideas than venture capital firms.

Even if you never ask family or friends for money, you should practice your elevator pitch on them first before you seek funding from more established investors.

Crowdfunding Platforms

Thanks to alternatives like crowdfunding it is possible for early-stage ideas to reach out to large audiences and ask for funds. With this option you have access to an important number of people who may be interested in individually contributing to your project.

Although each individual contribution might not be substantial, volumes do make a difference. The success of this strategy depends on your ability to connect with people, so don’t over-rationalize. Instead, try connecting at an emotional level. 

It is important to generate relevant content that will help you communicate your idea and motivate people to contribute. Visual material tends to generate a stronger impact than plain text. Videos are a great way to communicate your message and they are easy to share.

A 3-5 minute video should do it; remember that people don’t like watching long videos. Consider giving your contributors a reward as a sign of appreciation. This could be merchandise, stickers, free or discounted access to your app or service, etc. The more creative you can be here, the better your odds of success.

Some of the most important crowdfunding platforms are Kickstarter and Indiegogo, but they are by no means the only ones. There are some that are even industry-specific depending on what you plan to do.

Just remember to consider all the different crowdfunding platform options if crowdfunding is your final choice and check the terms and conditions. Most platforms have specific rules and may retain a part of the money you collect. Also, if you don’t meet an expected goal there might be certain conditions that apply.

If you feel crowdfunding is ideal for your app maybe you should also check funding opportunities like an Initial Coin Offering (ICO). In this little-known modality, a cryptocurrency token is offered in order to raise capital.

While an ICO might not be the right choice for your idea, if your business model or app idea centers around blockchain technology, you should strongly consider the pros and cons of an Initial Coin Offering.

Investors

This is the option most people think of when considering their funding options. Investors have the potential to solve your financial problems for years to come (assuming that you don’t go bankrupt and play it smart).

There are many types of investors, so it is a good idea to research them and decide which makes the best fit for your project. Venture capitalists and angel investors are the two most common types of investors for these projects.

These investors look for different types of businesses and startup ideas to invest in. Each type of investor has different goals and expectations so it is important to fully research them before making a pitch to ensure that it is as effective as possible.

These are people with a long trajectory of funding apps, so their app and business expertise is a valuable asset that might also interest you. Just keep in mind that they are professionals at what they do, and they take their job seriously. If you decide this is your path, make sure to have the necessary professional background. Additionally, be sure to register your company to bolster your credibility. Formation services such as Inc Authority, which has been reviewed in detail by GovDocFiling, can help with company registration as well as handling necessary legal paperwork for your fledgling startup.

If your app has some serious potential we highly recommend considering funding platforms known as startup accelerators. Y Combinator, Techstars, and 500 Startups are some of the most popular. 

The main advantage of accelerators besides funding is that they can help you mature and grow your idea. Being endorsed by an important accelerator is an almost guaranteed way of scaling your app. 

Other Tools and Alternatives

Another alternative to consider is whether you are willing to be the sole owner of your app. If this is the case, then you might consider bootstrapping it; we recommend you read our post on the subject. Just consider that this path might be hard, however, the results could be worth it in the end. 

Two other intriguing alternatives you should consider to fund your app include, getting a bank/business loan or entering app contests. There isn’t much to say regarding business loans. You should seek expert financial advice to make sure you understand the legal implications and that you can meet your payment obligations.

In regards to app contests, this is very specific to the industry you work in. Explore what potential opportunities exist in your target industry. You might be surprised to find that there are several different contests directly related to the industry your app is meant for.

One last funding option to explore is app-specific funding platforms. These platforms are specially designed to help app-based startups get the funds they need for app development. A good thing about this alternative is that it allows you to sell your app at an early stage and make some quick money rather than embarking on a long-term business adventure. 

Frequently Asked Questions

At this point, there are likely still questions you have regarding app funding. As a skilled development company, we have come across some questions more than others. We have included a few of the most common questions we get regarding app funding below.

How Do I Determine How Much Funding I Need for My App?

Calculating the funding required for your app involves estimating the costs of development, marketing, and ongoing operations. You’ll need to consider expenses like hiring developers, designers, marketing campaigns, server hosting, customer support, and include a contingency for unexpected costs.

What Key Metrics and Milestones Do Investors Look for when Funding an App?

Investors typically evaluate several critical metrics and milestones when considering funding for an app. These include user acquisition and retention rates, the app’s revenue model and income generation, the market potential and scalability, the expertise and experience of your team, evidence of traction in the market, and a clear roadmap for future development and growth.

Which Is the Better Choice, Equity Financing or Debt Financing?

The choice between equity financing and debt financing depends on your app’s financial situation and your preferences.

Equity financing involves giving up ownership in exchange for capital and can be suitable if you’re looking for long-term partners and are comfortable sharing control and profits.

Debt financing, on the other hand, involves borrowing money that needs to be repaid with interest and can be a good option if you want to maintain full ownership and control of your app.

Final Thoughts

The cost of app development isn’t cheap, but the alternatives to fund your app are many. In the end, there is no good or bad option. This is something that only you can decide depending on what your plans are and what the potential of your app idea is. 

We know that this is one of the toughest parts of bringing your idea to the market, but don’t feel discouraged. Good things take time, and the results are worth it.

If you feel like you’ve got the financials of your app worked out, it might be time to start looking for the right app development partner. When that moment comes, contact us. We’d be more than happy to help bring your app idea to life once you have secured app funding. 

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