When it comes time for you to start the development, marketing, and launch of your new mobile app idea, you’re going to need app financing. And here’s where you have a crucial decision to make: do you call investors for some much-needed capital, or do you find a way to bootstrap and keep it yourself? It all depends on what you need in both the short- and long-term life of your app. Should you leverage partial ownership of your app to get it on the market quickly? Will that limit your control and profit later on? Let’s take a look at both sides of this and see what makes sense.
The Lowdown on Investors for App Development
You hear the stories all the time, and they sound very enticing: you get an innovative idea for a mobile app, quickly hit the market at the ideal moment, experience explosive growth, and sell it to a huge company for millions at the height of its success. If this is your ideal situation, then you likely want to start looking to secure some investors.
Why? Well, it sounds like you value profit, and there’s nothing wrong with that. You may have been in the hi-tech mobile app world as an entrepreneur before, or perhaps have worked with another company that specializes in this space. This sort of expedited development and concise marketing happens with product launches all the time, and there’s plenty of precedence to learn from. Here’s a simplified list of benefits when you decide to bring investors aboard.
Readily available capital: This one is obvious, but consider the benefits. All those overhead expenses like office rent, payroll, and necessary hardware can get wiped out immediately. You can now afford to hire the best and brightest in the field for any particular role that’s needed. You know that marketing, launch, and future operations of your app will be properly financed, so you can focus on the details of development as you should.
Speed: This might be the most important aspect investment can offer. The mobile app marketplace is a ruthless place, with a long list of savvy competitors ready to pounce on the newest ideas. Jumping in with your product at the optimal moment can make the difference between an innovator and an also-ran, and the right investment team should have the resources and the knowledge to launch your app at exactly the right moment.
Experience: Yes, some investors have no idea regarding the technology and marketing of your upcoming mobile app. It’s more likely, though, that these teams have quite a bit of knowledge and experience in this realm. They should have teams of consultants, marketers and other experts readily at hand to provide solutions at any point. And, if it comes time to sell later in the lifecycle of your app, they can provide ample opportunity for that.
So, you can see how investment can be a great option, and you can read more about best practices here. There are drawbacks, however, to giving others control and equity of your app. We’ll show those while you consider bootstrapping your idea.
Bootstrapping Your App
The term bootstrapping refers to the practice of using frugality, agility, and good old-fashioned hard work and sweat to finance your entire operation and keep it yours. Make no mistake; this method will likely strain every resource you have, from manpower to bank account, to the absolute limit. But, for many passionate entrepreneurs, the idea of relinquishing control of your dream to others is just not an option. Let’s go over a few talking points about how to bootstrap and why you should.
Lifestyle: Yes, you’ll be stretched thin, burning the midnight oil, and basically living and breathing the development of your mobile app for the foreseeable future. For some, that can put too much strain on family and stress levels, and that’s understandable. For others, though, they can continue working on their vision unencumbered with the restrictions and demands of investors. Most investment teams need a constant stream of minute details and progress reports, and typically have a strict timeline as to when they expect a return on their initial investment. This may put you in a position of compromised quality or a potential sale of everything before you want to.
The Sweet Spot: As with everything business related, there’s a basic formula for determining when you should decide between investors or bootstrapping. Here, it’s called the Sweet Spot, and it represents the confluence between time and valuation where investors would most likely be willing to step in.
As you can see, this spot is just before the halfway mark in the timeline of the project, and before the potential value starts to grow exponentially, presumably after a big infusion of capital. It all depends on the inflection points, or when the value of the business or product jumps up due to factors like achievable milestones, market validation, or product viability. If you haven’t seen these inflection points by the theoretical halfway point in your timeline, it’s probably best to continue with your bootstrapping.
Control: At the end of the day, it’s likely that owning and operating this app, along with all its growth, success, and potential problems, is something you want to be firmly in control of. Watching your vision grow organically at your preferred pace might just be the way you want it, and you can continue its operation as your full-time job. Again, passionate entrepreneurs typically do this as a labor of love; they are the heart and soul of the product, and giving up equity and ownership compromises that.
Bootstrappers need to be resourceful and agile, and this includes sacrifice, humility, and some thick skin. You may get friends and family in on the project, but realize that this might put some strain on those relationships. These are all things to consider before entering this stage.
Wrapping It All Up
In the end, it’s all about personal choice and control. Regardless of which direction you choose to take, developing a viable and technically sound app from the beginning is key, and you can get some great tips here. Talking your ideas and strategies over with a business analyst from an experienced app development partner is a wise decision, as they can easily determine what’s viable and what it will mean for your strategy.