Where to Get the Money to Build Your Mobile App
You have a great idea for an app, but how do you find the funds you need to develop it?
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Raising $1 million for your mobile app startup is child's play -- assuming you've proven that customers want your product.
Many entrepreneurs mistakenly assume that investors will be interested in investing in their mobile app at the idea stage. What they fail to understand is that ideas, or great ideas, don't mean anything unless they're validated by customer orders or downloads.
In a recently recovered interview with Steve Jobs, he talks about the disease that grips most people, which he explains is "thinking that a really great idea is 90 percent of the work. The problem with that is that there is a tremendous amount of craftsmanship in between a great idea and a great product and as you evolve the great idea, it changes and grows."
Investors realize that there are many ideas that are similar in nature (Google vs. Altavista), but the difference lies in the execution. And when you prove your execution works, you have a better chance of raising money through venture capitalists.
Related: Why Starting Small Can Lead to a Better App
By the time Buffer App raised its $450,000 seed round, the team already had 55,000 users and were making about $13,000 a month. Buffer's co-founder Joel Gasciogne admits, "We would have really struggled to raise funding without that traction, and so I advise others to just get started and try and build something that people will pay for."
There are many options for raising funds to start building your mobile app before you get to the investor. Coming up with an investment source is not easy, but here are some resources to get you started:
Bootstrap: If there is any way that you can bootstrap your mobile app, do it. Bootstrapping essentially means that you raise money through your existing job, savings, investments or alternate business. If your start date is at least six months away, start contributing to a fund each month. You will not end up with a huge sum, but it will be enough to get you started. Outsource your app development in the beginning. This way, you can work out a payment schedule that is spread over the development lifecycle and will help you to get started right away with little investment.
App contests: There are many app contests where the top ideas win money to fund development. A lot of these contests are also run by business incubators and angel funds. The contests are highly competitive, and you typically make a pitch to a set of judges (mostly investors), so make sure your pitch presentation is fantastic and show how it is intended to change lives.
Related: How to See Your Startup Through The Eyes of Investors
Friends and family: Call on your friends and family members who would believe in your idea enough to put money in it. Get them involved and take them through the business plan, even if it is a rough sketch. Chances are friends and family will be more patient and forgiving than angel funds or investors. In return, you can offer them a stake in your profits.
Loans: Banks provide small business loans to entrepreneurs who can prove their idea can bring about a positive change. Of course, you need to present lenders with a solid business plan with market research, revenue projections, etc. The due diligence that is done by banks will be far more than what friends and family or crowdfunding would do, so be prepared for all sorts of queries about your business, product and its market. Some resources are SBA Loan Programs and Wells Fargo BusinessLine Line of Credit.
Angel or seed funding: Angel investors are individuals who invest in companies that have a concept or an idea, which is on paper and not yet materialized by means of a developed app. If they believe in your idea, they will fund you. However, this would work best if you can showcase a prototype (first release version) of your mobile app. This would serve as proof that you are serious about your product enough to put something at stake.
Credit cards: Last, but not the least, if you really must get started in building your mobile app while you are evaluating other options, credit cards can get you that initial push. Using a credit card can be an expensive way to fund the development, but on the positive side, it can help you get started quickly. In fact, if you can get your mobile app off the ground through this means, you can then go back to other sources to show proof of your work and gain more confidence in getting the second round of funding.
Raising funds for your mobile app is dependent on only one person -- you. Only you can invent the future you want. So brush up your networking skills and get out there and meet as many people as you can. Find other entrepreneurs who have raised funds for their mobile app in the initial phase and speak to them about their experience.
Related: Here Is How to Get a VC's Attention