The app market is a challenging and competitive landscape so it is important that entrepreneurs find the right investment for their project. In the digital age, a great idea and in depth knowledge of coding and programming is not enough to succeed as costs can mount up rapidly after launching an app based start up. Getting investors on board is vital so you need to prove that you can execute your business plan while highlighting the app’s promise and value proposition. Navigating the financial aspect is key to making a positive impact in your chosen sector so start by seeking out potential backers and investment opportunities.
Covering costs
Developing an app costs money so you will need to cover investment for the planning, design, features, infrastructure, app administration, testing and deployment stages. A recent Kinvey report shows that it takes upwards of seven months and an average of $270,000 to build one app though 14% of CIOs and Mobile Leaders have completed a project with an outlay of $50,000 or less. Whatever the size of the project, you need to start thinking about factors such as how many specialist developer consultants you require and the costs for scaling server and administration functions. To cut down on app development and management costs, you should try to use Software-as-a-Service products from cloud vendors like Salesforce and Microsoft.
A separate report by Clutch claims that the infrastructure and not the features of the app will be the largest cost drive during development. These costs typically include basic controls, third party integration, data storage, access to enterprise data, scalability and data encryption. Clutch estimate these costs can rise to around $60,000 on average compared to features ($30,000), design ($25,000) and testing ($20,000). Individual costs you will need to think about include login authentication, backend connections, complex business UI and offline functionality. There are several mobile apps available that will calculate the costs of ad development such as Otreva, Tsuna Designs, imason and Kinvey. It is important to remember that costs will continue after development with an AnyPresence survey showing that a third of enterprise mobile application development professionals update their apps at least once a month. Frequent updates can be a huge ongoing cost driver over the long term.
Fundraising path
Begin by establishing an ‘elevator pitch’ in order to best describe your app, what it is, competitive differentiators and other factors which make your app stand out from the crowd. This should be supplemented by a ‘Pitch Deck’, which is a sort of streamlined business plan to engage investors. This presentation should be no more than ten slides and last around 20 minutes. Finding investors that want to back you app can be difficult but they can be found from a variety of sources such as friends and family, ‘angel’ investors or early-stage VC funds. Try to get someone you know to make an introduction rather than opting for ‘cold’ generic emails and other communication. If you only have the option of connecting via email or social media, make sure to keep the pitch to between two and three sentences. Concise content is the best means to securing interest from investors. It also important to target seed stage investors that want to invest money in mobile apps and innovative tech.
Investment sources
There are a number of options available to you for raising funds, beginning with bootstrapping. This method involves raising money through your existing savings, investments or job and could be an ideal means to creating a starting sum to get your app and running if the start date is still a few months away. When looking for further investment opportunities, app contests and close friends and family should be the next port of call. You can then look further afield by appealing to angel or seed funders. Angel investors are usually individuals who get behind a particular idea and invest in companies even if they haven’t got a fully developed app yet. This is where your pitches will come into play while a prototype app can serve as a foundation for your project. Alternatively, showing an interactive app demo with a high fidelity user interface may be the best idea as it will enable investors to ‘get’ what the app is about without having to show a potentially buggy and slow loading application.
There has been a notable rise in the number of crowdfunding platforms such as KickStarter and Indiegogo in recent years so take advantage of these if you have a unique and original idea. Further options include Xchange, an app-specific funding platform that allows funders to buy your potential app and you then get paid when the app is published to the marketplace. This could be a worthwhile approach if you want to make an immediate return on investment. Meanwhile, Appstori enables developers to “raise funds, find beta testers, build an audience, advertise their needs and wants, and create an overall “Stori”, allowing friends, family, and consumers to be part of the team that brings an app to market.” In order to get funding via Appstori, developers must reach a designated funding goal while the app collects 7% for successful projects.
Stephens Inc.
You could also fund an app project by getting a traditional loan from a bank. Many banks provide small business investment to entrepreneurs but there will be much more due diligence involved. You will need to present a full business plan that covers aspects such as revenue projections and market research. Securing the investment you need is eminently possible in the investment world so look at all the options available to you. Stephens Inc. CEO Warren Stephens is a prime example of an entrepreneur turned hugely successful businessman. Stephens’ independent firm is currently among the largest privately owned investment banks in the United States.
Finding the right investment for your project can appear to be a daunting prospect but entrepreneurs with a bright idea and a successful plan can quickly get the finance they need to get ahead. Remember to budget for all the costs involved then begin to pitch to investors and take advantage of platforms that can make your prototype app into a reality.
