Today mobile apps mean big business, it’s hard to imagine life without them. That said, having an idea for a great app is only half the battle, to turn it into a reality you’re going to need to fund it. Now, the financial hurdle shouldn’t stop you in your tracks, but it’s certainly worth being aware of how you’ll get the money together before you get too far in. If you’re the ideas person, you might need a few pointers as to where to look for funding. Keep your eyes on the prize though, the potential business benefits and financial rewards, and the effort of funding your app should be far less painful. We’ve put together a list of some of the primary ways to get investment in your app idea to give you a steer in the right direction.
Charity starts at home and so should your app investment. Having as much money as you can behind you before you go looking for external finances is the best strategy to keep control of your idea and impress potential investors. Start by setting up your own fund and contribute a percentage of your earnings each month. Scrape together everything you can from existing resources and assets and prove to everyone that you have confidence in your idea.
An extension of self-funding your app idea is to ask for help from friends and family. With their support, financial and moral, you will still maintain control, while getting a less demanding investment than from elsewhere. Make sure to manage expectations with your friends though, be professional and present a business plan. Not only does this give them confidence in your business idea but it gives you the chance to start developing your pitch.
Not all investments have to come in the form of cold hard cash. Sweat equity is an investment in the form of skills and effort. It’s definitely worth bearing this in mind if you choose a business partner. Your friends might not be able to invest money, but they might have the technical knowledge to help you get a prototype of your idea up and running. It might not even be a friend that can invest skills. If your idea is a really good one, and your pitch strong enough, some developers may be willing to reduce their costs in exchange for a slice of the profits.
If you’ve put together a strong business plan for your app idea or have already gained some interest in your app, then business loans are worth considering. If you have good credit and can meet certain requirements, loans will allow you to raise capital from a few thousand to several hundred dollars. With any loan you consider, you need to take into account the amount of interest you’ll need to pay back. Traditional banks will have higher interest rates whereas government-backed loans will have stricter requirements but lower interest rates.
Although difficult to obtain, government grants are available for business start-ups in Australia. The major advantage of a grant is that, unlike a bank loan, with its associated interest, they don’t have to be paid back. On top of that, the grants also offer related assistance programs to help you along the way with business development. There are a number of grants and funding programs to assist Australian businesses, including the following:
It’s essential to ensure you don’t change the strategic direction of any business idea to suit a grant. There’s no certainty of receiving the grant, and you should stay true to your idea. Put your business idea in place first and then look for grants to help accelerate it. Grants should help build your app; your app shouldn’t be designed to meet the grant requirements.
Competitions are available worldwide to reward great ideas with app development funding. The competitions are usually judged by the investors themselves so your idea would need to seriously impress them to win. Some of the better known competitions include the App Idea Awards and the CodeLaunch App Competition.
Your guardian angels are those willing to invest in your idea when it is still purely at the concept stage. These type of investors are like gold dust, hard to find but often the most lucrative. These angel investors, as they’re known, tend to be introduced to you by a mutual connection. They will be affluent individuals who have the potential to front a large percentage of the capital for a business idea in exchange for equity, usually a substantial chunk. If a CEO of a company you’ve already invested in, for example, puts in a word for you with a potential investor then you’ve got an excellent place to start from. If an opportunity like this comes your way, then make sure you’ve perfected your pitch. Ensure your financial plan is squeaky clean, show off the credentials of your team and sell in the benefit of your app to its potential customers.
Crowdfunding is one of the fastest growing ways of funding an app. As it involves pooling money from a large number of people the ask of each is a lot easier. Crowdfunding works by you pitching your idea to a huge amount of potential investors usually online via a crowdfunding platform. The money you raise by crowdfunding can be in the form of donations, equity-based loans or reward-based investments. The most well-known platform is Kickstarter although there are many others both globally and specific to Australia. It’s worth bearing in mind that using this method of funding your app does mean that you will be releasing your idea without any non-disclosure, you will need to consider how to protect it.
The Australian government is in the process of making changes to the process of raising money from the public, known as crowd-sourced equity funding. The aim is to make it easier and faster for small to medium-sized businesses and allowing them to raise up to $5 million each year from multiple individuals. This makes it an ideal funding approach for mobile app development.
Once you’ve had a great idea for an app, the first stage in its development is knowing how you’ll fund it. The best time to start to raise money is before you desperately need it. Allow yourself time to gain the right investment and ensure you have the control you need to make sure your idea is a success. To put you in a good place with potential investors, it’s worthwhile creating a minimum viable product (MVP). An MVP is a scaled-down version of your app, but with all the key features which will allow investors to better understand the product as well as giving you time to gain invaluable user feedback. Funding rarely occurs as a single payment from one investor, but with planning and persistence, you should be able to get the investment you need to get your app off the ground.