As a startup business or even an established business, you may have an innovative mobile app or web service idea, but may be short on the capital needed for its creation. In most cases, in order to build the initial version of your software you could be looking at an investment in the tens of thousands of dollars or more. Budding entrepreneurs may not have the cash on hand to fund such a project, so how do you go about building a product that fulfills a real need, positively impacts the world and could make you wealthy?
This article will explore ways to raise capital for your project using investors, pre-seed funding, seed funding and angel investing. We’ll discuss bootstrapping, preparing to pitch your idea, pitching your idea, and other resources to help up your knowledge-game.
Likely Investors – Where to Find Money Fast
Here are some of the most likely and commonly used ways you can raise capital for your mobile app idea:
Friends, Family, and Colleagues
The most likely investors may be those around you–your colleagues, family, friends, friends of friends, business partners, and business associates. People you know and trust and who trust you will be your first line of funding. You can explain your idea in confidence, get their honest feedback and learn to hone your pitching skills. It’s important to view pitching your idea to them just as seriously as you would for someone you don’t know. People who know you already have a bias about you, so you should come to any such meetings showing a more serious side that is well prepared, conservative and risk averse. Ideally you create a Powerpoint slide deck to take the person through your idea. Again, be professional. It’s not uncommon to be able to raise up to $100,000 from these types of contacts to get you started.
Keep in mind that securing money from such sources will add a new dimension to your relationship with them. Money changes everything. If your idea is solid, you have a plan to market and sell the service, and have some preliminary evidence to back that up, you already have a better chance at succeeding. Whether you pitch your idea to them, or to outside resources, you’ll want your business plan and presentation to be as polished and well thought out as possible.
When you pitch your idea, make sure to offer investors an excellent return on their investment such as a share of your profits, a stake in the company, or some other deal to make the offer more attractive to them.
For friends and family, certainly explain the potential upsides, how they can benefit, and how the investment is worth the risk, but also let them know the investment doesn’t come without some risks. This may motivate them to want to contribute to your success in other ways beyond merely supplying capital.
Another popular way to get money fast is to fund your idea through debt such as loans, second mortgages, lines of credit and credit cards. I would argue that most successful entrepreneurs (including us) started by using some form of debt instrument, like a credit card. Try to secure credit cards with an initial no interest period of 6 to 18 months. In order to secure a short-term business loan you will need to have developed a solid business plan including projected revenue, timelines, market research and the like. This can be difficult to do if you are a startup with no track record behind you.
If you are a small business, you can use debt wisely to get off the launch pad and get the ball rolling. A wise choice might be to use debt in a limited way, such as to build a prototype, a business plan, application mockups, or for a product planning session. These items will help you to develop some assets that will make it easier for you to raise further money with outside investors.
The third most common source for funding and raising capital for your web/mobile app idea is angel investors. An angel investor is a person or group of people who have set aside funds for startup companies or promising ideas. Typically these people have more than $1 million net worth and were likely successful entrepreneurs or business owners themselves, who want to help others succeed as they did and make some money in the process. Angel investors can work alone or in networks where they pool their money to make investments they deem worthwhile. Networks can provide more capital and can be easier to manage since there is one source of money, instead of having to work with multiple individual investors. The best angel investors will be able to bring something to the table in addition to money, such as providing a hands-on role in your project, helping manage and guide operations to make sure their investment is more secure and profitable, or using their social/personal networks to bring in support, advice and help.
App Contests / Incubators
As an entrepreneur, you may be able to find app contests or app incubators that are run by angel investors or others where the best ideas win the money they need to fund development of the mobile app. Companies such as Y Combinator are using these types of contests and strategies to review and fund new app ideas. To win this kind of money, your app has to be extremely solid, with high potential upsides, because you’ll be competing with possibly 100 different other app companies for funding.
Bootstrapping – Self Funding Your Mobile App
Bootstrapping is the idea that you’ll pull yourself up by your bootstraps- funding the idea yourself or as a team of people involved in the creation of the business. You’ll take a very lean product approach, building only the absolute minimum in order to get the app to market. You’ll scrimp and save, possibly take on additional side jobs for extra money, work on reducing your living expenses, pause savings for a while, and maybe even tap into investment accounts, existing savings, etc. These are the stories you hear about in some of the great rags to riches narratives.
There is something to be said for doing things on your own or as a small team without involving outside resources. For one thing the only person/people losing money in the deal if it goes belly up is you/your team. You don’t ruin relationships, ruin your credit, or ruin future opportunities with investors if you are the ones footing the bill. Funding your mobile app idea may take longer, but in the end may be worth the wait. If you are able to fund your idea on your own and your idea starts generating income, you will have the reputation of being a wise, savvy business person or team who will become suddenly very attractive to angel investors, banks, and others.
Pre-Seed and Seed Funding
Pre-seed funding usually happens before a product is built, when a person or company has an idea but no tangible product at hand. Pre-seed money can come from any of the sources mentioned above but is often seen as an alternative to raising a traditional friends and family round of financing. It is used to fund the initial stages of the project. It is often followed by further rounds of investing.
Your goal should probably be to get $100,000 in the bank. This will give you the leverage and street cred to be able to raise additional capital from other investors. And you will need more money than you think to operate, staff and support your business in that first year.
Once you have your first $100K, you can go after other investors and tell them you already have $100K in the bank and you’re looking for a few other investors. Use this leverage and the halo effect it brings, to sell your idea and raise additional funds that will help get you through not only building the application, but accounting for some marketing, operational costs and getting you to the next round of investment capital you will need.
Seed funding usually involves greater sums of investment and happens after the initial product or service has been developed. Seed funding serves to expand the business by improving the initial product(s) or services, hiring employees, investing in marketing, design, engineering and other needs of a business. Where pre-seed funding involves smaller amounts, seed funding can extend up to $1 million and beyond. Regardless of what stage of funding you are at, it is vital to have a business plan and business structure in place to ensure things run smoothly and employees and investors are protected.
Under Promise and Over Deliver
Before you start taking money, define the critical milestones you will achieve once you get the cash. Always under promise and over deliver if you want any chance at getting further funding. Set the objectives, give yourself plenty of time and then do everything to make them happen. You will earn credibility and trust from your investors. Additionally you want to stay in good communication throughout the process with regular investor meetings, keeping them aware of what is going on and your progress. Proactive communication is the best way to keep things running smoothly but nothing beats delivering on your promises and keeping the commitments that you’ve made.
Pitching Your Idea
Whether you are pitching your idea to friends, family, colleagues, angel investors, banks, or in a contest, the same rules apply:
- Choose One Person in Your Business to Focus on the Funding. This leaves the others to focus on other aspects of building and running your business and avoids the common error of miscommunication.
- Be Prepared. Know the ins and outs of raising capital. Know what documents to prepare and what questions will likely be asked by investors. Do your research. Have prototypes, logo, videos, website, product demos, PowerPoints, business plans, projections, market research, etc. ready to go. This will go a long way in making you look organized and together, especially to investors who have opportunities to invest in products that are beyond the idea stage.
- Keep it Simple. Because investors see many proposals throughout the year, keep your presentation clear, concise, and simple. Don’t get into grandiose statements. Keep your pitch grounded. Remember you’re speaking to seasoned business people and investors who know the reality of running a business. If you come across insanely optimistic, they’ll smell your naivety. Keep it upbeat but realistic.
- Stand Out. Make sure you present what is unique and worthwhile about your web or mobile app idea as compared to others out there and why you think yours will succeed. Have a vision, know what problems you could face, know your competition, have projected revenues, how long it will take them to recoup their money, etc. These aspects will also make your idea more attractive to investors.
- Make your Presentation Interesting. As you prepare the above mentioned items, focus on making your presentation riveting, eye catching and interesting. Since this is the first impression investors get of your company, idea, style, etc., make it count.
- Practice Your Pitch. You can practice with family and friends, which is always a good idea to get initial feedback. Also record yourself doing a pitch so you can objectively review and improve.
- Pitch Sequence. Make a list of investors you would like to pitch to, and start from the least desirable first. That way you have plenty of time to practice your pitch and refine and polish it as you go along.
- Pitch Assets. Consider preparing the following items as pitch assets:
- A one-page pitch – This is a short pitch condensed into the most important points such as your idea, who will be involved, why you think it will work, and some basic financial information and projections.
- A brief presentation – Often called a pitch deck or investor deck, this is a presentation created through Powerpoint or another presentation mode that includes things like an introduction to who you are, your idea, who is involved in the team, the problem you are looking to solve, the reason you think your solution will work, who your customers are, a possible budget, etc.
- A business plan – This is a detailed plan outlining your business goals and how you plan to achieve them.
- Financial projections – This is a forecast of your research detailing future revenue and expenses.
Potential Funding Sources
It’s always best to start in your own backyard for funding sources. Here are some organizations in Florida:
- Florida Funders
- Accelerated Growth Partners – Miami, FL
- Florida Angel Nexus – Orlando, FL
- Go Beyond Network – Naples, FL
- Keiretsu Forum South-East – Miami, FL
- Miami Innovation Fund, Inc. – Miami, FL
- New World Angels – Boca Raton, FL
- Pipeline Angels
- Tamiami Angel Fund – Naples, FL
Additional resources for raising capital:
- Invstor.com – Angel Investors & Venture Capital
- EquityNet – Share your business vision with investors.
- Funded.com – connect with investors and get funded
- Gust – startup funding
- Angel Investment Network
- Angel Capital Association
- Lendio – Find the perfect small business loan
- Lending Tree Business Loans
- SnapCap – Business Lending
- SBA Government Loan
Alternative Lending Options
Contests – pitch and win $ if your idea is good enough!
- Flash Pitch
- Hello Tomorrow
- Hatch Pitch
- PITCH (web summit)
- Seven Ventures
- Startup Cup
- South Summit
- Cartier’s Women’s Initiative
- New York StartUP! Business Plan Competition
- MIT $100K Entrepreneurship Competition
- ARCH Startup Competition
- PostCode Lottery – for green projects
Get Your Funding and We’ll Build Your Web or Mobile App Idea
We hope you have found this guide on how to get funding and raise capital for a mobile app helpful.
Our web and mobile app experience can also help you build your app successfully. We have been building digital products since 2003.
The first step you might take is to build some prototypes, wireframes and perhaps a Roadmapping session so you can understand costs to present to investors. We can help you in any stage of the process.
Request a call or contact us at 727-562-5161 to find out more about building your next web or mobile app.