App development is an extensive process that requires a lot of working hours and investment. And finding a proper investor always ends up being the most grinding task for many Startups. Raising funds is indeed a challenging task for every startup wishing to develop an app. It has been seen that the more complex the app is, i.e., laden with multiple features, the more will be its development cost, and thus, more funds are needed. There have been cases when startups often fail to collect adequate funds and thus end up working on a limited budget and are forced to compromise the app’s efficiency. To avoid tight budget constraints, startups need to employ certain effective techniques to get investors’ attention.

This post will discuss possible sources that can help app startups raise adequate app development funds. Before looking for funding, it is vital to finalize the concept or idea behind the app. A greater budget helps startups to work with their full capacity. They don’t have to compromise by limiting features and cutting costs in various tasks like marketing and advertising, graphics, audio, etc. Moreover, investors only invest when they are assured that the startup will be successful, and they’ll be able to derive some profit from it. Thus startups must have a solid idea for the app that sounds viable enough and can generate great ROI. Let’s move forward to discuss some ways and possible sources for app startups to collect funds.

Why do the App startups need funds?

Businesses, whether small or big, require funds to start their business and get it running. Similarly, the app startups require funds for building their app, marketing it, and other post-launch operations. App development requires a good amount of money and the sum needed for the app startups differ depending on the type of app they want to build. For instance, if they need their app to deliver flawless and faster performance, they might be looking to develop a native app. Native apps are a bit costly to build and require a big budget; gaming apps mostly belong to this category. On the other side, hybrid and web apps are cheaper but don’t provide the same performance as native apps.

Thus depending on the type of app, the startup wants to build, the funds required also increase. The app’s cost also depends on various other factors mentioned earlier, like the number of features and type of functionalities needed in the app, type of platform, development time, etc. Thus for meeting all of these needs, the app startups need to collect funds from the investors. Certain third-party app development companies are available in the market, which can help you develop a good app for a price that fits your budget.

How to raise funding?

Funding is a thing that every business or startups need to turn an idea into reality. But gathering funds is not a piece of cake. Investors hold a pool of choices to choose from when it comes to investing; thus, startups need to have a feasible app idea that stands out amongst the competitors. Investors like to invest in those ideas in which they hold a chance of gaining ROI. Thus startups need to focus more on devising plans and solutions that appear more striking to the investors. App startups need to focus on solidifying the app idea to turn it into a fund-magnet. Once the startups are all prepared and confident with the app idea, the next step should be to look for possible funding sources. There are many free and open-source fundraising softwares available in the market, mostly used by non-profit organizations to get donations but can be used by startups too. Let’s move forward and learn more about these two steps in detail.

Top ways and sources to raise funds

#1 Ensure you’re following the right idea

The foremost step that startups need to take to attract funds should be to prepare the app as a fund-magnet. If an app startup wants to attract investors, the app idea needs to be useful and viable for future users. The app should fulfill the real needs of the user and must be meaningful in order to be successful. Investors look for those ideas which hold a potential market value and provide real solutions to the user problems. Therefore startups need to conduct proper market research before jumping to any conclusion on the app concept they want to work on. Once an appropriate idea for the app has been chosen, the next step should be to think more deeply about its specs. This may include the type of features, functionalities, and other aspects revolving around the app.

#2 Prepare an MVP(minimum viable product)

MVP stands for a minimum viable product; it is a prototype of the app with only those features that define its functioning. MVP helps startups to showcase their solution or the idea behind the app in a better way. It’s said that “action speaks louder than words,” in the same way a mere verbal presentation in front of investors is less effective than an MVP. For building an MVP, the startup should finalize what type of features and functionalities the app will have. Based on this information, an MVP should be designed to help investors get a clear idea about what the app is all about. Developing an MVP is the best way that surely helps attract investment towards the startup.

#3 Prepare an attractive pitch deck

Everyone in the startup world looking for investors must be familiar with the term “pitch deck.” Pitch deck refers to the presentations or slideshows that a startup usually creates to provide the investors and future shareholders a brief overview of the project. The pitch deck should be precise, informative, and easy to comprehend. “The first impression is the last impression.” Similarly, the pitch deck is the first impression of the app startup for the investors, and thus it needs to be effective and self-explanatory in order to create a good image. A good pitch-deck should be informative, and at the same time, it should seem viable to the investors. A well-prepared pitch deck should straightforwardly contain everything from the problem, solution to the investment needed, and potential success figures.

Now let’s take a look at possible sources that startups should consider to raise funds.

#4 Bootstrapping

Bootstrapping or self-funding is one and the same. The main perk of bootstrapping is that the owner has total control of the app and its future revenues. This can be considered the most secure way to run your company as you’re not answerable or owe money to any investor. If the app even faces drawbacks and fails to succeed, the need for repayment won’t be there. The startup can be funded by either the owner’s savings, monthly salary, or other suitable ways.

#5 Crowdfunding

Nowadays, crowdfunding is the most popular method for collecting funds. You must have heard about people pitching for crowdfunding on social media for various reasons like social cause, helping the needy, organizing campaigns, etc. But the same method is flourishing for raising funds for app startups too. In this method, instead of a small group of big investors, your startup is funded by a very large number of people investing a small amount of money. Most of the time, these small investors are the potential users or maybe the shareholders in the startup.

Crowdfunding is mostly carried out on platforms powered by the internet, such as Kickstarter, Crowdfunder.com, RocketHub, Gofundme, etc. Moving further, crowdfunding is of three types; donation-based, equity-based, and debt-based. In donation-based crowdfunding, the funding made is in the form of donations, and there is no need to return this money. In equity-based crowdfunding, the startups have to promise a share in the startup in exchange for money to the investors. Lastly, debt-based crowdfunding, in this method, the startup promises to return the money to the investors after a particular period. Crowdfunding is the best way to market and promote the app startup.

#6 Loans

This is not the best method for raising funds but is preferable when the possibility of the app’s success is very high or there is no other source available. This loan can be taken from either bank, a big investor, or any third-party organizations. But the main drawback of these methods is that the risk is quite high as there’s no relation between the fund provider and your startup’s status. The provider doesn’t care if the startup fails or ends up being successful; all they care about is getting their money back after a particular interval at a fixed interest rate. Therefore even if your app fails, you’ll be responsible for making timely repayments. One benefit that this method offers is that the investor has no control over your startup, and therefore if your app is successful, only the startup is entitled to reap its benefits.

#7 Angel investors

Angel investors are one of the most sought- after fundraising sources by app startups. Angel investors are usually wealthy and invest in app startups and, in return, ask for a share or a part of ownership in the venture. They invest in the early stage of the startup and belong to the group of investors looking for a higher return. The main benefit of this source is that you don’t have to worry about returning the money in case of startup failure. And the only disadvantage is that if the business succeeds, the angel investor will have a fraction of ownership in the venture and thus a little control over your business. You are answerable to the angel investor whenever a decision is made. This happens to be the main drawback of this method when compared to previous methods like taking a loan, where the investor has no control.

Wrapping up

Raising funds for the apps is quite challenging for any app startup looking for funds in the early stage and the preceding steps. But thanks to various sources available in the market, you can surely get funded from one or the other investor. We have listed above some ways to get supported but the main area to look for in the post is how to prepare the startup to act as a fund magnet. In the initial stages, getting funded becomes a little difficult, but with a perfect pitch deck and MVP, the right investor can be found. The app startup needs to look feasible and promising enough to raise funds, which is only possible through complete market research. This post will help beginners get to know the possible sources for raising funds and help understand how to prepare the startups to lure investors’ interest.

In case you’re wondering how do app makes money, please read this article – How do Apps make money in 2021?

Author Bio- Hi There, I am Shaun Williams, a content writer with Goodfirms, a research platform for Cloud Computing, Ecommerce companies, Translation services companies, among many others. I enjoy communicating ideas and knowledge creatively and also ensure that the readers never suffer from boredom while reading my posts.

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