You have a one-in-a-million app idea, and maybe even an MVP. You’ve poured hours into brainstorming, researching, and testing. You know it’s a great idea.
Now, you just have to convince other people.
While securing an investor is no walk in the park, it’s definitely possible, especially if you know what you’re getting into.
With that in mind, here are five things you need to know to secure an investor for your app.
It goes without saying that today, there are more entrepreneurs than ever trying to secure funding for their million-dollar app idea. In fact, thousands of apps get added to the Android and iOS platforms every day.
With those kinds of numbers, investors are naturally going to be picky about which projects they choose to support.
But don’t let that scare you. All it means is that you need to put more effort into making your product—and your pitch—as strong as possible.
If you don’t know how you’re going to sell your product to the public, you’ll have a hard time selling it to investors. Beyond just convincing them that your app is a good idea, you’ll need to show that you’ve researched your target audience and thought about how to market your app.
So before you can start looking for investors, make sure you’ve completed the following checklist:
Some investors may not need to see an MVP (minimum viable product), but at the very least they’ll want an explanation of how your product works and what it will look like. If you can show that you’ve already created a working demo and, even better, tested it with real users, they’ll be more likely to jump on board.
Investors come in all shapes and sizes, from crowdfunders to venture capitalists. Here are the most common types of investors when it comes to app development:
For a break-down of these investors and where to find them, read this.
Securing investors isn’t a one-and-done type of thing. As you develop your app, you’ll likely go through at least four different stages of funding:
Pre-seed is the first round of funding. At this stage, you won’t have anything to show, just an idea for a great new app. Since it’s harder to find investors at this stage, most of the funding will come from your personal network (friends and family).
You’ll use these funds to start building your product, which usually includes assembling a team, researching your market, and creating an MVP. These investments will likely be around $200,000 or less, but at this stage, you just need enough to get off the ground.
Now that you’re up and running, the seed stage focuses on growing and perfecting your product. Investments will range from $10,000 to $2 million, and usually come from angel investors, incubators, and venture capitalists.
Once you’ve passed the pre-seed and seed stages, you’re officially open for business. At this point, you should have at least some proof that your product works and is making waves. Now you can zero in on expanding the reach of your product. Investments in Series A typically fall between $2 million and $15 million, and tend to come from venture capital firms or angel investors.
At this point you have a fairly successful business. Now you’re looking to expand your team and spread out into new markets. These investments usually average around $24.9 million and come from venture capitalists and corporate investors.
After this round, of course, you can continue to seek funding for new stages of growth—which leads into the next thing you need to know:
Once you’ve funded your app’s development, it’s tempting to sit back and watch your baby take off. But your work is far from over. In fact, the process of seeking investors doesn’t stop until your app is self-sustainable, which means it’s generating enough revenue to fund its own growth. Even then, a successful app keeps evolving.
So continue adding value to your product, growing your audience, and seeking feedback from both users and investors. As your reach grows, so will your opportunities to hook bigger and bigger investors.
If you need help building an MVP to snag investors, give us a call.
By Band of Coders