Software & Apps

How To Get Funding for an App

Finance

Just like starting a new business, developing an app requires funds. Depending on the entire development process, an app development cost varies and can be as low as $5000 to as high as $500,000. Funding an app development from your personal savings often is very strenuous and may not be efficient. So, how can one get funding for an app? 

Quick Answer

There are many options to raise funds to build an app, depending on your situation. Most developers either go the bootstrap route, set up crowdfunding, seek help from venture capitalists, participate in grants, or take a loan from the bank

Having the next great idea for an app is often not enough to break into the market. You need the hardware, software, and a team of professional developers to make that idea a reality, all of which cost money. This article elaborates on some strategies to raise funds for an app. 

Strategies for Getting Funding for an App 

Convincing people to invest their money into an idea without presenting a prototype can be challenging. For this reason, getting funds to develop an app you know about can be tricky. However, this does not mean you cannot get funds for an app. Below are some of the best sources to get funding for an app. 

Strategy #1: Bootstrap With Co-Founders

Bootstrapping is essentially using your funds to finance the app’s development. But if you cannot spare cash for the app development, you can always ask others to contribute towards the goal. Meanwhile, finding the perfect co-founder can be a bit challenging. When searching for a co-founder, you want someone with the same purpose and objective as you do concerning the app. 

A tech-savvy would make a great co-founder as they would understand the various app development steps and be more supportive. A tech-savvy co-founder may even help out during the app development process, thereby reducing the cost of app development by a great deal. 

Strategy #2: Set Up a Crowdfunding Campaign

Another brilliant way you can raise funds for an app is by setting up crowdfunding. One thing about setting up a crowdfunding campaign is that it can raise funds for you even when you don’t have any resources. Hence, you do not have to present a prototype to convince donors to support the campaign. And the best part about setting up a crowdfunding campaign is that it is not borrowed funds. Hence you don’t have to repay it. 

Different crowdfunding platforms offer various models. So, when you pick a platform to set up a crowdfunding campaign, it is advisable to take the time to understand the type of model offered in the space. For example, Kickstarter is a popular crowdfunding platform with an all-or-nothing model. You cannot withdraw the money if the funding goal is not achieved. All the cost you might likely incur with a crowdfunding campaign is a service fee and a transaction fee from the payment processor. 

Strategy #3: Raise Donations 

Another ingenious way to raise funds for an app is by collecting donations from family and friends. Setting up a donations forum helps mitigate the problems of raising funds on your own. And the best part is that you do not need any elaborate campaign to set up a donation platform. You could set up the donation platform on your website or social media handle. All you need is a receiving account people can use. 

When you want to set up a donation platform, it helps to describe your proposed app and what it aims to solve. Also, it would help if you asked for small donations towards the app. And offering gifts and pre-orders to people that donate is a brilliant way to compensate and encourage people to donate. With time, the little donations made by different people will add to something quite substantial. 

Strategy #4: Participate in Funding Contests

Several entrepreneurs worldwide want to empower other entrepreneurs looking for funds to get started. One such contest that has been around is Shark Tank which has given out over $44 million in funding. While not many people might feel comfortable contesting for a grand prize, it is a great way to get that extra cash you need to get that app you have an idea for into reality. 

Apart from Shark Tank, you can use several other contests to get funding for your app development. If you are still in the university, you can check if your university or universities around you offer any contests. You can also take the time to check out Biz Plan Competitions and pick from the hundreds of contests happening worldwide. Some competitions are even hosted on Zoom, so participating shouldn’t be difficult. 

Strategy #5: Get an Angel Investor To Invest

As a startup, it is understandable to want to approach a venture capitalist. While there is nothing wrong with doing this, the chances of success aren’t always that high. Studies suggest that venture capitalists receive less than 3% of seed funding. A more viable option to go for is seeking the attention of an angel investor. 

An angel investor is an individual or a group of investors who provide funds to businesses in exchange for equity in the company. If you have raised bootstrapping or partnered with a co-founder, bringing an angel investor into the picture can help fill the gap without losing much of your company. And even if you have no funds whatsoever, if the idea of your app is that great, an angel investor will still be willing to invest in the app development. 

Strategy #6: Approach Venture Capitalists

Like angel investors, venture capitalists offer a significant donation towards the expansion of a business in exchange for shares in the business. While an angel investor and a venture capitalist will fund your business or app, the main difference between both investments is that a venture capitalist will only offer you funds for your app development when it is already in development

Also, a venture capitalist is much more prominent than an angel investor, which means the company has access to more funds to invest in your app development. But the more money a venture capitalist invests towards the app’s development, the more of the app shares you’d have to give up. When you go to a venture capitalist, you can expect something within 25% to 50% of shares

Stages of Startup Development

There are different stages of funding a startup or app development. The first stage is the pre-seed phase; next is the seed phase, followed by the series A, B, C, and beyond phases, each requiring a little more funding as your progress increases.

Conclusion 

Getting funds to develop an app is not easy, as many tech startups have come and gone simply because of a lack of funds, although they have many promising projects. With the right investor and amount of funds, you can get that app from just an idea to the next big thing in the industry. But for this to happen, you must first find that perfect investor. 

As we have elaborated in this guide, there are a few intelligent places you can get funds for an app. So, take advantage of every one of them to get the money you need to develop that app. 

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