You have the best mobile app idea anyone ever had. You documented the idea, defined its functionality in excruciating detail, took the time to understand the resources available to reduce costs (like SDKs and APIs), found a reputable, experienced, and reasonably priced developer, and you’re ready to go. Only problem is … you don’t have the money to develop and market your smart phone app.
You asked friends, family, and the occasional acquaintance. No luck. You were turned down by your bank (“we don’t finance start-ups”). Don’t yet despair. All may not be lost.
If self, family, or bank financing is not available, your next option is to seek investors, which in the tech business are commonly and appropriately referred to as “angel investors.” Websites like Go4Funding and Angelsoft pair up innovators with venture capitalists willing to take a risk on ideas or products. A LinkedIn search can likewise prove to be a valuable resource if you organize your search terms carefully (“mobile application,” “angel OR investor OR venture+capital OR partner,” for example). Inc.com has a list of angel investors, as well as a guide with instructions on how to go about finding, approaching, and dealing with investors.
The most important thing to remember, however, is this: investors are in business to make money. To have the best shot at getting them to buy into your mobile app project, you must define your product, diligently prepare your documentation, and hone your pitch before approaching them. You must sell prospective investors on the idea that you have an idea that has a very good chance of making money. This will involve answering, for you and for the investor, some really hard questions like:
- What is your value proposition? What need does your project serve and will customers be willing to pay to have that need fulfilled?
- How big is the potential market for your mobile app?
- How will the app make money? [See our post on how to monetize a mobile app.]
- What are the initial and ongoing costs?
- What is your marketing plan?
- What is the current competition and what is the competition likely to be?
We’ve spent considerable time scrolling through the blogs and forums, and the number of investment seekers who have not even considered answers to these questions is staggering.
Share the Wealth
Another funding option for mobile app development projects is to enter into a revenue-sharing arrangement with your developer. An experienced app developer may look at dozens of app proposals a month and will generally have a pretty good feel for whether your idea will have legs. If the potential revenue stream from the app appears promising, the developer might consider taking a share of future revenues in exchange for reduced development costs. Although this may sound attractive if you can’t find any other source of funding, you should know that many developers will not even consider rev sharing and those that do turn down many more rev share proposals than they take.
We deal with dozens of developers every week in our business. We hear hundreds of ideas every month. If you have don’t have clear answers to the questions above, expect any conversation with prospective investors to be short. However, if you have a compelling mobile app idea with a defined value proposition, a profitable potential market, reasonable development or operating costs, and a solid marketing plan, you may realize your dream project – and it will almost certainly be worth the effort.
Do you have some ideas about how to fund mobile app development costs? Leave a comment or e-mail me.