You may have a revolutionary idea for the next big app. However, without proper funding for your winning app, that idea will likely never see the light of day.
Unlike in a start-up, where the entrepreneur knows exactly what they are going to do, what products or services will be offered and how, what will be the monetization model, etc., app developers have little idea about any of these in the initial stages of app creation. User testing throws up curveballs that often require drastic changes. Most apps go through so many modifications and iterations that the final product will look radically different from the initial idea. For this reason, creating a consolidated business plan and applying for loans from banks becomes really difficult.
So what do you do? Here are some ideas to get you started.
1. Jump Start Your Way Up With Co-Founders
There is no more reliable source of funds than your own savings. If you can’t spare the cash to invest in your own brilliant idea, asking others to contribute to it is a bit unfair, don’t you think? Bank savings, personal loans, credit card loans, friends and family are perfectly legitimate sources of funds when your application is in its infancy. However, you don’t always have to go it alone.
Find the perfect co-founder to take responsibility for launching a new app. A co-founder is much more than a friend or a shoulder in bad times. Choose a co-founder based on his needs. A tech-savvy co-founder can help you design and prototype your app from scratch without spending a penny on third-party developers. Bobby Murphy, co-founder of Snapchat, was the development mastermind behind what was essentially Evan Spiegel and Reggie Brown’s Stanford classroom project. The app is currently valued at close to $20 billion.
Alternatively, find a partner who can finance your app while you develop it yourself. Case in point: Uber. Travis Kalanick was the cash supply for developer/co-founder Garrett Camp.
2. Set up a Crowdfunding Campaign
Crowdfunding is an attractive funding avenue for start-ups that have absolutely no resources of their own to get their ideas off the ground. Even though hundreds of app ideas and startups go unnoticed and unfunded on crowdfunding sites, the right pitch can promise a bonanza for your dream app. In exchange for a service fee from the crowdfunding platform and a transaction fee from the payment processor, you are guaranteed sufficient funds to get your dream off the ground.
Crowdfunding has several models you can choose from. The leader in the crowdfunding space, Kickstarter, is an all or nothing platform. This means that once you set your funding goal, you better hit the target amount to get the money. If you don’t reach your goal, contributions are refunded to individual investors. On the other hand, Indiegogo offers both flexible and fixed financing options, which means that if you don’t manage to hit your target amount, you can keep your collection in exchange for a higher service fee. You can also consider app-specific crowdfunding platforms, such as AppsFunder and AppSplit.
3. Raise donations on your own site
Crowdfunding is a great way to get resources quickly. However, it also has quite a few negative aspects added. There is tons of competition out there and standing out among a sea of aspiring entrepreneurs can be next to impossible for many. Then there’s the large amount of fees you pay in exchange for the funding you request.
A smart way to eliminate these problems is to fundraise on your own site. Yes, nothing prevents you from:
- Describe the application that you propose to your readers
- Ask them for a small donation for your application
- Offer them a gift/orders advance payments of your application/monetary compensation once your application is implemented in exchange for your contributions
A tool like 123ContactForm allows you to create a donation form in minutes. Even better, it easily integrates with various payment processors like PayPal, Stripe, Braintree, and FreshBooks to make the process of setting up your own self-funding campaign a one-stop affair.
4. Enter Funding Contests
If you’re an aspiring entrepreneur in the wired world, there’s no way you haven’t seen the business TV series Shark Tank, with over $44 million in funding spread across its Five seasons in, the hit show is an entrepreneur’s dream come true.
I’m not suggesting you try to participate in Shark Tank to fund your app. You should if you can, but that’s not the point here. There are tons of contests available sponsored by universities, tech companies, technology, angel investor networks and more that offer the resources to new entrepreneurs. to make your business idea come true. Check out Biz Plan Contests to choose from hundreds of contests around the world. You can even go to a contest near you and learn how to qualify and enter to win the funding your app deserves.
5. Angel Investors and Strategic Partners
Many startups are tempted to approach venture capitalists (VCs) for seed funding. However, the fact is that less than 3% of seed funding comes from venture capitalists. Instead, angel investors or strategic investors are strong contenders to get your new app off the ground.
Not always companies or institutions. Successful individuals and entrepreneurs often take an active interest in financing new businesses. Amazon’s Jeff Bezos and Yahoo’s Marissa Mayer are just two examples of avid angel investors in early-stage apps. Angel investors can offer anywhere from $25,000 to a few million in financing, depending on your app idea and stage of development. The size of the angel investment market is currently $20 billion annually.
Although angel investors are easier to convince than early-stage venture capitalists, you should still be prepared to provide a potential angel investor with details such as:
- The total amount of capital you will need
- How fast you will burn it (monthly consumption rate)
- What is your marketing strategy
- How do you promote the app
- Why you deserve funding, i.e. the technical and business skills of the founders
Coda
It’s not just you. Before Peter Thiel stepped in with the first external funds that Facebook would receive, Mark Zuckerberg and Eduardo Saverin managed its operating costs by striving to extract every last dollar. His $85 monthly cost for his first server rental was covered by Facebook ads using platforms like AdSense.
Moral of the story? With a little creativity, you can always make sure your dream app doesn’t just stay in your dreams.
Want to know more?
If you are interested in the managerial and strategic aspects of UX, consider taking the UX Strategy and Management online course. If, on the other hand, you want to brush up on the basics of UX and usability, consider taking the online course on User Experience (or another design topic). Good luck on your learning journey!
(Main image: Depositphotos)
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