So you have a great business idea. Your app could be the next Instagram, if only you could nail the funding, right?
If you are hustling to get the big guys to fund you, relax a little. You’ll get there, and you’ll get your funding. But here’s the catch: you need to show investors the real potential (and traction) of your app.
Doing that, however, requires you to lay some groundwork. A great idea alone doesn’t cut it. You need a viable prototype, some public interest, traction. . . something more solid to convince investors that you have a real product that consumers want. That is why starting small is a good idea.
Here are 8 ways to raise initial capital for your app.
1. Secure a small business bank loan
A small business bank loan may not be the first option on your list. But it may be worth a try, despite the trends. In the U.S., for example, “80% of small business owners get shut down on bank loan applications, and bank lending to small businesses has dropped by over 20% in the last decade.” However, if you have a solid business plan, complete with estimated numbers and figures, and traction (e.g. growth metrics, etc.) you can increase your odds.
2. Find a silent business partner
Do you know someone who believes in you and your idea? Even if this person works in an entirely different industry, they may be willing to invest in your app, for a share of the profit.
A silent partner has limited involvement in the partnership; they are limited to providing capital. This means that they don’t interfere in daily operations. They simply invest the money and take their share. If you’re ready to connect with like-minded and potential business partners, platforms like PartnerUp, BusinessPartners, BEAM, Founder2Be and others are a great starting point.
3. Consider crowdfunding
Crowdfunding is a great model that not only helps you raise capital directly from interested backers, but it also helps your marketing efforts. To that end, it is a win win for anyone that plans to build an app.
Essentially, if you aren’t familiar with crowdfunding, in a nutshell you fund a project or venture by raising small amounts of money from a large number of people, typically via the Internet.
Once you post your project to a crowdfunding platform, backers who like your idea will support you in the form of a donation, investment, pre-orders or pledge to purchase your app when it comes out–in exchange for stated rewards. Explore platforms like Kickstarter, IndieGoGo, ProFounder and AppBackr to get started.
4. Bootstrap your app
Bootstrapping is a good option if you have regular income, access to savings and can maintain strict cash flow practices in the earlier stages of development. Once you launch an MVP of your app, with your own money, you can acquire customers and scale by reinvesting earnings back into your app. In fact, once you gather traction, securing a larger outside investment becomes a bit easier. So how can you prepare to bootstrap your app? Here are a few tips.
Cut back personal expenses and start saving months in advance
Do what you can on your own at first, even if that means learning a new skill
Use resources you already have, like your computer, home office, etc.
Be thrifty wherever possible and search for deals
5. Enter an app contest
Every year, a number of companies, institutions, independent angel investors and other organizations announce app idea contests. If you enter and win one of these contests you can gain quick traction (and possibly investment) for your app.
— Code Authority (@CodeAuthority) July 13, 2017
Even if you don’t win, you gain exposure and access to people that could boost your credibility, make the introductions you need and more. App contests like NYC BigApps, CodeLaunch Pitch Day and the UChicago App Challenge for example.
Also, consider presenting your app at a local Startup Weekend. Startup Weekend is a 54-hour weekend event, during which groups of developers, business managers, startup enthusiasts, marketing gurus, graphic artists and more pitch ideas for new startup companies.
6. Talk to angel investors
Angel investors are wealthy business people who like to invest in promising small businesses for a profit. Research angel investor groups in your city and state. Platforms like Funded and the USA Angel Investment Network connect entrepreneurs with angel investors and take the legwork out of finding reputable angels.
7. Consider venture capital firms
Venture capital is the granddaddy of small business funding. These guys scout for entrepreneurs with brilliant ideas and earning potential. Not only do VCs invest, but they also guide, mentor and support entrepreneurs in many ways, and bring much-needed business experience to the table.
The catch: VCs are notoriously hard to impress. “VCs finance only about one or two ventures out of 100 business plans they see. They reject the other 98-99 percent either because they are not in the preferred industries, have not displayed the potential or the proof of potential, have not been referred by the right person, or any one of many reasons.”
8. Apply for a small business grant
If you are developing an app with social value, you can look to the government for funding. There are a number of small business grants available if your app is geared toward social impact. This is technically free money, as it doesn’t need to be repaid. However, you really need to prove that your app can truly make inroads for a social cause. Here’s a comprehensive list of 106 Small Business Grants to consider.
Funding your app
Remember, what works for others many not work for you. Assess your app idea and business goals carefully before you decide which routes to pursue. Whichever path you choose, don’t let rejection get the best of you. Push on and make it happen. Knock on multiple doors at the same time. If you persist and pivot as needed, success will come.
This article has been edited.
Ravin Lad is a Digital Marketing Strategist at MoveoApps, an iPhone app development company. He enjoys writing about technology, marketing and business trends. He is a tech enthusiast and loves to explore new mobile apps. He can be found on Twitter @RavinLad.