How to Get Investors for an App or Find Funding for App Startup?

Last updated on August 21st, 2024

Imagine you’re watching an episode of the renowned show Shark Tank. One entrepreneur steps into the tank, delivering an exceptionally compelling pitch that captivates all of the sharks. It’s not just his polished presentation style that wins them over, but also the substance and depth of his pitch. His unwavering confidence, thorough market research, and visible dedication to his venture entice even the most skeptical mobile app investors to buy into his business on his terms. The entrepreneur showcases impressive projections, user engagement metrics, and a clear roadmap for future growth, leaving the sharks eager to invest.

However, the reality is that not everyone gets the chance to appear on such a popular platform with millions of viewers. So, how can one attract investors for an app startup in the real business world where the competition is fierce, and visibility is a challenge? Whether your goal is to build your app from the ground up or scale an existing app to reach a broader audience, securing funding is essential to turning your vision into reality.

The key to attracting investors lies in demonstrating substantial growth potential in your app. This involves showcasing a unique value proposition, a scalable business model, and a strong team capable of executing the plan. Additionally, presenting concrete data, such as user acquisition rates, retention rates, and revenue growth, along with a well-crafted business plan, can significantly strengthen your case. Building relationships with potential investors, networking within the industry, and leveraging any opportunity to present your pitch can also create pathways to secure the necessary funding. Ultimately, persistence, preparation, and a clear vision will set you on the path to success in attracting investment for your app startup.

How to Convince Mobile App Investors to Fund your New App Startup?

You will agree with this—just as we meticulously scrutinize every detail of a scheme or insurance policy before subscribing, investors won’t be swayed by a basic app idea that lacks substantial research and validation. Investors are keen to understand not just the potential of the app, but also the market research, competitive landscape, and the specific problems your app aims to solve.

They want to know every possible detail because they are investing their money in your mobile app’s future, which includes understanding your business plan, revenue model, and growth strategy. Rather than merely convincing them, your idea needs to be so compelling, well-thought-out, and thoroughly validated that an investor feels confident enough to finance your business, believing in its long-term success and sustainability.

Also Read: How to Find Investors for a Startup Success

What do Investors for Apps Look for While Investing in Tech Startups?

To master the art of securing investors for your app, it’s essential to delve deep into understanding what investors seek when investing in tech startups. Sales professionals often succeed by getting inside the mind of the buyer, crafting strategies that address the buyer’s pain points with tailored solutions. Similarly, by identifying and addressing the specific challenges that investors face, you can build trust in your app.

The motivation behind a startup is a key driver of its growth, and as the founder, it’s crucial to know how to establish and sustain a robust market presence. This effort will streamline the process of finding investors for your startup. So, what makes investors invest in a startup? The answer lies in meticulously researched app ideas, comprehensive data on market competition, and a thorough understanding of investment strategies. A well-rounded combination of these elements will significantly enhance your approach to pitching your business.

What is the Best Way to Find Investors? Steps to Gain their Trust for App Funding

Even before the capitalist has given you the funds, they will start looking forward to receiving the returns. Hence, it is more than necessary to gain their faith and wealth.  Being an entrepreneur takes a lot of hard work and smart work. You have to wear multiple hats. Have you ever wondered, “What is the best way to find investors for an app?” You can secure funding for your business by following this process:

• Validate Your Idea – How relevant and viable is your idea? There are two aspects to this. First, it has to be practically possible, and second, it ought to have a unique USP. Start by conducting extensive market research to ensure there is a genuine need for your app. Engage in surveys, focus groups, and other methods to gather insights that confirm your app’s feasibility and the unique value it offers. This step will also help you refine your idea, making it more appealing to investors.

• Find the Right Market – You got to find and hit the right spot in the market. For that, you’ll have to know the market very well. Understand the target audience’s preferences, pain points, and behavior. Dive into market trends and analyze your competitors to carve out your niche. A profound comprehension of the market landscape will enable you to position your app effectively and resonate with the right customers, thus increasing the likelihood of investor interest.

• Choose a Reliable App Development Partner – You should get into an app development partnership bond with a company that can help you to build a robust application. A reliable development partner brings technical expertise, industry knowledge, and the ability to transform your vision into a functional app. They can provide valuable feedback and ensure your app meets quality standards, which is vital in persuading investors about the app’s potential.

• Know the Investment Basics – You need to have some investment knowledge. Without knowing the principles/rules, you won’t be able to read their mind. Familiarize yourself with common investment terms, processes, and what investors typically look for in a startup. Understanding these basics will help you communicate more effectively with potential investors and tailor your pitch to meet their expectations.

• Figure out Revenue Strategy – Show the investor how you will enable them to multiply their money. When you show them a foolproof plan, they will be more rest assured about their money. Present a clear and detailed revenue model that outlines how your app will generate income. Include projections, pricing strategies, and potential monetization avenues. Demonstrating a well-thought-out revenue plan can significantly boost investor confidence.

5 Stages of Startup Funding with Types of Investors Involved

Without money, human survival becomes problematic, and this is even more pertinent for start-ups. The likelihood of survival for a start-up with little or no capital is minimal. Investors need a great deal of patience, understanding that the returns on their capital may not be immediate.

Each stage of funding comes with different timelines for returns. The next section will guide you on how to attract investors for your app at various stages of development. Here are the five stages of funding along with the types of investors involved:

Stage 1 | Pre-seed Funding or Idea Stage

In the entrepreneurship realm, pre-seed funding is the earliest form of financial support and lays the groundwork for starting a business. Often referred to as the zero funding stage, it precedes the formal funding stages and involves a significant financial gamble on a nascent idea. During this stage, investors provide capital to entrepreneurs to refine their app concept and transform it into a tangible product or prototype. Additionally, in many cases, pre-seed capital loans convert into equity once specific growth milestones are achieved.

Stage 2 | Seed Funding

Seed Funding can be considered a part of the seed growing into a plant analogy. It is called the first official stage of funding for a startup. By this time, your startup has become ‘a thing.’ A fun fact is that most startups don’t grow out of this stage at all. Startup failures are not uncommon to us today. Statistically, 39% of startups fail due to insufficient funds. So, how to get investors for an app? These are the possible investor sources for mobile app startups in the seed stage.

Startup Incubators:

• Help businesses to grow and succeed in a proper business model.
• Provide funds as well as network connections, management training, office working space, and corporate mentoring.

App Angel Investors:

• Finance businesses that have potential but may not have access to traditional finance.
• Undertake technical due diligence before confirming their investment.
• Provide mentorship, ensure developments, and use investors’ connections.

Crowdfunding:

• Receive funds in the forms of loans, pre-orders, and contributions from multiple investors simultaneously.
• In return, investors expect gifts or equity from the company.

Stage 3 | Series A

Many inquire, “What is the purpose of Series A funding?” Following the seed stage, startups enter the first-round of funding where they can secure investments from dedicated startup investors. This phase is crucial for developing a strategy that ensures long-term profitability. By now, the initial version of the product has already been introduced to the market. Depending on the industry and potential investors, startups can go through multiple rounds of funding to raise additional capital. During the Series A funding round, investors seek more than just a promising startup idea; they want to see a well-prepared strategy aimed at generating substantial market revenue.

Company Valuation & Fundraising in Series A

• Startups with a good plan of up to $13 million and $16 million can raise around $15 million during their Series A financing stage.

Angel Groups:

• Consist of multiple app angel investors who collectively sign larger checks with minimized individual risks.
• Operate as a group to fund app-based startups.

Private Equity Firms (PE):

• Provide leveraged buyouts and growth capital.
• Assist primarily private companies and organizations.

Venture Capital Investors:

• Invest larger sums compared to individual angel investors.
• Participate from Series A and continue investing in later stages.

Table – Angel Investor vs Venture Capitalist

Stage 4 | Series B

When learning how to find investors for an app, it’s crucial to understand that the Series B round propels businesses beyond their initial phase. The investment at this stage aids entrepreneurs in expanding their market share. A company that has successfully navigated through seed and Series A financing has already amassed a substantial user base and demonstrated its readiness for significant scale growth to investors.

Therefore, Series B funding is essential for scaling the business to meet the increasing market demands. Developing top-notch products for customers necessitates quality training and substantial investment. Companies use the funds secured during this round to cater to these specific needs, which often involves substantial expenditure.

Stage 5 | Series C and Beyond

Series C funding is a critical milestone that signifies a company’s established success and readiness for substantial expansion. In this stage, various investors, including hedge funds, investment banks, and significant secondary market groups, join the earlier investors. The involvement of these entities reflects their confidence in the company’s proven profitability and robust business model. They come prepared to invest significant sums in companies poised for further growth and market domination. As Series C funding propels the business to new heights, it focuses on scaling operations, entering new markets, and potentially preparing for an IPO.

Hedge Funds

• Investors are attracted by two main aspects:
  • The fund manager’s reputation
  • Investment in specific assets
  • This investment category is considered the safest, given the possibility of losses.

Table – Funding stages, amounts & return

Read More: How To Attract Investors To Fund Your Mobile App Startup?

How Much Investment Should You IDEALLY Ask For?

Underfunding can leave you in a precarious situation because failing to secure the necessary funds within the allocated time frame can lead to significant challenges. Conversely, overfunding may force you to relinquish a larger portion of company shares to investors during the early stages of its development. Surrendering too much ownership early on can be quite risky.

1. Know Whether Your App Idea is Simple OR Complex?

The development of a mobile app can range from $10,000 to $550,000, depending on various factors. These factors include the functionalities required, the technology stack employed, API integrations, design complexity, UI/UX intricacies, and the range of features offered. Each of these elements contributes to the overall cost, making it essential to carefully plan and budget to meet project requirements effectively.

2. Refine your ‘Elevator Pitch’

Elevator pitches aren’t just for job candidates; entrepreneurs looking to secure investment should also refine their elevator pitches meticulously. When you’re seeking funding, confidence is essential. You’ll typically have about 30 seconds to captivate potential investors. It’s crucial to hone your app idea pitch so effectively that it encapsulates everything your app intends to achieve. Investors are looking for pitches that are short, compelling, and to the point. Make sure your pitch stands out and effortlessly communicates the value and potential of your app.

Conclusion – What to do After Your App is Funded?

In the end, we trust that all your queries regarding securing investors for your startup have been thoroughly addressed. For mobile app development or any related services, always opt for the best in the industry! Make sure to maintain transparency with your investors about business valuation figures, ideas, and strategies. Remember, they are the ones enabling you to operate your business. Execute your plan with precision and timeliness! Once your app receives funding, reach out to a reputable app development company to get started.

FAQs

Why do investors invest in startups?

Investors are attracted to startup apps due to the potential for high returns on investment (ROI). Both tech and non-tech startup apps often offer significantly higher returns compared to traditional investment opportunities. This lucrative potential drives investors to allocate their funds in ventures that promise growth and innovation.

How do mobile apps get funding?

It’s another way of asking, “how to get investors for an app?” Mobile applications receive funding through a variety of investment sources, including personal savings, bootstrapping, leveraging corporate connections and networks, private investors, crowdfunding platforms, bank loans, venture capital, and angel investors. Each of these avenues offers unique benefits and challenges, but all play a crucial role in driving the development and growth of innovative mobile apps.

How can MVP help with getting funding for an idea for an app?

An MVP (Minimum Viable Product) plays a crucial role in obtaining funding for an app idea. By demonstrating the core functionalities of the app, the MVP provides tangible evidence that the concept is feasible and not just a speculative notion. It helps establish credibility with investors, who can evaluate the practical viability of the app. Moreover, the MVP allows investors to provide valuable feedback, paving the way for further improvements and increasing the likelihood of securing the necessary investment.

Do you need investors to start an app?

There is nothing as complicated as rocket science in this answer. If you lack funds, it’s only natural to approach investors to kickstart your app development.