Imagine…. You’re watching an episode of the very famous show Shark Tank. One of the entrepreneurs on the show gives a very moving pitch, and all the sharks are ready to invest in his business. It’s not only the way he presents but also what he presents. His confidence, in-depth market research, and dedication to his business enable him to fetch mobile app investors to take an interest in his business on his terms.

Let’s face reality – not everyone is making it to the show. So, how to get investors for an app startup in the real business world?

You need funds in both situations – whether it is to build your app project from scratch or to scale an existing app. What you need in your app is growth potential!!

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

How do you attract potential investors? By offering them a Foolproof Package!

You will agree with this… We ensure every minute detail of a scheme or insurance policy when subscribing to it. Similarly, investors won’t fall for (won’t buy) a basic app idea with zero or less research. They would want to know every detail possible. The reason behind it? It’s obvious because they are putting in their money for your mobile app funding!!

Rather than convincing, your idea should be compelling enough for an investor to let loose his finance for your business.

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

To nail how to get investors for an app, you need to get into the depths of what do investors want while investing in tech startups. While creating sales strategies, salespeople usually get into a buyer’s mind and prepare the strategy. Capturing the pain point and providing them with a solution will enable them to gain trust in your app.

A startup’s motivation drives its growth. As the initiator of a whole business plan, you should understand how to create and maintain a strong market presence. IT will ease your finding investors for startup hustle.

“What makes investors invest in a startup?” – Well-researched app ideas, market competition data, and knowledge of investment tactics can give you a plus – a well-mixed combination of all these will help you to have the rightmost approach towards pitching your business. More below…

Ensure that you have a or are a:

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

“Returns matter a lot. It’s our capital.”

(Said by — Abigail Johnson)

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 hardwork + smartwork. You got to wear multiple hats. Have you wondered, “What is the Best Way to Find Investors for app?”

You can get investors for your business by following this process:

  • 1. 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.
  • 2. 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.
  • 3. 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.
  • 4. 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.
  • 5. 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.
  • 6. Create Prototype/MVP – You can plan on keeping the prototype or your most viable product (MVP) ready beforehand. Learn here more about MVP app development.

5 Stages of Startup Funding with Types of Investors Involved

Without money, a human’s survival is also tricky. In such a scenario imagine how a start-up can survive in such a scenario. With no or less capital, chances are less that a start-up will survive.

“Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.”

— Paul Samuelson

There is a lot of patience that an investor requires to withhold. Looking forward to the returns of the capital provided is exemplary. However, they cannot expect quick returns. Different stages of funding have varying durations of returns.

This upcoming section will help you explore how to get investors for an app stage-wise. The following are the five stages with types of funding or say the types of investors:

stages of startup funding

Stage 1 | Pre-seed Funding or Idea Stage

In the entrepreneurship realm, pre-seed funding is the earliest form of funding. It lays down the groundwork for the commencement of business. It is often referred to as the zero funding stage that precedes the very first stage.

Quite a money gamble on an idea. Herein, the investor lends the money to an entrepreneur to work on the application concept so that it can take a tangible form if not already done or works on making the prototype.

Adding more to this, in many situations, the pre-seed capital loan turns into equity once specific growth capabilities are accomplished.

  • Bootstrapping – Another source is bootstrapping. This is like Do It Yourself (DIY) / Bring Your Own Finance (BYOF). One uses savings, personal devices, and house/garage space to start and grow a company. Bring in your finance from savings or business funds you kept aside. In case you have exhausted it, your only way out is to undergo the stages of getting your app funded.
  • Personal Relations – (Friends & Family) – Another way to attain pre-seed funding is by borrowing money from relatives, friends, and family members. This also means that personal relations can be handy during such crucial times.

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 for mobile app startup sources in the seed stage:

  • Startup Incubators – A startup incubator helps businesses to grow and succeed in a proper business model. Apart from funds, they also help in building network connections, management training, office working space, and some corporate mentoring.

startup incubator helps businesses to grow and succeed

  • App Angel Investors – The primary purpose of angel investing is to finance those businesses that have the potential but may not have access to traditional finance. They undertake technical due diligence before confirming their investment. Adding more, angel investors provide mentorship, ensure developments, and use investors’ connections.
  • Crowdfunding – Receiving funds in the forms of loans, pre-order, and contributions from not one but multiple investors simultaneously is called crowdfunding. In return, the investors expect gifts or equity from the company.

SEE ALSO – How to Start a Crowdfunding Platform?

Stage 3 | Series A

Many ask, “What is the purpose of Series A funding?” – Following the seeding, there comes first-round funding where you may find startup investors. In this phase, developing a strategy that generates long-term profits is vital. The product’s first version has already been launched in the market.

Depending on the industry and potential investors, there are rounds of funding through which a start-up can raise further capital for itself. During the Series A funding round, the investor looks for something more than just a good start-up idea. He wants the investee to be ready with a strategy to help a business make big money in the market.

Company Valuation & Fundraising in Series A – Startups with a good plan of up to $13m and $16m can raise around $15 million during their Series A financing stage.

  • Angel Groups – When several app angel investors come together and sign a more extensive amount of checks with low-exposed risks, the group can be called an Angel group of app funding companies.
  • Private Equity Firms (PE) – Such a firm aids with leveraged buyouts and growth capital money. The catch here is that this only helps private companies and organizations.
  • Venture Capital Investors – This category of venture capital firms bring in the venture capital in bigger operating companies compared to individual angel investors. They become a part of the investment cycle from Series A and beyond stages.
Table – Angel Investor vs Venture Capitalist 👇
Parameter of Difference Angel Investors Venture Capitalists
Who invests? Own money Collected capital
Stage Pre-seed or Seed Series A, B, C & IPO
Amount $20 – $250,000 $2M – $100M
Expected ROI 20-25% 25-40%
Role in startup Require full control Require a say like the Board of Directors
Is Due Diligence required? Not really Highly required

Stage 4 | Series B

When learning how to find investors for an app, you must know that Series B round take businesses beyond their initial phase. Investment helps entrepreneurs grow the market by increasing their market share. The company that has completed a seed and Series A financing program already has a significant user list and has proven to investors that it’s ready for more extensive scale growth.

Therefore, Series B funding is a way to grow the business to meet the demands of this market. Building the best products for the customer requires quality training. Bulk spending costs a company some pennies. They use the funds received in this round to fulfill the exact requirements.

Company Valuation & Fundraising in Series B – Startups with revenue-generating models between $ 30 million and $ 60 million can raise $30 million during Series D financing.

The source of fund in this stage is Credit Investors.

  • Credit Investments – All kinds of credit investments involve the potential investor putting money into credit or debt instruments like debentures, long-term loans, and bonds.

Stage 5 | Series C and Beyond

This section will guide you through how Series C funding works. Several groups, including hedge funds/investment banks and sizeable secondary market groups, accompany investors listed herein in this series. The reason is that the company has already proven to be the most profitable business model and they come here expecting to spend huge amounts on companies that already thrive.

  • Hedge Funds – The two aspects in which investors get attracted towards entrusting their money are – the fund manager’s reputation and investment in the specific assets. Factually, this is the safest investment category considering the possibility of losses.

What’s Next?
Typically companies end the external financing in Series C. However, some companies may go into funding beyond this stage too. However, these three funding rounds make the company eligible for raising funds through IPO – Initial Public Offering. So, if you need more funds, don’t let the question “how to get investors for an app” baffle you. Go for IPO!

Table – Funding stages, amounts & return 👇
Funding Stage Funding Amount % of Shares Expected in Return
Pre-seed $100,000 10-25%
Seed Fund $150,000 – $1,500,000 10-25%
Series A < $3,000,000 25-50%
Series B < $5,000,000 ~33%
Series C & Beyond > $5,000,000 ~33%

How Much Investment Should You IDEALLY Ask For?

  • Underfunding will make you float in hot water because if you don’t secure the required funds within the stipulated time, you will have problems.
  • On the other hand, overfunding will compel you to surrender more company shares to the investor/s in the early stages of its foundation. Giving away too much of an ownership stake in the beginning phase can be pretty risky.

Conclusively, both are harmful in their ways. Hence, finding balance is of paramount importance. How to find this balance?

There are two fundamentals to master when discovering more on how to get investors for an app:

Fundamentals to know how to get investors for an app

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

The development of a mobile app can easily cost anywhere between $10,000 and $550,000, which is dependent upon several factors. The functionalities, tech stack used, API integration, design, intricate UI/UX, features, etc.

2. Refine your ‘Elevator Pitch’

Elevator pitches are for more than just candidates wanting to get placed. In fact, the entrepreneurs who look for investors to receive investments should also work on refining their elevator pitches.

When you are seeking money, you should be confident. You will likely spend 30 seconds with whoever you’re attempting to shake up for money. You want to fine-tune your app idea pitch so effectively that your app does everything that your idea should do. App investors are seeking short and compelling pitches.

Conclusion – What to do After Your App is Funded?

In the end, we hope all your questions revolving around how to get investors for your business startup have been answered. For mobile app development or any other services, choose only the best!

Ensure to keep your business valuation figures, ideas, and strategies transparent with your investors. After all, they have made it possible for you to run your business. You should execute the plan right on point, time-effectively! You will

Once your app is funded, place an inquiry with an app development company.

FAQs

Investors see the potential for high Returns on Investment (ROI) and put in their money. They also choose to invest in tech or non-tech startups app because these give higher returns than traditional investments.

It’s another way of asking “how to get investors for an app?” The mobile applications get funded through various investments – personal savings, bootstrapping, corporate connections and networks, private investors, crowdfunding, bank loans, capital and angel investors, etc.

The Most Viable Product (MVP) helps convince the investor that the app idea is practical, not a scam, and they can give their feedback after looking at the MVP.

There is nothing as complicated as rocket science in this answer. If you don’t have funds, it’s natural that you would have to approach investors to start your app development.

Paresh Sagar

Article By

Paresh Sagar

Paresh Sagar is the CEO of Excellent Webworld. He firmly believes in using technology to solve challenges. His dedication and attention to detail make him an expert in helping startups in different industries digitalize their businesses globally.