Every year thousands of entrepreneurs are filled with jest and hope to start a new tech business. Statistics state that in 2020, more than 4.4 million new companies started maneuvering. As all startups are not fabricated equally, entrepreneurs start their journey with varied ideas, goals, services, products, and target audiences. However, they all use similar ways to get funding for their app development.
Investment is at the heart of every startup. It is the lifeblood for entrepreneurs. Whether it’s app development for healthcare, transportation, financial services, artificial intelligence or eCommerce, all tech startups need funding. When it comes to financing, whether with the help of angel investors or through venture capitals, make sure to do your homework to ensure you don’t receive the short end of the stick.
Ways to get funding for your app development
In the coming years, the startup industry is expected to be a driving factor for innovation and growth on a global level. However, tech startups need to know about various ways to fund their app development. The most crucial aspect of getting funds for your app development is that your idea is unique and offers solutions that are untouched. Here are the five ideal ways of funding your app at its initial stage:
Bootstrapping
In simple words, bootstrapping means funding your app idea with your own money. There is no way of funding more reliable than your own savings. It is one of the safest options when it comes to funding app development. In case your app idea doesn’t take off as expected, it’s safe because you won’t owe any money to anyone.
Bootstrapping is the best option to go for if you have enough savings to cover your app development process with the help of leading mobile app developers. Moreover, if your money isn’t enough, you can even turn to your friends and family in your personal network who are willing to invest in your app idea. When your app is in its infancy, personal loans, bank savings and credit card loans are all ideally legitimate ways to fund your app development.
Crowdfunding campaign
Crowdfunding campaigns are a great way to attract investors from different walks of life. As crowdfunding happens publicly, it is the most perfect way to not only raise money for your app but also spread the word about your app development project. It helps promote your app to a much larger audience.
Along with that, some people might be enthusiastic to pay for early access when your application launches in the market. Moreover, there are various crowdfunding platforms too offering opportunities to attract investors for any business. Crowdfunding can be classified into three different types:
Equity-based crowdfunding: It offers money for a share in your app development just like venture capitalists and angel investors.
Donation-based crowdfunding: It offers donations when the app is launched more like premium features or early access.
Debt-based crowdfunding: It offers investors the opportunity to lend you money with a promise that you’ll give it back.
Raising donations
Although crowdfunding is a great way of getting resources quickly, it too has downsides. There is a lot of competition and to stand out in the crowd can be near to impossible for many entrepreneurs. Moreover, there’s also a multitude of fees to disburse in return for the funding you want. A wise way to annihilate these problems is by raising funds on your own website.
You can simply narrate your proposed app to your users and ask them for donations toward your application. You can even offer them monetary compensation or pre-orders once your app rolls out in exchange for their contributions. The best stage to look out for funds and raise these donations is when your app has crossed the validation mark and you have a clear overview of the technologies and features you have to focus on.
Bank loans
You can always go to private or government banks for personal or business loans for your app development startup. Governments even lend loans under certain programs and reforms. As they are becoming more and more supportive of the growth of innovative startups, you can expect more funding assistance forthcoming. When it comes to taking bank loans, it is the fastest option on the list.
In order to raise funds for your startup, you can either go to a bank or any financial body and expand your business feasibly. It is noteworthy that the rate of interest charged by the bank will depend on the repayment tenure and the amount of loan availed by you. Along with that, the process of funding your startup through a bank loan requires a lot of interminable and extensive paperwork.
Angel investors
A high net worth individual that lends you financial banking for your app development startup in return for ownership equity in your business is known as an angel investor. These investors are usually wealthy individuals that happen to invest their personal wealth in your small or medium-scale business startups. This is often in exchange for an ownership stake in the organization. Such angel investors that provide capital for your app development have a high risk as well as a high return matrix. Usually, the high-end margin is in reciprocation of either convertible debt or ownership equity.
Angel investors are also referred as seed investors, strategic partners or business angels. Strategic partners play a vital role in kickstarting your app development process and are strong contenders for your startup. Typically, an angel investor invests in an application if he/she sees high growth prospects in your business. They play an active role in the management side of the startups. Moreover, they provide seed capital to finance innovations even in the initial stages of a startup.
Winding-up
Startups need to adjust to new trends in funding while being efficient and sustainable to survive in the long run. Although the competition for investors’ attention is grinding, when you go to the battle prepared the chances of winning are much better. When commencing a startup, it’s essential to know in which direction the market is headed and foresee your place in the tech business.
If investing in the stock market seems intimidating, look into taking FinGrad’s mutual fund course. FinGrad offers stock market courses for those interested in learning more about the stock market.