App development can require quite a lot of start-up capital. For that reason, new companies often look at ways in which they can get funding. A lack of capital can mean the app never makes it to the marketplace. Yet not all developers rely on venture firms for funds. There are many potential avenues to get started.
How much do you need?
It’s important to work out how much you need to develop your app and be ready to launch your product. You will probably have no income during development, and so this will be the amount you need to account for when raising initial funds. You will also need marketing funds.
There’s no clear cut cost for developing an app, as this will depend on factors such as functionality, features and the cost of the team input. A simple app with minimal functionality which targets one platform can cost around $10k.
A more complex development with a back-end API server and front end user interface, with many features and available on multiple apps, will require closer to $25k – $100k.
Self funding and bootstrapping
Do not underestimate the power of bootstrapping! Many a successful company has made a fortune by keeping the business tight and growing slow and steady.
Bootstrapping doesn’t require any outside investment. Instead, you’ll need to focus on minimizing expenses and putting profits back into the business. If you can avoid outside investment, then you can also retain full control over your company.
Mail Chimp made over $400 million in 2016, and they bootstrapped all the way! Grammarly bootstrapped their way to 6.9 million users, and they were one of the top Android apps for 2018.
As an app developer, you may find that you need at least some start-up capital to actually get your app off the ground. If you are developing a basic app you may be able to gather most of this using your own savings.
You can also ask friends and family, but be sure to approach them with a professional business pitch that outlines how you expect to return their money and make a profit. They should also understand the risk (so those personal relationships are not left in jeopardy).
Assuming you, your friends and family are not exceptionally wealthy; you may have to seek other funds from elsewhere.
If you do need to raise capital, you could consider a bank loan. You will have to demonstrate how your app is expected to make money, and have a sound business plan in place, as well as fill out the usual forms and Q&As. You could also consider loan companies that take into account different factors, such as income and expenditure, rather than focusing on credit scores.
You could also approach private investors in your industry. They can fund the development of your app, or offer a certain amount of capital in exchange for an equity stake in your company. You give away some control, but if accepted, it can be the capital boost that you need.
The same is true of venture capital – larger investment firms who take on higher risk opportunities for a larger stake. They can take you all the way when it comes to the capital that you need, but again you need to be careful and consider the shares you are giving away. Do you really need to give away your business?
Many apps find investment in the form of Crowdfunding. This allows you to gain small amounts of capital from lots of investors. You can raise funds this way, with an added benefit of testing out the market for the product and potentially gaining a community of dedicated early adopters for your app.
It’s important to understand that there are many different avenues to go down when seeking funding for your app. Each app developer or start-up app company needs to weigh the pros and cons of each, and decide which one to opt for. There’s no set solution, but rather each unique situation calls for different funding combinations to get the app to launch.