The app market is a booming business. Successes such as TikTok, Instagram, and Tinder inspire entrepreneurs to go and create their own apps. A lot of entrepreneurs have thought about app concepts but have a hard time financing it. Creating an app is often paired with serious expenses. In this article, we’re going to dive deeper into the possibilities on how to find investors for your app idea.
Writing a business plan
Start at the beginning, just like when starting a new business it is recommended to write a business plan if you want to create an app. The business plan should describe the concept, the target group, the functionalities, the competitors, the finances, and other relevant cases. With a strong business plan, you create a sketch of your value proposition, the chances and risks, the capital needs, and besides that you have a nice document to show potential investors. Are you still doubting how your app idea is going to be profitable? Read more about making a profit with apps.
What type of investors are there?
The costs of developing an application depend on the complexity and the amount of desired functionalities of the app. When creating a customized app you have to expect to invest at least €15.000,- which can increase to an amount of above €100.000,-. Below you can find an overview of the different types of investors you can approach to finance your app idea.
Family and friends
Lending money from your family and friends can have surprising advantages. This way a lower interest can be discussed and you are not affected by the strict regulations of a bank. However, making clear agreements is a must to help prevent the straining of your relationship. Discuss what you both expect from each other.
Banks have a broad assortment of financial products. A product that fits the financing of an app is considered as a personal loan. Banks offer people from the age of 18 the possibility to loan between €2.500,- and €75.000,-, depending on the situation. This loan has a monthly installment with relatively low interest, the amount and currency of the pay off are determined and fixed.
Pay attention: always inform yourself about the pros and cons before you take out a personal loan.
Crowdfunding enables you to collect finances for your app and with crowdfunding, you get an indication of how big the interest is for your app concept. With crowdfunding, you collect a bigger sum by letting multiple investors donate. There are multiple crowdfunding platforms, a well-known one is Kickstarter. With Kickstarter, you can share your app concept and find investors. In exchange for a percentage of future profit or share, investors are willing to pay a part of the sum of the app business.
Another investment option is a grant. A grant is given by national, provincial, or local governments, and to get a grant you have to meet a lot of criteria, so it’s important to get the necessary guidance. DTT has relevant experience with grant advisors, we gladly share this knowledge and experience with our clients.
A fourth option is to focus on angel investors. This type of investor mainly focuses on start-ups. Companies like Google, Whatsapp, and Facebook are already big angel investors. Angel investors are often experienced entrepreneurs that have made a lot of money by (partially) selling a business. They use this money to re-invest in startups. The main reason for this group to invest their money is often: the fun factor, social involvement, the need for a balanced investment portfolio, and the need to belong.
Angel investors are hard to find, they often operate behind the scenes, because they don’t want to show off their capital and investments. How do you find these angel investors? To start you can look around in your own network, ask family, friends, and acquaintances if they know someone. You could also go to entrepreneur meetings, here you can contact the right people. Besides, there are conventions for wealthy entrepreneurs. These conventions are often organized by big banks, incubators, and pitch-meetings.
After you find the right angel investor for your app idea, make sure you have a strong business plan or development proposal where you explicitly show your potential output, market growth, and innovation.
How to convince investors
It’s finally time, you have found a potential investor for your app idea, but how do you convince your investor to take the next step? Think about the next components:
1. Have your story ready
When you want to convince your investor it is important to prepare a well-structured pitch. Think about your concept and the cost- and revenue model.
2. Develop a business plan
Here it is again, the business plan. The business plan should describe the concept, the target group, the functionalities, the competitors, the finances, and other relevant cases. With a strong business plan, you create a sketch of your value proposition, the chances, and risks, the capital needs. Would you like some help with this? Read the article Assembling a business plan for your app idea.
3. Clear development of our app idea
A good way to develop an app idea is to make an interactive demo of the app. A picture is worth a 1000 words after all. With an interactive demo, it’s easy to present your app idea to your investors.
Go find an investor for your app idea
It’s time to start, open a new Word document, and start writing your business plan! Would you still like some extra information on how to find investors or get some extra help when developing your presentation materials? We will gladly discuss the possibilities with you in a noncommittal conversation. At DTT we support our clients with the creation of the project. The acquiring of budgeting and finances can be simplified with the right contacts and presentation materials. Don’t doubt and contact us.
Are you still doubting about what kind of app you want to realse or which plaform? Read one of our other articles: