Startups and investment: how to sell an app idea?
We’ve already talked about how the mobile app market is growing from year to year as the number of users and the time they spend with their smartphones keeps increasing. If in doubt, take a look at the latest statistics. In this regard, many business owners and developers want to implement their ideas in apps, but find it difficult to do that with their own savings. We’ll tell you how to make investors interested in your startup at different stages of product development and where you can look for funding. All you need is an idea.
How to fund an app at the idea stage?
You have a great app idea and you need money to make it come true. What can you do? It’s just that no one is interested in ideas. An idea should at least be based on market research. Will there be demand? If your idea is promising, you need a clear and well-calculated implementation plan, and a dev team.
People often want to know how to sell an idea to tech giants like Google, Apple, or Facebook. A naive notion is common that these corporations pay for ideas. It’s not true. To do serious business with one of these companies, you may want to develop a quality app first and take some effort into promoting it. Perhaps then someone from Silicon Valley will notice you. For example, this was the case with MSQRD, an AR selfie app that Facebook bought in 2016.
How to find investment if you’ve just started an app development?
Another option: there are a concept, a team and the development process is underway. The question is, how to find investment. That is, you do not have a finished product, but you’re working on it. In this case, when presenting an idea, you need to highlight key points right. Focus on the team and the strengths of your coworkers as people often invest in strong professionals. Further down the list, but not least important: in addition to presenting the team’s hard skills, reveal the essence and value of your product. Make sure you evaluate the market and competitors and provide a forecast for the growth dynamics. Think about the total funds you will need and explain why you need them. Operate in figures.
How to raise money for an app at the MVP stage?
At this stage, the chances of getting an investment are the highest. You’ve created a minimum viable product – that’s a big deal. Well, how to promote it further? It’s no secret that investors are interested in facts (read, profit), but what if there are none yet?
The crucial thing is not to deceive the investor. Don’t paint it all bright for them. Instead, you may want to look at the existing metrics, and show them the unit economics and your marketing plan. Tell them how you will bring the figures together, what you will do to acquire users, and what model you plan to use to monetize the app – it does not matter if it’s paid or not. Subscriptions, content access, in-app purchases – think carefully about all suitable schemes.
Where can app developers look for investment?
- Startup platforms like Startups or Gust.
- Business incubators and accelerators. Try 500Startups, TechStars, and Ycombinator.
- Business angel networks like the Angel Capital Association and Angel Investment Network.
- Crowdfunding. Get people interested in your idea and raise the right amount on Kickstarter, Indiegogo, or OurCrowd.
- Networking and professional social media. Look for the contacts you want. For example, you could use LinkedIn and Xing.
- Direct investment markets. Submit offers to companies that specialize in investing in business projects or buying business ideas in general (with full copyright transfer). The more offers you send, the more chances you have to successfully sell your concept.
- A new way to finance SaaS companies. Pipe platform offers to sell the recurring revenue from a cohort of customers to investors for dilution-free capital
Why can’t I sell my app idea?
Oftentimes, even viable and extraordinary ideas fail. Business owners can make several fatal errors at the beginning of their journey or, having met their investors, they can present their idea and talk about it wrong. What errors are we talking about?
- You try to attract investment in an empty idea – you need calculations and a plan.
- You don’t study the market or show investors any figures – make sure you calculate your project.
- There is no clear business offer for investors – how much will they invest and what will they get? At the expense of what?
- You do not track all the data on the project – transfer all your ideas and calculations into the presentation format, draft tables with calculations, and a pitch deck. And it’s better to carry them with you at all times.
Pitching errors
1. Wrong format
Before designing a presentation, you need to define its purpose clearly. If you send your pitch deck to investors, then you need to include a little more text so that the general idea can be understood without a speaker. If you use your pitch deck for a performance, keep in mind that too much text can distract the audience and make the slides look crowded. If the format doesn’t correspond to the purpose of the presentation, the audience will lose interest and perceive the information worse.
2. Too much focus on the product
It is not necessary to describe in detail all the functions of your product on 10 slides. This will shift the focus to details and may confuse the viewers who do not understand the technical side of the project. Paying more attention to the market slides, business model, and options for investors is a much better solution.
3. Lack of Call to Action
The last slides have the famous ‘Thank you for your attention!’ way too often. Ending your presentation like this won’t leave any room for a dialogue with the investors, but merely ‘justify’ the time that you took from them. Instead, you may want to use the last slide to specify how they can contact you. A good solution is to leave a QR code with a link to the project MVP.
How often do companies buy apps?
Yes, more often than not, companies buy small apps to help them compete. In 2012, when Facebook bought Instagram, the photo service was not making any money. But these are well-known deals involving large corporations. There are others as well. You can see who buys whom and for how much here.
Summary
An interesting app idea is a tiny part of success. To make investors or large companies interested, you may want to develop a minimum viable product (MVP) first and show its prospective profitability. Be ready to put in the effort and draft a business plan so that those who can invest in it could trust you. Research the market and your potential competitors carefully. Our new Performance section can help you do this too.
