Your Guide to Attracting Investors to Your Mobile App

Have you heard that mobile app market is projected to be 278 billion dollars by 2026? This is a rocketed growth, which is appealing to investors willing to invest in the next big app. Nevertheless, a brilliant idea is not the only key to obtaining investment. The article will prepare you with the awareness that you desire to obtain information about your ideal app investors, the way to attract them and captivate them, and what to anticipate in the fundraising exercise.

Although it is essential to raise money, acquiring the right investor is not only about money. Shareholders are also good partners that can provide other benefits on top of the initial capital. We have included their motivations as opposed to merely enumerating the various types of investors.

The Category of Investors

Angel investors are rich individuals who provide funding to startups that have a high growth potential. Pros:

• Passion: Tend to be attracted to the innovative ideas that seem to be personally interesting or can make a difference
• Financial payback: Although they want to achieve good returns, they may be less strict with scheduling than VCs
• Mentorship: Like working with start-up firms and mentoring

Cons:

• Angel investment is usually smaller as compared to VC capital
• It is hard to find angels that share your vision

Venture capitalists (VCs) are companies that bank on startups assumed to be growing at high rates. Advantages:

• High financial payoff: VCs require high returns in a given period of time which can be in terms of acquisition or IPO
• Strategic fit: They can invest in applications that are complementary to the portfolio companies or to establish new opportunities in the market
• Expertise: VCs provide good industry experience and contacts to aid startups to grow fast

Cons:

• VCs demand a high level of returns in a particular time, which may be overwhelming
• Start ups may find it challenging to meet VC investment requirements

Crowdfunding sites are internet based sites that bring together individuals or organizations in need of money and a huge number of potential investors or donors. Advantages:

• Democratization of investment: Let ordinary citizens put their money in startups in smaller amounts
• Marketing and community building: Crowdfunding will help create buzz initially and win over prospective customers of the app
• Financial return: This is a good investment by the investors because it would yield a good payoff in case the app becomes a success

Cons:

• The only way to achieve your funding objective is to do a vigorous marketing campaign
• The sum of money you will raise on crowdfunding might not satisfy you

Corporate venture capital (CVC) are investment vehicles of existing firms that seek novel technologies/solutions. Advantages:

• Innovation accessibility: CVCs can invest in startups that create innovative technologies or disruptive business models that can help their business
• Create financial returns: CVC investments may create large financial returns in the event that the startups that they invest in become successful though this is not the main objective
• Establish strategic alliances: Incorporating startups would help the corporation to build strategic alliances. They are able to study the agility of the startup and acquire knowledge about the new trends

Cons:

• The technology or solution of your startup must fit in the interests of the corporation
• Limited control: CVCs might desire to have control over the direction of your startup

The techniques mentioned below can be used to locate investor to mobile applications and in case you are inventing a startup in a different field. The point is that you should take into consideration the peculiarities of your industry.

The Idea Funding Competitions and Innovative Festivals

Competitions give you an opportunity to win money and get a rich exposure to your app idea. Festivals serve as a hub where founders present their ideas of the app, prototypes, or businesses to their potential investors, partners, or customers. Study future attractions in sync with your target market and type of app.

Target Angel Investors

Find investors who have a record of investing in startups in your app niche. Customize your pitch to emphasize on the possibility of high returns and social impact (where applicable) that are appealing to angel investors.

Use Your Contacts

Network with people in the technological and business circles who could have contacts to potential investors. Participate in industry events and conferences to network and market your app.

Network with Private Investors

Research venture capital firms and private equity groups which invest in early-stage companies. Make sure that your application fits their investment orientation and that it shows a certain road to profitability.

Crowdfunding Campaigns

Websites such as Kickstarter and Indiegogo enable you to tap the general population to raise funds. An effective crowdfunding will justify interest on the part of the audience and will create pre-launch buzz.

Identifying Co-founders with Investment Potential

Identify co-founders with complementary skills and experience. Potential investors may be more attracted to a powerful team with varied knowledge.

Accelerator Programs

These serve as mentorship programs, resource-based programs, and even funding programs to high-potential startups. Research accelerators that are specific to our industry or phase of development. Among them are Y Combinator, Techstars and AngelPad.

Building an investor list is not just a matter of putting names and contacts down on paper. It insists on the ideals of quality over quantity and making sure that your list is customized to bring the right type of investors to your startup.

Although this may appear huge, this strategy takes into consideration the truths of fundraising. To get an investment one has to have a large net. To achieve your goals of raising funds you only need a number of investors to say yes. When you present to a bigger group of well-squared investors, there are more chances of getting the necessary capital. The following are the main conclusions:

• List down your immediate network: This is friends, family, and former colleagues. They might not fit the best but can be the start point and could bring valuable introductions
• Check investors in the free OpenVC database: You are able to search investors by a specific parameter, e.g. geography, industry, or investment stage. It is an excellent way of getting investors that are a good fit to your company
• Increase your search to other investor databases: There are several online resources of investor lists. Crunchbase, PitchBook and NVCA are some of the popular ones. It can be useful in getting more specific investors
• Clean up your investor list: This is the process of getting rid of duplicates and ensuring that all your investors fit your requirements. You do not want to waste your time in pitching to investors who are not the right fit to your company

Keep in mind that a full list of investors is not the only step to make. After making a good foundation, then you can concentrate your efforts on developing an effective fundraising strategy that will target these investors, and you will have higher chances of succeeding.

The interest of mobile app investors will depend on the ability to show that the app can be successful. The following are some of the factors that attract attention of investors:

1. Obvious Business Plan

How will the app be profitable and how will it make revenue? A clear roadmap should be given on how the app will make money and become profitable. This strategy ought to outline the pricing strategy, the mode of getting users and financial growth projections.

2. Good Team and Experience

Strong team Members With the team, does the founding team possess the ability and experience to develop and operate a successful business? Investors back strong teams. Demonstrate the talents and experience of your founding team with particular reference to their capacity to build, start, and grow a successful app business.

3. Market That is Promising and Has a Need

Does the app have an advantage over the current solutions in the market? Investors want solution with high target market that can be identified. Discuss why your app is special amongst other current competitors and why people will prefer it over others.

4. Properly Worked Out Plan

Is it possible to build the number of app users and income substantially in the long run? An effective monetization plan and a roadmap to build a large user base are very essential. Investors would wish to know how your application will yield a lot of revenue and win a huge number of users in the long run.

5. Powerful Pitch

It is important to have a powerful pitch that will present the proposal of your vision, target audience, monetization strategy, and development plan of your app in a succinct manner.

6. Minimum Viable Product (MVP)

The presence of an effective MVP demonstrates the main features and capabilities of your app. It enables you to get user feedback and impress the investors about the potential of the app.

To raise the funds needed to take your innovative app idea to the next stage, you need to impress the investors. This is how you can make a winning pitch that will land your mobile app the funding:

Business Plan: Executive Summary

You have 1 minute to persuade an investor. This brief introduction must draw attention to the essence of the value proposition of your application, your experience, and the size of the funding you need.

Market Analysis

• Who are you targeting? - define your target market. How large is this audience?
• Competitor analysis How do your competitors solve it? What is the unique value proposition (USP)? Point out the competitive edge of your app
• Show growth potential in the market - prove to the investors that the industry is about to grow and your app is ready to take advantage of the opportunity

Product Development

• Speak in detail about the main features of your app and its functionality
• Write about your technology stack that you are going to develop with
• Add a roadmap of development, which will show how your app will develop over time. This demonstrates your vision in the long run

Marketing/Sales

• How are you going to promote your product - how are you going to attract your target market?
• Discuss the marketing channels you will take advantage of (social media, optimizing your apps, etc.)
• How will you monetize the app - what will you do to earn money? Is it by subscriptions, in-app purchases or by advertising?

Financial Projections

• Prepare sound financial forecasts of revenue, costs and profitability within a given time period (e.g., 3-5 years)
• Demonstrate to investors your accountability of the financial implications of your app

Pitch Deck

• Build a summarized and engaging pitch that sums up your app, your market, its unique value proposition, and its success probability
• Emphasize the issue that your app will solve, market that your app will fill and the revenues that your app is going to bring
• Be ready with possible questions of the investors. Test your pitch before an adviser or colleagues whom you trust with to get constructive criticism and polish your speech and be sure of yourself

This is a roadmap of the different funding stages of mobile apps and what to expect at each phase:

Pre-seed Funding

This is the first stage followed before even thinking of the eventual formal fundraising. It is where you refreeze your business idea and maybe develop a prototype. At this stage, investments are usually low in value and most of them are personal savings of the founders, friends or relatives.

Seed Funding

This is whereby you aggressively go out to find funding to grow your product or service. Seed funding enables you to get your MVP ready, test your idea with actual users and begin to create traction. The investors here comprise angel investors, early venture capitalists and startup incubators.

Series A Funding

This is an indicator that your startup is ahead. In this case, it is all about scaling of your business and product. With series a financing, you can invest in marketing and sales, grow your team and develop your product through user response. At this stage, the main investors are mainly the venture capital firms, super angels (rich people who put money in startups) and even major companies seeking potentially promising ventures.

Series B and More Funding Rounds

All about growth and expansion. The B funding is the one that helps to firm up your future intentions, be it international expansion or massive staffing up or mega product development projects. Further funding round (Series C, D, etc.) may be aimed at preparing to an Initial Public Offering (IPO), finding strategic relations, or entering new markets.

One size does not fit all to what mobile app investors are fair percentage. It is based on a number of factors such as the level of funding and the type of investor. The following table summarizes the common ranges:

In the view of Oleg Puzanov, CSO: It is important to find an investor who believes in your product, its values, goals and mission. This helps to feel the coherent partnership and have a common outlook on the future. The investor is to have a clear idea of the industry of your product or at least to have a desire to know more about it. See your investor as a ladder to other growth prospects. Use their network and connections to bring in future investments and alliances. Find a person, who could provide the strategic insight, industry knowledge and access to other valuable resources and not just financial support.

Read the Terms Sheet carefully, which provides the terms of the investment, use of the funds and required reporting as well as the investor rights. There is nothing to be afraid of negotiating terms of the investment. Secure the interests of your product and identify with its objectives. You are not to be shy to agree to the terms with which you take any money.

Securing funding for your app is a long and difficult marathon, but with an appropriate strategy, one can make it to the finish line. Now you know the basics of the fundraising phases and how to make a pitch that works so it is time to raise some money.