15 Practical Ways to Secure Funding for Your App
December 14, 2016
Raising funds for your new app can be difficult and confusing if you don’t know where to start.
In this article, we lay everything out for youーclear and simple.
Here are 15 different ways you can raise the funds to bring your app idea to life.
Your family can be a great source of initial investments, not to mention they’re also the easiest to secure. Families usually want to help and see you succeed, so it’s no surprise that family (and friends) actually invest the most in early-stage startupsーover $60 billion per year.
However, you need to approach raising money from family very carefully. Explain the risk that they might not get their money back, but that you’ll be working as hard as you can to ensure that your startup is a success.
You should expect to answer the following questions:
You should also make the investment official with a written letter or contract documenting the transaction. It’s crucial to set expectations appropriately, especially when mixing family with your business endeavors.
Going hand in hand with family, you could also ask your friends. Back in 2010, 5% of U.S. adults polled said they had provided funding to someone starting a business. Of those respondents, 32% said the funding went to a friend. With the startup boom, that number has most likely increased exponentially.
While asking friends is another great way to secure funding, you should also approach this the same way as family. Involving your friends in business matters could potentially ruin relationships. Be smart and ask cautiously!
The R&D tax credit is a general business tax credit for startups that incur research and development costs. In short, you may be able to claim credit for free money.
Here are a few expenses you could potentially have reimbursed:
This is a great way to put money in your pocket一 at no additional cost. Learn more about the R&D tax credit and if you qualify here.
The easiest way to guarantee a continuous flow of funds is to get a side job(s)!
And if you think that “not going all in” by taking on a side job will stop you from being successful, research shows otherwise.
A study by the University of Wisconsin-Madison showed that people who engage in a venture on a part-time basis are 33% less likely to fail than people who quit their jobs and startup full time.
Here are two great options:
Want to reach thousands (or even millions) of people who would be interested in your app? Start crowdfunding!
Years ago, entrepreneurs would have to pitch multiple investors, make connections through their personal networks and put out thousands of dollars themselves. But with crowdfunding, you can simply list your app or app idea on a platform and if people love it, you’ll have funds in no time!
With just a quick Google search, you can find hundreds of software development and app idea contests.
Most grand prizes can range anywhere from $500 to $300k!
“If you’ve got your own money on the line, you’re going to look at your business very differently, you’re going to want to really do your due diligence to make sure you can minimize the risk of losing your money.
You’re going to plan differently. It becomes all about planning, all about homework, and all about having a solid business plan. You will run a smarter and better company as a result. And all the rewards will be yours, not the bank’s.” ー Stephen Key, Author of “One Simple Idea for Startups and Entrepreneurs”
Using your personal savings to start a business can be very risky, but very beneficialー use your discretion. If you do plan to dip into your savings account, keep at least $5,000 in the bank.
Funds are easier to come by with credit cards. They’ll also provide you with a cash flowーas long as you make payments on time.
Larry Page and Sergey Brin, the founders of Google, actually maxed out $15k from credit cards to make ends meet. They later paid their debts after investors covered the financials.
Disclaimer: This method is not for everyone. If you don’t use them correctly, your company could end up thousands of dollars in debt
This method of raising funds is particularly effective if your company (or nonprofit) supports a cause. This is also known as donation-based crowdfunding.
Platforms such as Kickstarter typically encourage you to give rewards or incentives to people who back your projects. With donations, there usually isn’t a reward beyond a tax deduction.
Angel funding is a form of equity financing. Essentially, you raise capital by selling a percentage of the equity in your business to accredited investors. Landing an angel investor does take a lot of work, but don’t let that stop you. If you decide to go down this route, start searching as soon as possible.
Once you find an investor, be prepared to give an amazing pitch to grab their attention and sell them on your product.
Certain startups skip their angel rounds if they are very high growth prone. If you have a growth rate of 5-7%+ per week, this would be an excellent route for you to take.
An incubator is an organization that is designed to nurture and accelerate the growth of startups through their early stages of development. Incubators typically provide affordable co-working spaces, hands-on training, support, and usually access to financing.
Accelerators and incubators have some similarities, but there is a major difference when it comes to how these programs are structured.
Accelerator programs typically work with startups for a specific amount of time. Your company could spend anywhere from 90 days to four months working side by side with mentors and experts to start your business and learn the in’s and out’s of your industry.
Accelerators such as Y Combinator and Techstars grant over $100k to everyone they accept. The acceptance rate is 1.5%, but if your product or service is remarkable, you’ll have a great chance of getting in.
Taking out a loan to start your new business is a tried and true way to obtain the funds you need. We recommend you meet with a financial advisor to figure out if this method is right for your company.
Government funding covers almost every base. There are countless opportunities ranging from tech startups, arts and education, environmental safety and everything in-between. The only catch is that your project must fit the government funder’s exact qualifications.
You should have a good idea of where to start now, but keep in mind that what works for one startup might not work for yours.
Figure out which method is the most cost-effective and practical, and get to work!