How to Get Funding for Your Startup, App, and Digital Product
Whenever I have meetings with startup founders or product owners and creators, one of the most frequent questions I get asked is, “How do I get the funds to kick-start my app?” I always answer that there’s no silver bullet that will magically throw you money just because you have a great business idea.
So, I’ve come up with this simple list of viable options for budding entrepreneurs who want to launch their app. Startups have to deal with a lot of costs to survive and maintain momentum. If you’re exploring how to get funding for your startup, I encourage you to mull over each of them. A lot of factors are at play here, including your immediate and future needs, ambitions, personality, and the ideas that you have. Don’t get discouraged if they don’t work out! There will always be an alternative as long as your put your (positive) mind into it!
Options for Getting Funding or Investment for Your App
I’m assuming that you already validated your ideas, ensured that they solve real needs, and have a concrete plan to build it. The next step is finding the financial resources you need to get it started.
Convertible Notes/Convertible Bond
In this scenario, the investor gets equity or shares of the startup’s stocks in return for their investment. This option is great for those who are sure that their idea is going to work out and don’t want to waste valuable time networking and pitching to potential investors. You hire a team, and after the company becomes profitable or raises capital, each team member gets payment according to the amount of hours spent on the project. I personally know a startup founder who’s adopting this approach and is currently working with a team of developers to build the app.
Bootstrapping a startup indicates growing your company without outside investment. If you’re still working on your daily job, for example, you can spend some savings building prototypes from no-code app development solutions or involving a freelancer. Rates vary dramatically based on the location and qualification. Decent full-stack developers in Europe will charge about US$30 per hour, which means you need at least US$5,000 for every month of work. If a freelancer has clear requirements, they should be able to complete a minimum viable product (MVP) within two to three months, although the timeline varies depending on the project’s scope. Conversely, you should be able to create a requirement specification for your project. On the upside, many of today’s successful startups had their humble beginnings as a bootsrapped startup, including GoPro, Basecamp, and Mailchimp.
You might be surprised to know that there are so many people out there looking to invest into cool and meaningful projects. In fact, I know a couple of them. These people are angel investors (aka private investors, seed investors, angel funders), and if you know any, approach them for a chat about your project. If you don’t, a good way to start your search would be angel investors communities. If you’re in the UK, there are various angel investment networks you can explore, as well as angel investors you can reach out to. Seedrs, a crowdfunding platform, has a list of angel investment networks in London that you can tap into. Also note that while angel investors in the UK still have an appetite for investing in startups, the COVID-19 pandemic is compelling them to rethink or recalibrate their plans. For more actionable insights on angel investments in the UK, check out this resource from Activate our Angels (AoA).
Business incubation is an umbrella term for a wide range of support provided by different organizations, not only the services by the incubator itself. Incubators usually help in polishing your idea, choosing better ways to monetize it, finding the right product market fit, and building a team. Incubators usually target early-stage startups to help them with resources and community support. Founders who enroll with incubators get to talk to mentors, investors, and other founders who’ve been on the same journey, which in itself brings a lot of value and opportunity to look at their projects from different angles.
The UK government created an online directory that’ll make it easy for you to search for incubator and accelerator programs that could be suitable for your needs based on your location, duration, and price, among others.
Scaling ambitiously: Accelerators, venture capitals, grants, crowdfunding
These types of funding are for startups that have already found a product-market fit, built an MVP (or in the process of building one), got feedback from early adopters, and proved that the digital product solves real needs. At these stages, founders need the funds to accelerate the startup’s growth, enter new markets, and enhance the technology and product with new features.
Unlike incubators, accelerators usually provide support through a highly selective, cohort-based program with limited duration. Services often include assistance in developing the business plans, investor pitch decks, prototypes, and initial market testing. Accelerators sometimes provide seed-round investments in exchange for equity.
Venture Capital (VC)
VCs are a hard nut to crack. They want the next “unicorn,” looking for bold, ambitious, and courageous founders with novel ideas and strong teams. If you want to get into the space of venture capitalists, you need to network a lot. They always prefer warm introductions and attending events. Talk with as many venture capitalists as possible. Make sure that your idea is scalable and solves real problems while keeping your solution novel and hard to replicate.
Government agencies around the world provide perks and financial grants in setting up new businesses. They vary significantly based on the local authorities that provide them and the industries they cater to. If you’re in the European Union (EU), check out this comprehensive list of publicly backed and private business grants and funding programs. The UK government, too, has an online portal for funding programs you can filter depending on the type of support you need, your industry, and region.
This can be your viable option if you already have an MVP and want to complete and deliver the product. There are usually two kinds of crowdfunding models: You sell a part of the company as debt or equity in exchange for money; or you collect donations from people to fund your startup and provide them the finished product. Both require completely different business models and approaches. The first one is pretty similar to raising money from VCs, because the conditions are almost the same. However, don’t think of it as an easier option to go for crowdfunding. It requires a lot of marketing, PR, direct communication with your target audience, and a very good understanding of what you’re selling. The Startup Grind, a global community for entrepreneurs, has a list of crowdfunding platforms you can explore.
For Female Founders
A Crunchbase report said that 97% of all funding goes to male founders. It’s very important to bridge this gap, which is why there are more and more programs for underrepresented entrepreneurs. If you are a female founder or a person of color, there are plenty of options available to fund your venture, including private and government-backed business grants.
How long does it take to get funding?
A common timeline would be six months. It’s a misconception that if you go out there and land a VC contract, you’re all set. In reality, many startups raise funds every year, and most just raise enough to achieve an immediate milestone. Getting a startup funded is a constantly moving process that can take 12 to 18 months per funding round. Some take at least 90 days (and as long as nine months) from initial pitches to the actual funds. Just scheduling a meeting with a potential VC firm can take weeks, not to mention that meetings, conversations, and negotiations that follow.
Many entrepreneurs end up waiting too long and unfortunately go bust or move on to other ventures. Fundraising is time-consuming, so it’s very important to schedule your activities as effectively as possible and prepare everything that you need, like pitch decks and project specification, well ahead in advance.
Where do I start looking for investors?
A good starting point is doing your research and compiling a list that you will reach out to once you’ve finalized your idea and determined your startup’s future. You can start with business schools and universities with strong entrepreneurial programs, which usually have a network of investors and successful entrepreneurs. You can also sign up the help of your friends and family, contact industry colleagues, and join regional groups and startup communities.
Before reaching out to these investors, determine if:
- They know your market
- They’ve invested in a similar project or industry
- They’ve invested in competitors and future or potential clients and partners
- They’re experts behind the technologies you’ll use
These will help you focus on things that matter most and filter the people you’ll talk to, which will help you save time and lessen your frustrations.
What are the must-haves for startup founders when pitching?
An idea is only as good as how it’s conveyed, and that’s especially true to startup founders. Here are some must-haves when pitching:
- A pitch deck, the one that can make or break your startup, should include your value proposition, how your idea will solve problems, customer journey and stories, business model, milestones, and the numbers behind your own numbers.
- Investors capitalize on the people who bring ideas to life. Share details about your rock star team, the skillsets that would complement your current team, and the overall structure of the company.
Why does a good UI/UX design matter?
Amidst tight deadlines, limited resources, and busy schedules of launching the startup, user interface and user experience (UI/UX) could be the last thing on an entrepreneur’s mind. They should not. Regardless of what kind of digital product you’re creating, the ultimate goal is to attract potential clients. They only become loyal customers if they’re happy and satisfied with your product. It’s not just about what icons go to what part of the screen; a good UI/UX design reflects the problems you are trying to solve and gives insights into how your customers will interact with your product. There’s more to UI/UX design than creating a visual identity — it maps out the user journey that enables your investors to visualize how customers will use your product.
Real Life Stories of Startup Founders
Over the years, we’ve helped different startup founders develop and launch their digital products that, in turn, helped them secure funding. Oursky worked with Johnny Quattro, MiQ Limited’s founder, to build the Jamn PLAYER, an award-winning iOS music app. At the time, no other software development agency was interested in partnering with Johnny as the technologies and expertise needed to bring the app to life was deemed outlandish. After working with an MVP for the app, Johnny was able to secure an equity-based funding. The app garnered over 3 million within six months after it was launched. We also helped Johnny build the technical team for his own startup.
Another success story was a UK-based online marketplace platform whose app we helped develop won the Best of App Store under the leisure category. Through an iterative approach, we were able to constantly improve the app, and even outfitting it with an artificial intelligence-based (AI) recommendation engine. With a robustly designed MVP and prototype, they presented their idea and successfully secured the financial resources they need to improve and expand their platform.
Getting your startup and digital product funded involves time-consuming and complex processes and trade-offs between short- and long-term costs, returns on investment, and ownership. It sure is a lot of hard work, and you need the right tools and partner to help you. Ourskyers are all about helping entrepreneurs, creators, startup founders, and product owners bring their ideas to life — get in touch with us!