Startup Funding for App Development – How to secure Mobile App Funding?

Did you know about 80k android apps and 30k iOS apps are launched on PlayStore and AppStore, respectively, every month?

The immense increase in the demand for myriad mobile applications across different industry verticals and sectors has opened up the market for a wide range of startup app ideas. With more than 77 billion mobile app downloads in just the first half of 2023, venturing into startup app development is becoming a trend among young entrepreneurs. However, the most challenging problem that entrepreneurs need to find a solution to is how to get funding for app development.

Starting a mobile app business is not an easy nut to crack unless you have all the strategies in place for your technology startup. Building even the simplest mobile app requires $10000 to $30000. And as the features, functionalities, and app complexity increases, the cost also increases. Mobile app startup funding can be challenging without the right approach. Many startup ideas failed just because of the lack of proper funding.

When you have an idea, you should have an entrepreneurial approach, planning every aspect by having a detailed business plan for mobile app. The biggest concern for app startups is to find funding for mobile app development. Let’s start by understanding the need.
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Why do Tech Startups require funding for App Development?

Any business would require a financial boost in its initial stage to cope with myriad settlements. From registering the logo and company’s name to spending on infrastructure and other legal licenses, it would cost enterprises an arm and a leg. The capital investment is also required to kick off the app development project even before the core operations start.

Having an app idea is just the start of the journey as an entrepreneur. Establishing a mobile startup requires thorough planning, research, experiments, and execution. For a startup to get a custom app built requires a considerable capital investment. So, funding for app development is raised from various sources, and the capital raised can help startups to:

• Acquire the best talented and skilled employees
• Develop and improve mobile apps as your business products
• Market and promote your app-based startup and the value proposition
• Expand to new markets and tap mobile users
• Survive the competition and the uncertainties

Based on the type of mobile app development funding acquired, it can provide a tech startup with valuable guidance, mentorship, feedback, and connections from the funders. Having the required funds and being financially sound helps you to plan your strategy, keeping in mind the changing ways of the market and putting in resources for technology updates. This approach allows you to stay ahead of the market as a pioneer, increasing the chances of success and profitability for your startup. Therefore, you need to have a clear and realistic approach to startup funding for mobile apps.

How much Mobile App Funding should I raise for my Tech Startup?

To get into a highly alluring mobile app market that is projected to touch the mark close to US $674 billion by 2027, you need to arrange funds. The amount of funds required for a startup that earns by having various types of mobile apps on app stores depends on several factors.

You require more funds if the size and complexity of the apps are comparatively higher. You also need more money to develop and maintain your products on the app store with periodic updates and bug fixing. One of the best ways to reduce development costs for your startup is by outsourcing app development services and, if required, partnering with the service provider for long-term benefits.

Additionally, the marketing and distribution strategies also require financial backup for your mobile app. A general mobile app development cost estimate ranges anywhere from $10,000 to $300,000 or more, depending on the number of features and functionality.

Suppose you are working on a startup idea that has multiple apps in different categories and markets. In that case, you need to prepare to raise a substantial budget and a clear business plan to ensure profitability and sustainability.

Startup Mobile App Funding Sources

If you worry about how to get funding for your mobile app business, there are many ways to delight you! We have acquired the tips to get financing for app idea to turn into a genuine product and start a great business. Using these funds, you can develop, launch, and market mobile apps of all kinds as your products.

Here are some of the most common sources of funding for app entrepreneurs:

Bootstrapping

Bootstrapping means using your savings. It could be from your income or assets to finance your app startup business. This type of fundraising is known as the most low-risk and low-cost option; nevertheless, the downside includes immense limitations to your growth potential as funds from bootstrapping are often not enough to cover all your expenses.

Private/local investors

Another source to get funding for mobile app startups includes getting the required money from individuals or groups who trust your confidence and are willing to invest in your app startup business.

In most cases, such investment is always in exchange for equity or sharing some portion of profits. These private or local investors could be acquaintances, business partners, or local companies. While these investors may offer you mentorship, connections, or feedback, they will have great expectations or demands about their shares later.

Personal and close network

Funding for mobile apps is also possible by reaching out to people you know personally or professionally. Unlike private and local investors, you don’t need to work harder to convey your startup business idea and confidence to this close network.

The close network may range from former colleagues or classmates to your mentors, clients, and even loyal customers. These buddies can get you loans, grants, donations, or referrals. Of course, no help is without any gain; hence, they also expect something in return, like recognition, involvement, or financial favors from the profits later.

App funding competition

The question of how to get funding for your startup app development cannot bother you anymore, with astounding options available in this era where startups are encouraged like never before. App funding competition is one of the best tips to get funding for an app idea.

Simple participation in contests or challenges can reward you with fantastic cash prizes, exposure, or opportunities. Such startup app funding is organized by big MNCs, app development platforms, giant media companies, or even local governments. Such entities offer you app startup idea validation, feedback, or publicity. However, they have stricter criteria, deadlines, or prerequisites for app startup ventures.

Applying for Grants

Government agencies, private foundations, or non-profit organizations typically offer grants. Unlike loans, recipients of grants are not required to repay the awarded amount, and there is typically no equity stake involved. Mobile app grants are awarded based on considerations that include:

• Satisfying outlined criteria
• Startup app’s potential social impact
• Alignment with the grantor’s mission
• Feasibility of the proposed initiative

Applying for grants involves a formal and competitive process. Applicants are required to submit detailed proposals highlighting the potential impact of the app project and undergo a thorough evaluation. This structured approach ensures that awarded grants contribute to startup projects with meaningful outcomes, fostering innovation and positive social change.

Venture capital investors

Venture capitalists are firms that specialize in investing in high-growth and high-risk startups. Hence, if you have bigger plans for the future despite possessing the risk, venture capital investors can provide you with large amounts of capital.

You can also leverage their expertise and networks. Again, such venture capitalists take a significant share of your equity, control, or profits. Also, your mobile app startup company should have high standards and the potential to grow.

Bank loans

Probably one of the most common ways to get startup app funding is to obtain these loans from a bank or a financial institution to back your startup app business. Bank loans come with stability, flexibility, and security; nevertheless, loans from banks are known to charge you heavy interest, fees, and/or collateral. You also need to keep in mind that your venture should pass strict eligibility, repayment schedule, or documentation requirements.

Crowdfunding

The popularity of crowdfunding has been a rage these days, and this could be one of the best tips to get funding for an app idea for business. Crowdfunding means raising money from a large number of people online who support your mobile app startup business.

The supporting people could be loyal customers, ardent fans, staunch supporters, or even strangers with all faith in your startup app idea. Crowdfunding can get you pre-orders and donations, but they expect significant rewards, updates, or involvement from you.

Angel investors

With thousands of billionaires all around the world, many of them are quite interested in investing in projects and tech startups that are worth and have the potential to grow in the future. These tycoons and big-shot businesspersons are called angel investors.

These angels are wealthy enough to invest in early-stage startups with high potential. While these can be a great helping hand to get funding for startup app businesses, you can also ask them for mentorship and business connections to grow your startup business.

Of course, in return, they would ask you for some stake in your equity, and they may also like to participate in decision-making or direction. Angel investors have personal preferences, opinions, or agendas for mobile app business ventures.

Stages of Startup Funding for Mobile App

Now that you know the types of startup funding sources, a big question arises: How to find investors for a mobile app idea and turn it into a profit-making business?

Finding investors is not an easy task because it requires a lot of homework, preparation, research, and networking. Let us see the different stages of mobile app startup funding and how to find investors at each stage.

Pre-seed Funding

Pre-seed is the earliest stage of funding, where the app idea is in its infancy. You are validating its market potential and hence, you create a minimum viable product (MVP) that demonstrates the core features and value proposition of the app.

For this stage, it is better to rely on your savings. If that’s not possible, you can get funds from family members, friends, or crowdfunding platforms to fund your app development. If needed, seek some advice or mentorship from experienced entrepreneurs or incubators.

Seed Funding

The second stage is the seed stage, wherein you have launched the MVP and have some initial traction and feedback from stakeholders and end users. It would be best if you refined the app strategy based on overall feedback to enhance your product’s efficiency and usability.

Ultimately, you need to start building a scalable business model, and at this stage, you seek funding from angel investors or seed-stage venture capitalists (VCs). These will get you more capital, network, and guidance.

To succeed in this stage, you need to be perfect in pitching your startup app idea to potential investors by showing them accurate traction and metrics. This should convince them about your enormous market opportunity and the competitive advantage of your unique startup idea.

Series A Funding

Series A is the stage of proving your product a market fit, which means you need to demonstrate that your mobile app business has a solid user base and planned revenue streams. Once the product is out, you are ready to scale up it to reach a broader customer base.

Here, in this stage, it is needed to optimize the app performance; do it by expanding your team, enhancing your marketing strategy, and exploring new partnerships or channels.

In the Series A stage, you can seek funding from well-established VCs to provide you with huge capital and strategic support. For this, you need to present your mobile app startup idea with a vision and growth plan along with financial projections through market analysis.

Series B, C, and D Funding

These are the later and last stages of mobile app funding. In these stages, you will have already established yourself as a leader in your industry and are looking to grow your startup app business further. This is when you enter new markets, acquire other companies, or develop more unique products or services. Here, you need to keep up your competitive edge, innovate remarkably, and diversify business revenue streams.

During these stages, you need funding from even larger VCs or private equity firms capable of getting you massive amounts of capital and access to global networks. For this, you will have to showcase your app’s grand achievements, prove market dominance, create immense social impact, put forth a long-term vision to potential investors, and prove that you can generate the best and quickest ROI.

How to Craft the Perfect Pitch to Raise Funding for a Mobile App Idea?

A great mobile app idea is nothing if it does not get the required traction and funding. Here are the best tips to pitch your mobile app idea in front of investors so that your pathway to getting the required funding for app development and other priority actions, necessary to take your startup app idea forward, do not face any hurdles. You need to craft a compelling and convincing pitch that showcases the value and potential of your app idea.

Let us take a look at the steps to perfectly Pitch your Startup App Idea to Investors

• Start with a clear problem statement: First, you need to explain what problem your application solves. Also, include who it is for and why it is crucial. It is better if you have data and statistics to back up your claims and demonstrate the market size and demand for the app in the market.
• Show how your app is different from the existing solutions: It is next to impossible that you have the most unique idea that nobody has thought of to date. However, highlighting the unique features and benefits of your app is possible. You need to prove that your startup app idea has better problem-solving capacity and enhanced user experience than the current alternatives. You can use screenshots, mock-ups, or demos to illustrate how your app works and what it looks like.
• Know your Target Audience and Market: Catering a perfect solution to a targeted market provides better results. So, it is vital to learn about your audience and the actual problem for which your product is the most feasible solution. It will also help you understand what questions your potential customers will have and also know their mindset. Along with that, provide evidence of market validation, such as user feedback, surveys, or early adopter interest.
• Outline your business model and revenue streams: You need to explain how you plan to monetize the app idea you have – whether through ads, subscriptions, in-app purchases, or other methods. It is suggested that you provide realistic projections of your expected revenue and expenses; also, you may show how you are going to achieve profitability and growth.
• Showcase detailed Marketing and Growth Strategies: Based on your research and the competition, make sure you have a detailed marketing plan that will help your startup app get the traction your startup requires. Focus on building your growth strategies in a planned manner so that every step and every phase is planned, measured, and executed appropriately. This approach is sure to get the results and also get the investors to believe in your thoroughly planned approach.
• Introduce your team and their qualifications: Many investors prefer seeing the workforce and their capabilities before putting money into a project. Showcasing the skills and expertise of teammates would work to build confidence in your app startup. Prove that they are the best people to execute this application idea as a business. You may mention any relevant experience, qualification, or achievements to demonstrate their efficiency and expertise.
• Ask for a specific and realistic amount of funding: Random demands for funding an app idea may not work. You need to have a specific figure or at least a range of money you want. Also, it is essential to convey to investors how you will use the funds you get. Be clear about how much funding for app development you need and proportionate to what valuation you are offering.
• End with a call to action and a summary of your key points: Lastly, you should invite the investors to ask questions or speak for any queries they have. You may also offer them the chance to try out your app prototypes. Alternatively, you can schedule a follow-up meeting to know the status of your mobile app funding. Remind them of the main benefits and advantages of your startup app idea and why they should invest in it.

Closing thoughts on getting funds for App Idea

This guide makes you a perfect entrepreneur to have mind-blowing app business ideas and you will be able to pitch your startup venture in front of potential investors. You will get the required funds, and then you are all set to start dreaming big about your startup and executing the strategies that will help your enterprise reach greater heights in success.

Nevertheless, the most crucial part of this entire journey is not to let a gap fall between getting funds and executing your mobile app startup business idea. When funds are arranged, you need to immediately search for the best startup app development company specialized in building startup apps, hire the best talent from them, and kickstart your project as early as possible.

FAQs on Startup Funding for Mobile Apps

How to raise funds for a startup?

You can raise funds for a startup by bootstrapping, crowdfunding, applying for grants, joining accelerators, or pitching to angel investors and venture capitalists. The best option depends on your stage, industry, traction, and funding needs.

How to find investors for a mobile app?

You can find investors for a mobile app by networking with other founders, attending events, reaching out to potential high-networth individuals, or using online platforms like AngelList, Crunchbase, or Product Hunt. You should also prepare a compelling pitch deck, a prototype, and a clear value proposition.

When should I raise funds for my app idea?

You should raise funds for your app idea when you have validated the problem, the solution, and the market size. You should also have some traction, such as user feedback, downloads, revenue, or growth metrics.

How much funds should I raise for my startup app idea?

The amount of funds you should raise for your startup app idea depends on your runway, milestones, valuation, and market conditions. A general rule of thumb is to raise enough to cover 18 to 24 months of expenses while leaving some room for contingencies which comes to around US $ 20000 to 500000 today.