Coming up with a great mobile app idea is tough, but once you have one, figuring out how to pay to have it built can be even tougher.
Unless you’re lucky enough to already have a hefty savings to pay the development costs out of your own pocket, you’re going to have to find money elsewhere.
Don’t worry though, you have options!
In the first round of funding (when you are still pre-product), you just need to get enough money to build your initial product with some money left over for targeted, regional marketing to prove your idea has legs.
Unless you find an angel investor you’ll need to look into some different options.
Use Crowdfunding to Fund Your App Development
One option that you have is crowdfunding (check out our Ultimate Guide to Crowdfunding), which means using sites like GoFundMe or Kickstarter to raise many smaller amounts of funding from people you don’t know around the world to add up to the amount you need.
The good thing about it is that all you need in order to receive funding is an idea (and a story, photos, a video and a plan… but you don’t need the actual product).
If you get enough donations, then you get to keep the money and you use it to develop your app.
Keep in mind that crowdfunding platforms generally take about a 5% cut of the total donations you receive depending on which site you use, but you also don’t have to give up any equity…. a HUGE win for you.
If you don’t reach your goal, though, then you’re shit out of luck — everyone keeps their money and you get none of it.
Ask Friends & Family
What most founders end up doing is finding money through friends and family (as well as gathering up their own savings).
It can be difficult to ask friends and family for money so it’s important to keep them well informed of your business and plans so they know what they’re investing in as well as making sure that nobody is giving you money that they can’t afford to lose.
It also helps to have them spread the word to anyone they know who has invested in start ups or who they think might be interested in your business.
Keep in mind although it’s referred to as a friends & family round, it doesn’t have to be limited to people you know directly.
Friends of friends and the networks of others are certainly fair game. Go as deep into your network as necessary to get the funds you need.
The funding you raise through this tends to add up to anywhere from $25,000 to $150,000 depending on who your friends and family are.
They can also give loans as an investor or partner depending on what role they want in your business, unless they’d rather just make it rain money on your company and then leave the rest to you.
The best part about it is that you don’t get caught in the deadly clutches of bank loans.
As long as you’re smart and careful about it, borrowing money from family or friends can be a great way to go. You just have to make sure to put your agreement on paper to protect your lender, yourself, and your relationship and ensure that they know there is a chance they may never see that money again.
You wouldn’t want your Aunt Susie leaving you angry voicemails every week demanding her goldarn money back because you can’t repay her and you don’t have an agreement in place in case of that situation arising.
A simple and good way to go would be to make your lender a shareholder in order to make it easier from a tax standpoint as well as making their loan an official investment.
Also, if your business becomes a huge hit, their original investment will be worth more which means you can buy matching houses on the beach.
Find Your Angel… Investor
Another option, although a lot less likely, is to find an angel investor. Finding angels directly is the hardest route by far.
Angels generally like to remain anonymous and they don’t know you so it’s hard to get in front of them.
As a general rule, you can assume you are not likely to get investment from formal funding sources like venture capitalists or private equity with an idea. You need to have a product that is showing positive traction before formal investors will invest in you.
However, there are networks of angel investors out there that invest in pre-product startups.
Angel networks or investment syndicates have people that source deals for the individual investors, allowing them to keep their anonymity.
AngelList is a great resource for finding both individual angels as well as syndicates.
You Can Do It!
It’s unlikely that you’ll find yourself with an abundance of money and investors coming your way when you first begin looking for funding for your app, so the best way to go is to bootstrap and look to your family and friends to open up their hearts and wallets to you.
Many startups have gotten started this way. It is possible and it is the most common path.
Now organize your plan, figure out how much money you will need to show positive traction, and start tapping your network.