A Venture Capitalist is an investor who is looking for firms that want to commercialize their idea, and the investor provides the capital for it. The venture capitalist provides the capital in exchange for an equity stake. Due to the risk involved in this investment, venture capitalists are known to experience high rates of failure, as the success of the business is very uncertain since the beginning. They are known to fund those app ideas that have the potential to achieve stability in the future. Venture capitalists are looking for a faster Return On Investment (ROI), thus, from their experience, they might ask you to make a few modifications to your app idea, to achieve their goal, i.e. a higher ROI in much less time.
BEFORE APPROACHING THE VENTURE CAPITALIST
Before approaching any venture capitalist for your app or product, you should have completed your homework. Your homework includes trying to convince the investors about how your app or product is different from your competitors, and how it would be much more successful than them. To be able to convince the venture capitalists, you must know the following details thoroughly, so that you can present your proposal from a much stronger position.
1. Know your app’s niche
As the investor capitalists will be taking a big risk by investing in your app or product, they want to see some unique ideas. Your app idea should be unique and should be made for a specific target market. With so many apps out there, for the almost very purpose, you could think of, you must be prepared for some common questions. These questions include, but are not limited to, “How is your app different and unique from others?,” “What problem are you trying to solve with your app?,” and “How does your app function?.” You should also have enough details about your competitor’s service model and revenue growth.
2. Branding your app or product
Branding your app gives a very professional and serious look to your product. Branding can be done by creating a logo, purchasing a domain name, creating mockups for the screen, etc. Although these are insignificant details, they will show the investors how serious you are about your product. It also helps in giving the investors an idea of how the final product will be perceived by your audience.
3. Your app’s elevator pitch
Venture capitalists are busy people; they deal with numerous clients in a day. Therefore, the amount of time they can allot to each client is very limited, but they are interested in finding out all the important details about your idea. That is where your app’s elevator pitch comes in handy. The elevator pitch is a summary or overview of the app idea, containing all the details that might pique the interest of the person it is being presented to. Your elevator pitch must be designed in such a way that it strikes a chord with the venture capitalists. If it does not create an impact on the investors, you will not be called in for a second meeting to discuss the app idea in much greater detail. The elevator pitch must highlight the important and different features that your app has to offer, and it should mention the problem your app is solving. If this interests the investors, then only will they call you for a second meeting; oversee this would be your first and last meeting with them.
4. Create a pitch deck
If you are lucky enough and your elevator pitch manages to grab the attention of the venture capitalists, then they would call you for a second meeting to discuss all the ideas you have regarding your app or product. For this meeting, you need a pitch deck. A pitch deck is a presentation of not more than 15 slides, that describes your business idea in greater detail than the elevator pitch. One thing you should keep in mind is that the pitch deck should have a lot of visuals in it, such as stats, figures, graphics, images, etc. instead of having text. While presenting, you must not read from the pitch deck; you should only talk and explain what is shown on the slide. The investors can read the text themselves, therefore, they expect you to talk and explain the graphics in your own words. This will help you to grasp the attention of the investors as they would be kept to listen to you. Visuals and your script, collectively, will help to grasp the attention of the investors.
5. Build a Minimum Viable Product (MVP)
Since the investors would be investing in your app or product, providing them with an experience of the app or product will be highly beneficial for you. The main goal of these meetings is to sell your idea to the investors so that they like it so much that they agree to invest in your idea. Furthermore, something tangible during the meeting leaves a good impression on the investors, as they can see how seriously you are taking your app idea. The product demo provides the investors better insight into your app idea, giving them an interactive session before they make the final decision.
These are a series of events that take place when you approach a venture capitalist. After these steps, the funding rounds begin.
For funding, you will come across different investors who will invest in the various rounds involved in your app idea. Each round requires a different level of funding that requires different investors. The funding rounds begin as soon as you come up with your app idea. To understand the funding process better, the app should be visualized as a seed.
The rounds of funding are:
1. Pre-Seed Round Of Funding
This is the first stage that involves investment into your app idea. These investors come from your lose family and friends who are willing to support your app idea. This capital will be used in creating an MVP, researching the app idea, and paying the team for their work and effort. This investment is usually about $200,000 or even less.
2. Seed Round Of Funding
Money from this stage is required to refine your app idea further, making it market-ready. This amount depends on the features and technicalities of your app. The more features an app has, the more money has to be invited into it. Investing in your idea, at this point, is a big risk, and requires those investors who are willing to invest, despite this big risk. For this reason, you should pitch your app idea to angel investors or early-stage venture capitalists. This amount usually varies between $15,000 to $3 million.
3. The Series Round Of Funding
These series are:
If your app has seen some success, then the Series A round of funding starts. This validates that your app is approved for the market and you are closer to achieving your goal. This funding allows you to focus on scalability and the marketing aspect of your app idea. This investment can range from $2 million to $15 million.
—Series B, C
These funding series build upon the path to success. Now that you are very sure about the success of your app as it is being used by numerous users, you can now team up with top-notch executives to make your app even better than before. This is the stage where you are looking for investors with deep pockets. This funding can go up to $25 million.
OTHER INVESTORS AND FUNDING SOURCES FOR YOUR APP OR PRODUCT
There are various types of investors that you can approach, apart from venture capitalists, to help fund your product or app idea.
A list of investors and funding sources has been listed below.
—App Development Company Financing
AFTER SECURING FUNDING
Funding for your app or product is an ongoing stage, and must not be stopped until and unless you are sure that your app would be able to survive its growth and expansion by its own generated revenue. The app market has a lot of competition; thousands of new apps are being released into the app market worldwide. For this reason, you must continue to strive and update your app. This will help to provide your users a better and smooth experience than before. Creating and updating an app is a complex and ongoing process, that must be done to ensure your app succeeds in the market.
Receiving funding for your app can be a very time-consuming process. However, if you choose to work with the right app developers, you can speed up the launch of your app. DigAptics is one viable web app development company, who work endlessly with their customers, to help them achieve the goals they desire. These expert app developers work closely with their clients to deliver what they are looking for. The dedicated team of app developers at DigAptics helps their clients to create out-of-the-box app ideas. Contact them today to consult them for all your app development solutions.