One of the most daunting challenges many startups go through is getting their first investment. In a world where you’re constantly hearing news about startups getting hundreds of millions of dollars in funding, it’s easy to assume that money is just being handed out to anybody with an idea.
In my experience, out of 10 people who tell me they’re confident they’ll get an investment, only 1 will actually get it.
As part of my job at app development company Messapps, I try to help our potential clients get an investment. Two of the most common reasons for companies not getting an investment for their app ideas:
- They don’t have their financial estimates ready
- They don’t understand the specifics of pitching an app idea as opposed to anything else
So let’s talk about what you need to include in your pitch when you’re trying to get an investment for your app idea.
Have a prototype ready
If you want someone to invest in your app, you must have a fully designed prototype. The app market is still relatively new—only 8 years old, in fact. And for many investors it might be difficult to fully comprehend how the app will function if they can’t see it.
Having a prototype shows that you’re serious. Anyone can come up with a great idea, but it’s the execution that matters. If you aren’t willing to put time and perhaps some money into creating a designed prototype, why should an investor be willing to put up their money?
“A picture is worth a thousand words. Don’t bore investors—show them a prototype.”
Creating a prototype is actually pretty easy:
- Choose 1-3 main user stories (or the sequence of screens user will see before achieving their goal) and design them
- If you have some funds, you can hire a professional designer or an app design and development company to help you with the design. No funds? Use UI kits—they let you quickly design a user story by simply dragging and dropping design elements.
- Then prototype it in InVision and you’re good to go.
A day of work prototyping can be the difference between you getting $1 million and you struggling to pay the rent.
Related: UX design tips for your app
Finally, consider how you’ll make your pitch. Shark Tank is a great show, but don’t expect pitching to be like that—you don’t always get to stand in front of investors and show your carefully prepared slides.
Most pitches actually happen over coffee or lunch, not like ‘Shark Tank.’ If you’re thinking you’ll be able to fit your laptop and your printed slides on the table between cups and utensils, think again. Make it easier, and less awkward, by simply pulling up a prototype on your phone and walking them through your app.
Have a development plan
Let’s assume the investors like your idea. The next thing they want to know is what it takes to execute it.
There are 3 ways you can develop an app (or any software, for that matter):
- Develop it yourself
- Hire full-time developers
- Hire an app development company
The choice will depend largely on your skills, your budget, and the scope of work.
If you’re a great developer and you can finish the app on your own in less than 2 months, then you might want to do just that. However, that rarely happens because most apps will require back-end coding in addition to front-end app coding—and very few developers are great at both.
If you have a good budget and know where to hire great developers, consider assembling a full-time development team. The potential downsides here include high salaries (unless you have an equity deal in place), and possibly hiring the wrong people who won’t perform the way you’ll expect them to.
“If an investor likes your idea, they’ll want to know how you plan to execute it.”
Or, you can hire an app development company. This allows you to keep your equity, avoid any long-term commitment, and have access to all types of developers and designers. The main drawback company rates vary significantly. The same app can cost you between $50,000 and $500,000 to develop depending on the shop.
Whichever option you choose, create a timeline broken down into feature-related milestones and associated costs. Research average salaries and talk with few app development shops to fully understand your options.
Having an app means having a business. Market it!
The app market is very different from most other businesses—once you’re ready to launch, you already have a distributor ready to show your app to people. If you’re selling cereal, you need pay for shelf space to get into stores. If you’re a dry cleaner, you need to pay for real estate where you’ll place your business.
With apps, it’s different. Once you’ve launched, you automatically have your real estate and your shelf space at the App Store.
This really messes up the way people think about apps. Many assume that just because your app is now live and visible to anyone on the app store, you can just sit and collect money.
“When an investor asks about estimated expenses and potential user numbers, be ready.”
Having an app means having a business. And if no one knows about it, no one will use it. To acquire users, you need a marketing plan.
Many user acquisition strategies exist. Here are a few of the most important:
- Do App Store optimization to make sure you rank high for important keywords
- Have a website with an email signup to notify users when you’re going to launch
- Have a budget for “cost-per-install” ads that will allow you to pay only for users installing your app on their phones
- Consider having public beta tests that will help you get early loyal users
- Use general PR methods and reach out media to get them to write about you
By studying your competition and how they market their product, you’ll be able to estimate your expenses and potential users. Also, have those numbers ready when an investor asks.
Major pitching rules still apply
Though there are some differences, apps still follow the main pitching rules. Prepare a pitch deck clearly conveying the problem you’re solving, how you’re going to solve it, and what financial benefits are waiting should you be successful.
Be a salesperson and a storyteller. Know your numbers, but don’t make it a boring accounting lecture. Explain why you are passionate about the idea and show your passion. Often, it’s not the idea that people invest in—it’s you. If the light in your eyes conveys passion, and you show you’re serious about your numbers and execution, you’ll double your chances of getting an investment.
“Often, it’s not the idea that people invest in—it’s you.”
At the end of the day getting an investment can be tough, and it might take you quite some time before you get it.
But don’t give up. Keep going out there and reaching out to new investors. As long as you’re prepared and have confidence in your idea, it’s just a question of time until you get an investor to write you a check.
Though a lawyer by trade, Vasily Malyshev found his passion in the mobile tech, self-taught design and development. He is the founder of <a href="https://messapps.com/">Messapps</a>, one of the top New York app development companies. Today, in addition to working with Messapps, Vasily is also teaching app development and marketing at New York University and regularly invests in other tech startups.