Get Funds For App Development As A Tech Startup

Get Funds For App Development As A Tech Startup And Give Wings To Your Dreams

Author image By Manish Patel  |  Wednesday, January 19, 2022 03:42 PM  |  5 min read  |   185

Funds For App Development

For startups of mobile apps, funds can be a real challenge. If you, too, are thinking of building a high-tech software product, do consider funding at the very beginning with a proper analysis of the pro and cons associated.

In this article, we will discuss how fund generation happens for On-Demand Fintech App Development process. What all you need to know and the most famous business finance sources. An idea of what venture capital firms are and who are angel investors.

How to get funding for an app?

First things first, no one just comes from anywhere and gets due of money. There is a stepwise process that everyone has to follow for their idea to deserve an investment. The funding is amount should be enough to finance the growth of the startup and can take a period of 3 months to one year.

Let us go through the different stages of fundraising for the startups.

1.  Pre-seed stage

At this stage, the founders of the startups try executing the idea financed by their own money. Here are different ways for startups to get funding for app development.

  1. Looking for a genuine co-founder for launching the startup.
  2. Starting a crowdfunding drive.
  3. Raising funds through a personal website.
  4. Being a part of the funding contests.
  5. Focusing on angel investing from the very beginning.

2. Seed Stage

This stage involves attracting angel investors for mobile app seed funding for the startup. The investment required for the startup is a modest amount that shall cover the plan of the business, team’s salaries, rent, production cost, etc.

3. Series A

It aims at attracting third-party investors for the further growth of the business. This is the stage of the business in which you are making money from the business and have a business model and an adequate client base for running the business.

4. Series B

At Series B, businesses and startups scale up and are turning into enterprises. Moreover, Business viability is about focusing on the business that is now entering into new markets.

5. Series C

This business stage is very demanding, and considerable results expectations are from you at this stage. Now the business has reached the $100+ million mark. Now you are on a hunt for equivalent funding for the business.

6. Initial Public Offering (IPO)

This is the final stop to the existence of the startup. It is basically about the sale of a private company’s share to the public. IPO provides great funding opportunities with transparency.
Fundraising for startups requires time and a contemplative business strategy.

Funding Sources for Tech Startups

Funding Sources for Tech Startups

The primary sources or app funding companies for a tech startup are as follows.

1. Crowdfunding

In this fund generation process, funds generation is by pre-ordering the digital product before the development of the product. After the required funds’ generation happens now, you can start the Finance App Development process. This method has the setback of stealing ideas before their execution in the market. But still, it makes a great way for the fast launch of the startup.

2. Business Incubators

These are the organizations that mentor the early-stage development of the startup. These organizations provide the seed capital, organize lectures, share insights, organize business meetings with the owners of the startups.

3. Bank Loans

Bank loans help startups with short-term financing. Business loans are sources from various financial institutions that help businesses gain complete control over the business. But it can get hectic as a lot of documentation goes behind the procedure of a business loan approval.

4. Venture Capital

It is a business investment type in which different organization groups collectively invest their money in various projects with the help of a venture capitalist. VCs invested their money in startups with a great and functional plan and aimed towards profit generation.

5. Angel Investors

These are individual groups that distribute funds to different startup groups, even the risky ones. They study the risk factor of the business and guide them accordingly. These study on various factors like the market needs, team associated with the business, initial clients of the business.

Before coordinating the angel investors, make sure you are very well prepared with a business plan, professional-level presentation, and an answer to why the investment should be in your startup beforehand.
Among all the above-discussed different financial sources for your business, the most demanded are venture capital and angel investing. Let us gain a detailed understanding of these two financing sources in detail below.

Relate: A Smart Investor’s Guide: What Are The Best Investing Apps of 2021?

Venture Capital as a primary source of funding for startups

As we have already got a brief on who a venture capitalist is and helps startups that have some potential to reshape their market and can grow rapidly. The investment made by a VC on startup comes from different sources like millennials, institutional investors, insurance companies, corporations. In a VC firm, there is a partnership in which a certain group of individuals or organizations decide whether a startup needs financing or not.

The money lent by a VC is short-term money. The idea of finance by a VC is to help you scale your startup and earn huge profit margins. However, the downside for the owners of startups herein is that while getting funding from a VC firm, it gets participation in decision making along with the share of the equity.

Benefits a startup can get while getting funds by a venture capital

  • Experience and expertise of VCs help in facing business challenges.
  • Expansion of business network.
  • Improvement in public reputation of the startup.
  • Risk management.

Angel Investors and their role in helping startups

An Angel Investor is an individual who willingly funds your startup. These investors do finance in groups also and are a great help to fund your startup in the initial stage of the business.

Moreover, venture capital and angel investor are the two very popular financing sources. Both help startups execute their innovative ideas and deal specifically with technology companies.

Differences between venture capital and angel investors

1. Investment amount

The amount invested by venture capital in a startup is in millions, but angel investors can’t invest this big sum.

2.  Returns on Investment

Venture capital’s engagement in the startup a lot, so expect higher returns, but angel investors are not engaged solely, so there is less return on investment.

3.  Role in the business

Both the investors have equities in the startup so that they get higher returns on the investment. But comparatively, angel investors demand total control over a business. VCs just demand a seat in the Board of Directors.

4. Motivation

Angel investors are more personally involved, are willing to invest even in risky projects just by seeing the potential of the business. Venture capitalists study every aspect of the business they are planning to spend their money on. They prefer spending on stable projects ahead of the competitive market.

Why do tech startups need investments?

There are various factors to why startups need mobile app funding and investments, which are as follows:

  • Market Research.
  • Analysis of customer issues.
  • Defining the features of your tech product.
  • Hire a team.
  • Software development process.
  • Feedback.

How one can calculate the investment cost of a startup?

Pre-planning and considering various budget factors is essential to represent the rough investment costs to your investments. This way, both investors for app development and you will have an estimate of the cost of your project.

Tips on the calculation of the budget of a startup are as follows:

  • Select the platform on which you are planning to launch your app.
  • Estimate the features of your app.
  • Have clarity of revenue goals and your profit margin.
  • Hire the best team for efficient and profitable business results.

In conclusion, these are all the tips and tricks on how a tech startup can get funding for the mobile app development process.

 

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Manish Patel

Manish Patel is a Co-Founder of Concetto Labs, a leading mobile app development company specialized in android and iOS app development. We provide a one-stop solution for all IT related services.

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