When building your mobile app startup, the biggest challenge you face is – raising capital. Finding investors who believe in your vision as much as you do is not an easy task. When it comes to pitching investors for your mobile app startup, you will realize the storytelling you have to do is enough for a lifetime.
Your success to win investors largely depends on your abilities to influence them. If you are looking for practical strategies to win the confidence of investors for your mobile app startup, you have come to the right place. Here are some guidelines and collection of thoughts from successful entrepreneurs who have walked this road before you.
Learn some investment basics
It is always a good idea to learn about some investment basics. You need to understand the details of fundraising and running an app startup. For those who don’t know, there are different stages of fundraising for a company/startup and it will decide what kind of capital to expect from investors. For example, Self-funding is the 1st stage, 2nd stage is investment from friends and family, the third stage is seed capital which is used for research and development of the product. Other funding stages are Growth, Expansion, and Mezzanine.
Finding the right investors
To pitch your app idea to right investors, you must first find them. Many app developers and entrepreneurs get caught up in the excitement of happy fundraising story without understanding the difficulties in influencing the investors. According to Paul Graham, one of the successful startup entrepreneurs, fundraising is not easy as it seems. He tells it is very hard to convince people to give up their hard earned money to build something that might have a bright future. The starting point of the fundraising journey is finding the right investors.
You have to make your pitch stand out as many investors receive hundreds of pitches every week that makes things more difficult for entrepreneurs. In order to reach right people, you need to make the right connections. Start building up your professional network. Here is list of influential people who can help you reach right investors.
- Startup Lawyers – venture capitalist and angel investor’s work with startup lawyers all the time. Building a relationship with them can get you close to VCs and other investors.
- Startup-Focused Recruiters – recruiters are known to have deep networks that also include startup entrepreneurs, Venture capitalist, angel investors that back startups.
- Other Entrepreneurs – founders who have successfully garnered finance for their startup long time back might be connected to a handful of investors who can invest in your app startup as well. Search sites like Angel List and LinkedIn to find out which entrepreneurs are well connected to investors. If you know the entrepreneurs well, ask them to introduce you to the investors.
- Other Investors – startup investors invest in multiple companies and they are connected with other investors. Ask the investors in your network to introduce you to other investors they know.
Get investors interested through attractive pitch deck
The pitch deck refers to a presentation which includes slides to present information about the app and a prototype for demonstration. The pitch deck provides the investor with the required information to base his decision whether or not to invest in your app startup. When making a pitch deck – keep it simple but captivating. The elements of a pitch is similar to a storyline but with a slight difference. The beginning of the pitch needs to be interesting enough to hook the investor’s interest; the middle section needs to contain all details about your app startup and the conclusion needs to encourage the investors for positive action. Here is a tried and tested formula for creating an attractive pitch deck.
- Company Purpose: you need to define your company in a single declarative sentence. Don’t get trapped in listing your business objectives. You need to communicate your mission to the investors to gain their confidence.
- Problem: describe the pain points of the targeted customer. Show what the currently available solutions lack and how you plan to address them through your mobile app.
- Solution: Explain your app idea to investors. Also, explain why your app is unique and what value it brings to customers. Tell investors why your app will be successful. Show them a detailed plan of your app journey highlighting milestones.
- Market Potential – define your target audience and identify the market. Some innovative companies define their own market.
- Competition –who are your indirect and direct competitors? Explain your plan to win over them.
- Business Model – present a business model that showcases how the app will thrive in competition, details of financing needed, identifying sources of revenue and intended customer base.
We recommend you to focus on the above business elements to attract the attention of investors. Put some variation or follow the sequence mentioned above. Some people have an opinion that the pitch deck should start with the company purpose and them move ahead to explain the problem the customer has and then present the solution at the end. But don’t forget the product- Keep the prototype ready for the investors to see and believe in your app idea.
Keep a prototype ready
If you want to attract investor’s attention, keep a prototype ready. The app market is new and it will be difficult for the investors to comprehend how your app will look or function. A fully functional prototype will remove all doubts related to your app idea and the business plan you present to the investors.
Investors know there is the difference between Google and AltaVista. The execution is as important as app idea to succeed. You might be a good speaker but that does not mean you bore investors with storylines, show the prototype to investors and they will have answers to the majority of their questions, uncertainties, and doubts. Since your app startup is at the earliest stage of fundraising, having a fully functional prototype will make things easy for you. To build a prototype, hire an app development company. This is a safer decision as many app startup entrepreneurs do not have confidence in their own skill sets and lead a team of developers and coders to make the project successful. Hiring a leading mobile app development company means you will have a team of designers and coders who have years of experience in developing an app prototype that attracts investors’ attention.
Show the investment opportunity
In a fundraising pitch, everything ends with a call-to-action. Don’t forget to show the investment opportunity. Position your pitch in a way that shows win-win situation for both. Remember pitching to investors does not mean you are desperate for money but think you are sharing an investment opportunity that will bring good dividends to both parties.
In this section, you need to show the investment plan to investors. Include the following things in this section
- How many funds do you plan to raise?
- Different ways you are following to raise money – investment from your pocket, government grants, funds from investors, and crowd-funding plans if any.
- Be specific when mentioning what you expect from investors and what they will get in return.
- Share your plan of investing the money you get. For example, how much money will be invested in development, marketing, setting up infrastructure and other things related to business? If any potential investor asks for estimated expenses, keep the numbers ready.
Practice your pitch
Pitching your app to the investors is generally nerve wrecking. Most of the app startup entrepreneurs are doing it for the first time. That is the reason you need a good practice to pitch your app idea successfully to the investors. You can give a real presentation to your friends and family before approaching the investors. Get the feedback from your closed ones and improvise.
You need to also anticipate the questions investors may ask and keep the answers ready. It’s good to know numbers but don’t make the pitch boring for investors. You need to be confident and passionate when explaining your app idea. It’s the passion and spark in your eyes that will convince the investor to believe you and have a strong belief in your app idea and business plan. If they see the seriousness in your numbers and execution, you will see funds pouring in much more than you expected.
A strong pitch will get your app idea off the ground. You can use the guidelines and tips to find right investors and win their confidence that will encourage them to invest in your app startup. Many app startups fail not due to lack of funds but due to poor execution. Remember the investors aren’t meeting you for some amusement; they want hard stats and facts that support your app idea. Don’t get excited and project some ridiculous growth picture that is hard to believe. If you are presenting some estimation while pitching your app, let them know they are estimations which you plan to make realistic. If you overestimate, investors won’t take you seriously. Follow the tips and you will have the majority of things sorted when pitching your app to investors.