You have a revolutionary idea for an app, but when it comes to figuring out how much it will cost, you are lost. Without guidance on how to get funding, your app might never see the light of day. This is where the Clear Function team can help! We’ve taken our clients through the process of funding their app because we see the value in digital products and know the resources that are available for new entrepreneurs.
If you’ve done even ancillary research around your funding options, you are probably overwhelmed and confused. From self-funded to venture capital and everything in-between there is a lot to consider when figuring out what your best option is for getting your app and start-up off the ground.
Throughout today’s article, we will answer several of the most asked questions around funding your app. When you’re done reading, you will have a better understanding of what you need and how to get started. It may seem like a hard process, but with expert help, it can be smooth sailing!
Keeping Your App Development Costs in Check
It’s important to realize that the cost of your app could vary wildly. It depends on the complexity of the application, the reach, and how much you decide you want to spend. If you are looking to create an app on a smaller budget, we recommend a few steps.
- Create an MVP: MVP stands for Minimum Viable Product and is essentially your app in its most basic form. It is the first version you release with only a few features and a minimal design. MVPs are used to conduct user testing and are a fundamental component to receive early feedback.
- Find a cheaper developer: The actual code development of your app is where the money starts to add up. The Clear Function (CF) team is full of expert engineers, but we understand that not everyone can afford the cost of local development. We partner with an offshore agency to provide a high level of development to our clients while still providing a local CF project manager. With a local project manager, you can rest assured that you will always be up to date on the timeline and that your needs will always be advocated for.
- Prioritize features: What features are a priority for version one of your app? When you try to build the first version with every single feature, it can get pricy. Spend time talking to your focus group and researching exactly what they want and need. Prioritize those features and only focus on the first few for version one.
We have launched MVPs from 5 thousand to 200 thousand dollars. If you are coming to an agency with an already validated idea and design, the cost will be much less than if you are coming at the very beginning. When you talk with an agency like Clear Function, they will give you a better estimate about how much your specific app could cost.
How Much Money Do I Need to Get Started and How Do I Raise Funds?
The first thing to do is to evaluate how much money you currently have to work with. If you have a good amount of money and feel confident that it is enough to create your MVP, then you are in a great place! This is what we call:
Scenario 1: Self-funded
Say you have a good job that has given you industry expertise in the area you want to create your app in, and you have been able to save capital to self-fund your app. You are able to meet with developers and begin the process of creating your MVP.
Once you have an MVP created, this is what you will then show to potential investors to create the next version. Version 2 will include extra features and a more complex design. Having an MVP to show investors will make you look more credible and will show that you have a solid audience who is excited about future releases.
We always recommend keeping in mind that as soon as you release your app to the public, you will need to make changes. This comes naturally as you receive feedback or you have an error in the code. It’s essential to have enough money to fix those errors or make improvements.
Scenario 2: Friends and Family
The second scenario involves having a good idea but not having the existing capital to do it on your own. You have pitched the idea to your friends and family, and they agree that it is a good idea. They have helped you out with the initial investment but will want to see completed designs and market testing before they commit to more money.
This is also where crowdfunding can come into place. Several websites exist to help with this, like AngelList or Fundable. Don’t feel like you have to rely on your family and friends throughout the entire development of the app. After you have the MVP, you can take it to outside investors with this scenario as well.
Scenario 3: Bank Loan
The third way to get funding is through a small business loan. Typically banks require a very robust business plan, so before you meet with an underwriter, you will want to do a lot of work on the front end. The 7a program is used for startup loans and will require a personal guarantee if you can’t pay the loan back.
Creating an app is a risky move, just like any other startup business. We don’t recommend taking out a loan as your first option, especially if you risk losing your house or another piece of collateral. If you do decide to consider a loan, make sure you have all the necessary paperwork and information together. It can beneficial to work with a business coach at this step who can take you through the process.
How Do I Get Started?
You will need several things nailed down before you actually start the development of your app. Do you have a financial model? Have you done market research? Have you thought about what your brand identity will be? These are all questions, along with many others, that will need to be answered, and the process can be much easier with a business coach.
A coach will help you see beyond just the lines of code. They will prioritize what you need to work on and make sure you will be able to recoup your investment early on. While this is an added expense, it is completely worth it because you’ll actually end up saving money in the long run with a more strategic business plan.
Are you ready to talk about your app idea and get started funding it? Schedule a Discovery Session with our team and start the exciting process today!