4 May 2022

Does My App Need Investors? Pros And Cons Of Getting Funded

Finding investors in Australia to fund your app development is no easy matter. Should you go at it alone? Do you even need investors to assist you financially? Is it the right time to fund an app? These are just a few of the questions that you’ll be asking yourself. Once you have a well-developed and working app, the next step is to secure funds to ensure it keeps growing.

4 May 2022
Today, finding investors to fund app startups is a rising trend. Since everyone is doing it, it’s only natural that you should do it too.
However, is ‘funding for an app’ really worth it and whether you can survive without it? In this article, we will look into why looking to opt for investors shouldn’t be your first source of funding, and touch on the pros and cons in depth.

Why investors looking for app ideas turn down funding requests?

The app development trend has attracted the interest of many investors. While there are many examples of apps which have received funding, finding investors in Australia is more difficult than you think. It takes significant commitment, diligence and creativity to be able to come up with a pitch (and product!) that investors will positively respond to.

 

Today, there are numerous reasons why app startups aren’t ready for funding by the time builders seek these all-important funds. Majority of the factors include:

 

  • Lack of a ready prototype – funding agencies will hardly invest in an idea unless you present them a prototype that can pilot well.
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  • The lack of relevance of your application – Potential investors expect your app to solve a real problem that users experience. Having some data to support any claims you make concerning the demand and applicability for your app will go a long way in winning investor confidence and getting app funding.
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  • Overcrowded market – Unless you’re developing for a niche market, you’ll have to do some extra homework to convince investors why your app is worth their attention.
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  • Device compatibility – Investors are well aware of the many operating applications in existence today. Ensuring that your app has a wide range of usage and coverage possible will work in your favour.
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  • Lack of a development plan – If you don’t have a solid development plan to fall back on, it could kill your chances of receiving app funding. It’s required to have a comprehensive, well-thought out plan to ensure your app is successful when it enters the market.
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    Once you’ve looked into these potential handicaps above, it may be a good time to reach out to investors and present your app funding proposal. Chances are high that you will come across an Australian investor who is willing to fund your app.

     

    Before seeking out a potential investor for your app startup, it may be beneficial to have a viable working app that has already received traction to present to prospective investors. With a Minimum viable product (MVP), you will have greater chances to get people to open up their wallets for you. Compared to an idea that only works on paper, a visible product is more likely to secure funding.

    The Pros & Cons of funding your app via an investor

    There are several types of investors you can get, each with their own advantages and disadvantages. We analyse all five.

     

    Crowdfunding:

     

    If you get investors with a lot of equity, this may oust you out of your own company later down the line. Most founders will have to make peace with it if they are looking to seek investors. Crowdfunding on the other hand involves getting a lot of people to invest in your company, meaning everyone chips in a small amount to contribute to the end goal. This can spread out the risk and no one person holds too much power or equity over your startup.

     

    On the other hand, crowdfunding is costly. You will need to consider 8-10% crowdfunding platform fees, marketing costs for advertising and the possibility of running into potential scams, more specifically, companies promising to ensure that your project is funded by millions of people.

     

    Angel investors

     

    They’re not called angel investors for nothing. Most of the world’s famous tech startups have received angel funding at some point in their app development process. Some of the advantages that come with angel investors include bonafide experience. Many ‘angels’ are ‘high net worth’ individuals who have already made their money in the business. Angel investors also possess valuable connections as well as the flexibility to feel confident in the direction of your business.

     

    Nevertheless, there are cons too. Angel investors often desire to become personally involved in the project, wanting to oversee its day to day operation. Looking for a reliable angel investor can also be a time consuming job in itself, taking your focus away from developing your app.

     

    Venture Capitalists (VC)

     

    This is the group of investors that everyone thinks of when seeking funding for their app. These professional investors can provide you technical support through their experienced networks of professionals they have at their disposal. This gives you better chances of getting to the next level.

     

    However as with angel investors, you may face significant disappointment down the line. Fundraising from Venture Capitalists is time consuming with monthly reports taking up the majority of workload instead of going into app development. Additionally, a VC’s primary concern is focusing their return on investment, so it’s most likely they’ll be asking for a huge chunk of the equity of your app product.

    The Conclusion

    On paper, finding an investor to fund your app seems straightforward but in reality, it’s never easy. In fact, most people encounter many rejections or give up on their app becoming successful, so don’t be too discouraged when facing hurdles. Whether it’s potential investors wanting too much control, or possessing too poor pitching skills, finding the right investor takes time and considerable patience!

     

    If you’re serious about finding investors in Australia to fund your app startup, we suggest you take a step back and consider your options closely. It’s important to think about your business plans for it now and into the future.

     

    Ask yourself. Do you want your customers prior to product launch? Do you want to execute more control? These crucial questions will help you decide what sort of investment you want to venture in.

     

    In the end, it’s all about looking at what’s best for your business. Look into your company’s needs and wants, figure out the direction you want to take before you make a choice. While it’s nice to have a working app, it’s marketing and developing it constantly that will take it to the next level.

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