While indie developers are still thriving in app stores today, there's a growing number of teams or companies that are funded because they raised capital. From Sunrise to Yo, getting funding helps companies build features for their apps faster, have more budget for marketing, and generally provides a longer runway for them to test ideas and find their product to market fit. In the last couple of years we have successfully helped a number of our customers raise outside funding for their apps. Although Savvy Apps has never taken funding itself, I wanted to take the time to share what's worked for our customers, for those considering the fundraising path.
- Hone your elevator pitch before trying to communicate your app idea with investors.
- Research your app's competitive landscape to find your "uncontested" market.
- Legitimize your business by having a real domain name and landing page.
- The best way to start conversations with investors is to get someone to make an intro for you.
- Show investors a prototype the highlights the promise and value proposition of your app.
- Practice until you can talk about your app to investors even without slides .
- With every “no” you hear, think about and even ask what you can do better next time.
Nail Your App's Elevator Pitch
I've gotten on calls with people where after 10 minutes, I still didn't know what their app was about. The reality was, neither did they. An elevator pitch is how you would describe your app to someone in the span of a riding in an elevator with them. Honing it will help you on everything from writing emails to thinking about your competitive differentiators.
Find the Uncontested Market for Your App
Before you get too concerned with the functionality of your app or how you'll develop it, you need to understand its competitive landscape. You should be intimately familiar with the offerings of the other apps in your space. You also need to look at alternatives, including those that may not even be app-focused. For example, before Instacart existed, there were other grocery home delivery services. Alternatively, shoppers could go to the store themselves. In App Savvy, I covered a framework called Blue Ocean Strategy (BOS). It provides a specific methodology to understand a competitive landscape and find your "uncontested" market. We try to start our process with BOS, often spending as many as two weeks honing and refining an app idea. It then influences the initial features we will focus on for a v1.0.
Get Some App Branding in Place
Having an actual domain name, at least a placeholder landing page, and a logo go a long way to showing that you're serious about your app. Will that alone get you the money you're seeking? No. Will it help you seem more legitimate? Definitely. We often do this kind of work with our customers because it provides the foundation for the rest of the app. There are sites like 99designs to help with logo creation or tools like LaunchRock to quickly set up a landing page. Putting this extra effort in will set a more "this person is taking this seriously" tone. It will also help with creating business cards and other marketing collateral.
Familiarize Yourself with Investment Basics
It will take you some time to understand all the details about raising money and running a startup. You do need to grasp some basics to start though, including investment stages and what kind of capital you're open to taking. Almost any venture just starting is going to be targeting a seed (or pre-seed) round. A seed stage investment generally means that your company is in the pre-revenue portion of its existence and probably doesn't have an app. The range of investments do vary because of this "pre-seed" round, but you can expect this type of raise to be anywhere from $200,000 to upwards of $1.5M. For a primer on what seed financing is for, check out Fred Wilson's blog post on this exact topic.
Target Seed Stage Investors Interested in Mobile
When you're at this stage, you'll have to look for investors who want to be involved this early in your company's existence. These investors can vary from friends and family, individual "angel" investors, accelerators like Y Combinator and Techstars, or early-stage VC funds like First Round Capital or True Ventures. The best way to start conversations with any potential investors is to get someone to make an intro for you. For example, First Round Capital suggests this exact approach on their website (you should subscribe to their The Review). Otherwise, you'll have to send a "cold" email, often to a generic email address. In either case, your email should be concise, contain a version of your elevator pitch (no more than 2-3 sentences) and why you're reaching out to them. Do a little research because there are some great articles available on crafting the perfect email to investors, especially for angels.
Put Together your Pitch Deck
Business plans are largely dead today. Most entrepreneurs now focus on their investor or pitch deck. Similar to other advice, your deck should be tight. Guy Kawasaki says it should be 10 slides and 20 minutes. Fred Wilson challenges you to do it in six, three, or none (yes, I'm a Fred Wilson fan...you should be, too). One of the things I do with our customers is review investment decks from companies that successfully raised money. There's a significant number of examples available to draw learning and inspiration from on places like Slideshare. Check out Onboardly's best startup pitch decks of all time. Some of my favorites include Buffer and Foursquare. I also recently read this Medium post about pitching your startup in 30 seconds by Hyde Park Angels.
Have an Interactive App Demo
If you get the chance to actually pitch investors, having a demo goes a long way. If you read one of the posts above, there was even a suggestion to pitch just with a demo. Because you're in the earliest phase of your venture, this kind of demo will be different for two reasons. The first is that you probably still won't have an app. Secondly, even if you did, it's risky to do that unless you've put significant time into development. We sometimes get prospective customers who think they need to show some early prototype to investors. While functional, a prototype does not show the promise of your app. It also has the potential to be buggy, especially if only a few weeks of work are put into it. What we do for customers has zero code and shows real, high-fidelity user interface, so investors immediately "get it." We use tools like Flinto to make the key flows of the app tappable on each screen, all while doing this demo from their device itself (or a browser if they're remote).
Practice, then Practice Some More
Those giving TED talks practice upwards of 200 times for their 10-15 minute presentations. That doesn't include all of their prep time putting together their talk, designing the slides, or comparable pre-rehearsal items either. Know your material back and forth. You should be able to do it without slides or your demo, if needed. Anticipate questions you might be asked and what you might do if you there's a question where you don't know the answer. I recommend reading books on public speaking because there's a bunch of good tips that will help you communicate your pitch more clearly. Take a look Scott Berkun's Confessions of a Public Speaker or Carmine Gallo's 10 Simple Secrets of the World's Greatest Business Communicators.
Learn with Every "No" You Hear
It's very likely you'll hear the word "no" more than the word "yes". Don't let that discourage you. With each "no" you hear, make sure you understand why that was the answer. Ask for insight on what will make you, your app, and your pitch better. By having this type of mindset, our customers learned about certain milestones they need to achieve in order to have interest from certain investors. In some cases, investors encourage them to reach back out later or keep them in the loop.
One other common trait for those who have successfully raised capital is that they've usually put in some of their own money as well. This provides potential investors with an additional vote of confidence that these entrepreneurs have "skin in the game." The money could be used for the steps above or on comparable items but rarely is it used for building any part of the app itself. None of these steps outweigh the most important element of having an app idea that will flourish in app stores. Assuming that's in place, these steps will put you in a better position towards your goal of raising capital to bring your app to market.
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