Not everyone will get the chance to (or want to!) appear on Dragons’ Denbut, if you’ve decided you’ll need external funds to pay for any additional resources as you build and market your app, there are several avenues open to you.
If you do find that you are going to need outside funding to do justice to your app, be realistic in your expectations. You may believe 100% in your idea, but you’ll need to persuade any potential investors that they will see a decent payback.
Your ability to really sell your idea will be important, then, as will your choice of backer.
Approaching someone who understands what you’re doing and buys into the whole concept may be a safer bet than going to a more risk-averse bank. Then again, banks are now being offered new incentives to invest in entrepreneurs and small businesses, which could change things.
Remember to do your research before approaching potential backers, and to draw up a formal business plan if you’re targeting more formal sources of investment – so you don’t fall victim to the sort of humiliation seen in Dragons’ Den.
The Angel Investor Network has some good advice on how to produce a suitably impressive business plan. And for help in approaching VCs (not to mention a whole range of other useful stuff) take a look at the Microsoft BizSparksite.
Read on for a roundup of the most popular funding options.
A grant is a sum of money awarded to an individual or business to help them fund a project. If you meet all of the scheme’s requirements, it is unlikely that you will need to pay back the grant.
Grants are available from a variety of sources, including the Government, the EU, Business Links and local authorities – and there may be others in the specialist field targeted by your app.
However, it is not always easy to secure a grant. A tough economy has meant that many funds have been scaled back. Competition is likely to be very tough in any case, and you will have to pass a series of eligibility requirements.
Grants vary in amount and there may be an expectation that you will match the amount awarded from your own resources.
Good sources of information about grants are listed below:
- Business Link: http://www.businesslink.gov.uk/bdotg/action/home
- The Prince’s Trust (note that you must be under 30 to apply): http://www.princes-trust.org.uk/
- If you’re a student, you can enter the competition for the Microsoft Imagine Cup grant
While a difficult economic climate has made it a lot more difficult for small businesses and individuals to borrow money from banks over recent years, the Coalition has now made a pact with high-street banks to encourage new lending to entrepreneurs and small/medium businesses. Total funds of £76bn have been earmarked for these purposes. Apart from anything else, it now looks good for banks to be supporting innovative projects so you should find a friendly ear if you approach your bank manager.
If you do decide to pursue a bank loan go prepared with a business plan, paying particular attention to the financial details around your idea – the minimum start-up amount you will need and your financial projections as the project unfolds and the product is launched.
Before any funds are released, you will be subject to credit checks and the bank will want to look at any previous small business activity you may have been involved in. To increase your chances of securing a loan, it may be an idea to partner with someone who has had business success in the past.
The rate and terms of your loan will vary depending on provider and the perceived ‘risk’ of your project, so do your research to ensure you go after the most appropriate loan for you and your idea.
Angel investors, or business angels, are affluent individuals who are keen to invest in ideas they believe will be profitable. The panel on Dragon’s Denare angel investors.
As it is their own money they are risking, angels will be demanding and will scrutinise you and your business plan. They will also require on-going progress reports and may prefer to stagger their investment as the project progresses. Many angel investors are former business owners with a wealth of experience under their belts. It will be hard to pull the wool over their eyes, and they will expect to be involved in important decisions.
Choose your investor carefully based on their area of particular interest, as they are likely to specialise in the field(s) they know best. Research their background before you approach them to make sure they will be receptive to your idea – and to show that you’ve done your homework. Often, angels invest through networks or groups to minimise their own personal risk and to share knowledge.
If you’re after a significant amount of money, angel investors can be a great option. But don’t expect quick and easy money – or necessarily the full amount you’d like. It can take several months for an investor to commit, and they may not be prepared to shoulder the entire risk. Directories of angel investors can be found online (the British Business Angels Association at www.bbaa.org.uk/ is one of the most comprehensive resources), and Intermediary agencies exist to match entrepreneurs with angel investors (see for example http://www.inbizvest.com/).
There are also other sources of practical help and advice such as Microsoft BizSpark. BizSpark is a global program helping software startups succeed by giving them access to software development tools, connecting them with key industry players, and providing marketing visibility. Take a look at http://www.microsoft.com/bizspark/.
In an uncertain climate where no one has much money to spare and nearly everyone is worried about the future, it can help to spread the risk. Another way of looking at this is letting multiple people share the opportunity to invest in and be part of your success!
On a personal level, perhaps various family members, friends and work colleagues would each be prepared to put up a small amount of the money if they believe in you and your idea – in return for some share in your riches if your app turns out to be profitable.
If you’re worried about entering into financial arrangements with people close to you, or don’t have wealthy relatives you can turn to, why not take a more arms-length approach and appeal to networks of willing strangers via a ‘crowdfunding’ web sites. These are web sites designed to connect budding entrepreneurs with everyday people who’re willing to take a punt on a good idea. Each person may only contribute a small amount, but if a high number of investors catch on to your idea, you’ll soon hit your target figure. And more than simply being about upfront cash, this can also be an excellent way to help you find people with the skills to help get your ideas off the ground.
Most crowdfunding sites require you to submit your idea for review. If it passes the guidelines, it is posted to the site. You set the amount you’re looking for and the date by which you need the money. The catch is that if the total required funds aren’t raised by the deadline, you won’t receive anything (a bit like the situation on Dragons Den).
It is likely that you’ll be required to pay a percentage of the amount raised to the crowdfunding website and its payment provider if you do secure the money. Make sure you read through the site’s terms and conditions too, to ensure that you still retain ownership of the app and any proceeds once investors have been paid back.
- Useful crowdfunding tips can be found here and here.
- Ten of the best crowdsourcing websites are listed here.
- For crowdfunding forums specifically targeted at mobile apps, check out AppBackr and Appsfunder.
- And Quora details those with global coverage (i.e. outside the US).
And finally…. the bank of Mum and Dad
Do your parents or other family members believe in your idea? Would they be willing to support you financially so that you can get your app built and to market?
If so, it may be worth sitting down and discussing your idea with your parents or close family – in a way that shows them how serious you are. This will mean indicating the research you’ve done, showing them something of the market potential, and giving them a feel for how you plan to move forward.
The upside of keeping it in the family is that, if the individuals concerned are generous, they won’t add on any interest. But don’t take too much for granted. Remember that money matters can be a source of tension in families, and your backers are going to want to see an end product at some stage.
- Download the Windows 8 Developer Tools– they’re all free
- Windows Developer Centre– all news, updates, links and downloads
- Building Windows 8– an inside look from the Windows engineering team
- http://channel9.msdn.com/– video tutorials and product information from Microsoft
- Windows 8 Consumer Preview forum– need help? Try here.
- Windows 8 Developer Linked In Group – got an idea for an app? Join the Windows 8 developer group on Linked In to get your app into the Windows Store.