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How to Finance Your App Business

Smartphones have become ubiquitous and integral to our daily routines, and this is largely due to the rise of useful mobile apps. App downloads neared the 35 billion mark in 2020, while app usage increased by 40% worldwide. The average user now spends 4 hours and 20 minutes daily on their smartphone, as consumer spending on mobile apps also rose to $27 billion during the second quarter of the year.

From all this, it’s clear that our dependence on mobile apps has made the app industry highly profitable. But developing an app is not at all cheap. In fact, the cost of laying down the foundation of an app business ranges from $5,000 to $10,000 — and this is just the beginning. Initial investments can cost anywhere from $60,000 to $230,000 because apart from the development process, the costs of an app startup include business fees, salaries, office space, utilities, and equipment.

Though apps, even free versions, can be monetized in various ways, coming up with a funding strategy is a must to get the business running and ensure your success.

Bootstrap your own app

In the business context, bootstrapping simply means funding the business using your own resources. That means you won’t get any outside financial help — making you the sole investor of the company. Whether you can actually bootstrap your own app business or not ultimately depends on your financial situation. It might not be an option for others with limited means. The biggest benefit of this though, and why some startup owners choose to take the bootstrapping path, is ownership. As the only shareholder and owner, you have sole control of app development and the company itself.

Start a crowdfunding campaign

Raising funds from individual investors has become a popular way to finance a cause or a business. This is known as crowdfunding, which usually happens over the internet through various websites and social networking platforms. There have been plenty of once-fledgling businesses that have found successful beginnings through crowdfunding, such as Oculus VR and Fidget Cube. However, note that not all mobile apps can find success in crowdfunding. It’s hard to entice investors to apps because they are usually limited by one operating system or huge competition. Free apps that have no clear ways of monetizing are also not the most attractive to backers. That said, crowdfunding campaigns are usually free of cost — it won’t hurt your business to try!

Pitch your idea to investors

Angel investors or venture capital firms are always looking for the next big thing that can generate profit. So, it would be in your best interest to look for investors who can finance your app business — for a share of the returns, of course. Your best bet would be to pitch your app idea to investors within a specific industry. For example, meditation apps like Calm are all the rage these days because of increased anxiety induced by the pandemic. If you have a groundbreaking idea for an app dedicated to stress management, you might need to look for private investors who can see value in that. Wellness business owners, for instance, can be a good fit, as well as companies that can benefit from a stress-free workforce.

Join an incubator or accelerator program

Finally, scout for startup incubators or accelerators. Incubator programs provide support during the idea creation stage of the startup, while accelerator programs help you grow as a business. Both can offer financial help or connect you to people who can.

Developing an app, getting traction, and running the business all cost money. But if you can find the right financial help, you can definitely turn it into a profitable business.

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