How to Land the Perfect Funding Partner: an App Founder’s Checklist
The highest-performing apps don’t survive by chance — their founders have waded through mountains of data, created the perfect recipe to acquire and retain users, and explored myriad financing options. They build businesses, build products, envision the world differently — and then they raise money to execute this vision. Understanding the funding landscape, the way it relates to your business model, and the interests of investors will help you achieve long-term growth and revenue for your own business.
Choosing the right financing partner requires plenty of preparation and a thorough understanding of your business needs. Mobile apps in particular must consider such essential factors as serving your revenue streams, being conscious of profit models, and finding a financial partner that appreciates the worth of your brand.
When deciding on your next financier, remember to carefully consider each of the following points on this checklist to nail down an effective support system.
Define Your Funding Needs
Every dollar you raise should have a purpose. Prior to raising capital, you should define your business goals and the key outcomes that you expect to achieve in using those funds.
During this early phase, it is particularly vital to identify the exact purpose of your upcoming funding round. Investment for investment’s sake is an improper use of time and resources — and will quickly turn off any potential financing partner. Whether you’re filling out your development team or smoothing out the edges of a product for launch, try using these two clear objectives to nail down your immediate fiscal goals:
- Create a financial forecast
Using estimated statements of income, expenses, and cash flow projections, you can point to a moment when your business can expect to bring in revenue. Funding can help you traverse that gap.
- Outline a funding time frame
Depending on the time frame within which you expect to bring in revenue for your business, the size of the investment will differ. A well-planned funding time frame helps you hit accurate goals and shows investors that you’re using their money wisely and are on track to turn a profit.
Compile Your Ideal Financing Partner Criteria
Every journey needs a roadmap. On the quest to find your next financing partner, a clear rubric of qualifications, resources, and industry expertise is key to charting that path. Consider the following key points of interest that will help once you start making connections:
- Identify a financing partner’s preferred area of business
When a financier has had success in a certain industry, it’s more likely that this success can be replicated. Certain financing partners are better suited to mobile app businesses and subscription services, both in their knowledge of the marketplace and the forms that their investments take.
- Propose the avenue and expectations of their investment
Do you want your future partner to be a lender or an equity stakeholder? Unlike baseline support from friends and family, a financing partner will expect some level of return on their investment — it just depends on whether debt repayment or equity is your preferred exchange.
- Consider the extent of the partner’s future involvement in business decisions
Lenders like financial institutions or small-scale P2P loans only need to see the financial returns that pay off your obligations. But for equity holders, especially VCs, a knowledge base for making future business decisions can be a powerful resource — albeit at the cost of a seat at your table. Consider the extent to which you want that additional asset.
Reach Across (and Outside) Your Network
Your financial sphere of influence is probably bigger than you think. Whatever phase of your funding journey you’re navigating, financial support can be found in creative and unexpected ways — whether through unique forms of cash support like cohort-based funding or your professional network when bootstrapping or crowdfunding.
No matter who wants to invest, you’ll want to make sure they’re interested in the same business problems you’re solving. The children’s media organization The Mother Company first honed their business model and idea when the founders talked to other mothers on the playground. It was also through those connections that the company raised their first $500,000 in funding, which gavegot the business its initial momentum — and they haven’t looked back since.
Ask Prospective Partners the Right Questions
After making connections and engaging with your shortlist of potential partners, vet the candidates carefully. With pointed questions, you can better target the types of people who are attuned to the unique needs of your subscription service. These questions can include:
- How many investments have you made during the last six months (or year)?
- What are your revenue expectations for your investments — both in speed to revenue and long-term viability?
- What are other forms of support you can or intend to provide, besides financial?
- Does the provider have a stable and scalable supply of debt capital?
- How easy is it to terminate this agreement? Are there any punitive provisions related to termination?
Check Their Receipts
Success is rarely a flash in the pan for financiers. Before making the final commitment, be sure to double-check your investors’ own financing histories and examine how these individuals have treated and supported their companies of choice in the past.
A review of investors’ prior investment-related financial records, equity stakes, and current revenue streams can reveal how valuable their support turned out to be for other companies. It can also indicate, beyond the support of the partner themselves, how much their earlier deals compare to what’s being offered to you. Contrast your own mobile app business accurately with others in their portfolio and you’ll be able to determine if the person or institution you’re dealing with is focused on replicating those successful previous deals.
While avoiding the cliche that a financial partnership is like a marriage, it’s true that these decisions are serious and can have enormous long-term benefits — and consequences. For your mobile app business, carefully consider the items on this checklist before making a final decision. With support from the right partner, a well-structured company with a groundbreaking idea will be well positioned for viability and success in the future. If you have questions on how funding works for mobile apps, chat with our partner Braavo Capital!