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How to fund your app development project

Tom Riglar

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Thu Mar 24 2022 - 4 min read

It’s no secret that building an app is far from cheap. And it’s not just the development cost that has to be covered – there’s also the marketing, admin and other elements that go towards making your app part of a healthy business.

If you want to build something successful you’ll eventually need hundreds of thousands of pounds to be sure you’re not cutting any corners. And unless you’re lucky enough to have that sitting in the piggy bank already, you’re going to have to source it from somewhere. So what is the best route to fund your mobile app?

1. Apply for grants

One of the first funding routes to look at is applying for grants. Schemes like Innovate UK can be a really effective way to fund the R&D of your app idea, with upwards of £150k often available. And the best thing is it’s essentially free money – in other words, you can fund your app without giving away any equity.

But there are two big drawbacks to keep in mind. The first is that instead of equity, you do end up paying in time and – more often than not – sanity. Grant applications are relentlessly bureaucratic, asking you to provide details on everything from long term financial projections to the wider societal impacts of your product. For solo founders or small founding teams, addressing all of that can be pretty intimidating.

The other potential hurdle is that grants are extremely competitive. That makes the criteria for success very strict, and there’s no back and forth if you tick the wrong box or leave something out by mistake. If you’re going down this route, it’s worth checking out a grant consultancy or platform like Grantify to help break down your application and maximise your chances of success.

You can book a consultation with Grantify here.

2. Use your own profits

If you’re an established business and you’ve got some existing profit sitting under you, that’s another way to fund a new app – and one that can be pretty appealing for a few reasons.

For starters, if you’ve already got the profit there you can be reasonably confident you’ve also got the business savvy and market you need to launch a successful new app product and slot it into your existing setup. But it can also be a smart business decision, as you can claim back some tax on your spend with R&D tax credits.

One thing to remember though is it’s not just about having enough cash to get started. You need enough profit in the tank to fund all the development and maintenance your app will need before it begins generating enough revenue on its own. Will it eat into your rainy day fund or leave you vulnerable to unexpected bills? Building an app is a long-term project, so your funding needs to be thinking just as far ahead.

3. Savings or family support

One thing we get asked a lot is if you can fund your app build with your savings or help from friends and family. And if we’re completely honest? It’s very rarely a great idea.

If you come from a millionaire family then maybe it will work out. But £30k from your nan and grandad probably won’t cover a bare bones MVP, let alone all the marketing, branding and other elements you need to build a sustainable business at the end of it.

Even if you do have enough affluent personal backing, this route still doesn’t become a no-brainer. Your friends and family probably won’t have the commercial and industry insight of an outside investor, and without that professional feedback, it’s all too easy to blow their money building something that doesn’t succeed on the market.

4. Venture capitalist

If you don’t have existing profits and grants aren’t an avenue for you, then you might end up looking to a venture capitalist or VC. VCs invest from a large client pot rather than their own money, and can be great options for funding you through to the next round as their main goal is to grow the value of your business.

But that means they can also be pretty demanding. There will be a lot more financial KPIs and expectations they’ll want you to hit early on to get a sense for how well the business is growing. Those targets don’t leave much breathing room for exploring ideas, pivoting or looking after your founding team’s mental health when you’re stretched thin, so a VC might not be the best option for your first funding aim.

5. Angel investors

Lastly, there are angel investors. For angels, investing in startups isn’t just about business – it’s also an emotional, even philanthropic decision, and having someone on your side who believes in you as a founder can be invaluable for your fledgling idea. To learn more about what these investors are looking for, check out our interview with angel investor Ash Phillips.

Angels might invest anywhere from £40k to £100k, which is typically less than you’d get from a government funding grant. Depending on the project you could easily use most of that on the app build alone, so you’ll likely need to find a second angel to make sure the business costs are covered too.

But angels will also be far less bureaucratic to approach than a government body, and less reliant on financial KPIs than most VCs. Most angels aren’t so much invested in the idea as the team behind it, and they understand the need to get the product right before the revenue comes in. On top of that, they’ll have a unique set of skills and insights to help guide you through setting up your business, as well as a network of useful contacts they can work to build the value of your new brand.

Part of working out which funding route is the right one for you is knowing how much you’ll need in the first place. If you’re planning an app project and need some help setting those expectations, drop us a line. Or to learn more about getting investors on side, check out our blog post where we ask, should you bring your app developer to an investor meeting?

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