To take your new app to the next stage and push it out to the wider market, you’ll likely be looking for seed funding. That means pitching your product to potential investors and convincing them you have a viable, sustainable business that will give them decent returns.
Pitching for investment is a daunting prospect at the best of times – but when your business is an app, it can feel like an even bigger challenge.
Apps are relatively new products – the Apple App Store only opened 14 years ago, remember – so even seasoned investors might have limited experience of working with them. Many will also lack understanding when it comes to the technical side of things.
Before you head into your investment meeting, it’s important to think carefully about how to present your app and prove that your idea is viable.
Preparing for an investment pitch
Look for relevant investors
First, you’ll need to secure an audience for your pitch. Investors can be found in lots of different ways, but here are some of the most common:
Be proactive in approaching potential investors and remember that the worst they can say is ‘no’. Get in touch by email and succinctly explain what your business does and why you think it would be a good opportunity for them.
Define your app’s mission
All successful businesses have a clear purpose. If you can’t explain the point of your app in a straightforward sentence, your audience is going to lose interest before you even attempt to tackle the more complicated topic of functionality.
Define the core mission of your app. It helps to think about it in terms of the problem it solves, or the main pain points of users that it eliminates.
For example, fashion rental app By Rotation gives a short but engaging description in its App Store bio:
“By Rotation is transforming the way we consume fashion: rent what you need and lend what you don’t. Rotate your wardrobe at your fingertips and do good for the planet, your wardrobe and your wallet all at the same time.”
You should also demonstrate that this problem is worth solving by pulling together data to show that the market is growing and people actively want a solution to this problem.
By launching an app, you’re entering a crowded marketplace. Standing out will be one of your key challenges. Do your research on apps that promise to do a similar job to yours and try them out yourself, thinking about the needs and capabilities of different kinds of users.
This will help you define your point of difference and convince investors how and why your offering will outpace the competition.
Tailor your pitch to each investor
Before each pitch, it’s a good idea to research the investor and their background to get an idea of their technical understanding.
Perhaps they’re clued up and will want high-level information on the back-end processes. Or maybe they have no knowledge in that area and will want to focus more on the growth potential.
Make the most of your time with each investor you meet by catering to them specifically. In other words, talk in their language.
Explain your business model
There are lots of different ways apps make money, with no one-size-fits-all option.
Whether you charge for downloads, have in-app purchases or host adverts on your app, explain the process in detail so that it’s clear how your business will be bringing money in. Work on some financial forecasts too, to give investors an idea of the revenue they can expect to see.
Talk about your technology
It’s common for founders to shy away from talking about technology in a pitch. After all, you don’t want to confuse or alienate investors who aren’t necessarily tech savvy.
However, there’s a balance you should aim to strike. Investors will want some insight about your technology so they know your app is secure, stable and most importantly, scalable.
If you use the investment to attract thousands more users, can the technology and architecture of your app sustain the increased demand? If it can’t, then you may have to rebuild your tech for scalability which will cost time, money and cause disruptions if you don’t have the right partner to guide you.
At AVAMAE, everything we create is built with security, stability and scalability in mind. Learn more about how our approach differs to other software development models here.
Proving traction with your app
Use current analytics
Before you go to any seed investors, it’s a good idea to do one last push of your app to boost current numbers. Encourage sign-ups by increasing your marketing activity, making it easy to find and download, and collecting reviews.
A large existing user base will help you prove that you have traction in the app market and demonstrate interest in what you’re offering. Better still, it’ll give you a larger base for collecting other forms of data that investors will want to know.
Metrics investors will look out for include:
- Customer acquisition cost (CAC): The amount of money your company spends to get a new customer
- Monthly recurring revenue (MRR): The total revenue your company expects to receive on a monthly basis from customers
- Annual recurring revenue (ARR): The amount of money that comes in every year from recurring subscriptions or contracts
- Churn rate: The rate at which customers stop using your app over a set period of time. The higher your churn rate, the more customers that have stopped using your business
- Active user base: The number of unique users who engage with your app over a set period of time (for example, active users per day or per month)
- Total user base: Your total number of users (active or not)
You should expect follow-up questions about how these metrics are changing over time too. A large base of active users might initially seem like an attractive investment proposition, but is it in decline from six months ago?
Prepare answers that explain how you’ll improve each metric. If you’ve got a high churn rate, what are you doing to retain users? How will you increase your MRR over the next six months?
The above metrics are key for investors, but don’t forget about the qualitative insights you can’t collect via the app itself.
It’s a good idea to survey your users to learn more about how they use your app and what they think of it. Find out:
- Why they use your app
- What problems it helps them solve
- Whether they’d be willing to pay for extra features or capabilities
- Whether they’d recommend it
- How satisfied they are with its performance
Also find out more about them as people and the commonalities they have. This will help you to define your target audience and begin to estimate your app’s addressable market and growth prospects.
Share your plans
Showing traction is all about giving investors a tangible idea of your company’s potential. So, take the data you’ve collected from your app, user surveys and other research and use it to inform your game plan.
Explain how you plan to put their cash to work and take your app to the next level, then demonstrate – using your current numbers and user feedback – the extra momentum that it will give your business.
How to pitch an app to investors
Ready to seek investment and want help getting in front of the right people?
The Pitch is a free competition that gives startups the support to grow and the platform to raise investment. And it works – finalists from recent cohorts have raised tens of millions since taking part.
Applications are now open for The Pitch 2022. Find out more and enter your business here.