If you are a startup business the initial funding is likely to come from yourself, friends or family. Even at this stage you should really consider how much equity you give other investors and what your shareholder agreement is.
When there is no revenue it is easy to give up a lot of equity, but you have to consider that if your mobile app is successful you will need multiple rounds of capital raising. To make it easier to raise investment at future stages you need a shareholder agreement that will facilitate this and enough equity to offer to investors.
Beyond family and friends in the initial stages of app development you could consider Angel investment. Angel investors invest in early stage companies – basically when your startup is still in the idea stage. As an Angel Investor is taking on a lot of risk they will seek a large equity stake (25-50%) and are looking for approximately a 10 fold return on their investment within 5 years.
The services division of Applabs will fund startup apps at the Angel investment stage through in-kind development and corporate support.
The next stages of funding are known as Seed and Series A.
If you have the first version of your product developed and attracting customers, but you need more funds for further product development, marketing or to scale your startup mobile app business you are now ready for Seed funding.
If your mobile app is at the stage where it has considerable traction, customers and generating revenue you would be looking to obtain Series A funding. Essentially this is to assist your business to scale to service growing clients, increase your market share or enter new markets.
If you are looking for Seed or Series A funding the most common sources for tech startups are VC funds, stockbrokers or high net-worth individuals.
The investment division of Applabs provides Seed and Series A funding.
If you are seeking investment the three main things investors are looking for are:
- Quality teams
Before you approach an investor make sure you do some research, as even though they may invest in tech startups they might only invest in social media apps. If that doesn’t fit your mobile app then they are very unlikely to invest in your startup business.
Applabs App Financing
Through the services division Applabs regularly invests in app products, predominantly at the Angel stage.
We look for mobile apps that have quality people involved, are tackling a large market and are iPhone, iPad or Android App based.
They must generate revenue through subscriptions, clipping a ticket of transactions or service enterprise clients. We will rarely invest in games or consumer focused apps with no clear revenue model.
We will typically invest in-kind resources to develop and launch the product in exchange for 10-25% equity. Applabs will never fund 100% of the product development as we expect the founder to have significant skin in the game. We would expect that the founder would contribute a minimum of $20,000 to the mobile app product development.
As well as development resources Applabs will provide marketing and business strategy support, corporate advice and through our networks we can help your startup business attract Seed and Series A funding when required. We may also opt to invest our own cash at the Seed or Series A stage if the product has gained traction and meets our investment criteria.