To ask anyone who has founded or worked in a start up how the hell you get funding

[Fundingconundrum]

Ok I know I’m being unreasonable posting on Aibu - but...

I’ve had an idea for an app and I think it’s a very very good one. It’s got a clear monetisation strategy, I can quite easily provide a strong business plan for it etc.

However the amount needed to get it off the ground will be huge, and I don’t have it.

So wise MNetter - has anyone ever successfully got funding for a startup like this?

I do run my own business - but this is a completely different type of venture and I’ve never needed any outside funding so am stumped.

Any advice gratefully received.

Apply for a Start Up Loan from the Start Up Loans company or Google local Angel investors. Have a look on Tech UK’s website as well.

Thanks - I’ve looked at angel investors. Thing is I’m not kidding about the amount needed - probably about £750,000 - so assume Thsi will be harder than someone just wanting say £25k

You want the best part of a million quid to launch and app?

I think you need to economise op

@Sootikinstew if you mean economise on the app - not possible.
If you mean if I eat a MN chicken for the rest of my life to save up half a million - also not possible.

Take it on dragons den then op. I do love a Peter Jones eyebrow raise 😆

That seems an incredible sum for a startup. Will you be writing this app yourself or do you need it written for you which would obviously massively increase the cost.

I dont think any investor is going to risk 3/4 of a million on something that is unproven and from what you say just an idea at the moment. The other thing is that a lot of apps are provided free up front and then rely in selling premium additions.

I suppose you could try copyrighting the idea in the hope you can persuade a developer to buy it from you. Alternatively you may be able to persuade an investor to make a small investment so you can start to develop and test the idea.

Sorry I'm being a bit brutal but we've worked with start ups in the past and a lot of them never get past the start.

@listsandbudgets I work with small businesses so I’m also extremely brutal and see where you’re coming from.

However yes it’s paying for the app that’s the majority of the cost - however it will also rely on a very heavy marketing budget to work.

It’s not “just an idea” it’s an Saas - so not reliant on in app purchases etc. It’s a form of payment platform - with multiple suppliers and integrations hence the high costs.
It is proven - however without giving too much away it’s a disruptor if what is already in existence.

I'm assuming you have a full business plan presentation and have factored in marketing into that budget?

It's so so hard unless you have track record in the area where the app is aimed, what are the cost breakdowns?

What is the area the app is aimed at, who is the demographic? Who's going to be the team behind this, what are their credentials?

Breakdown:
Development
Directors Salary
Marketing
Business admin
Legal
Accountancy
Staff?

Where is all the money needed?

Can you develop a beta app, have you got full market research done?

All of these things I'd be having to see really strong evidence to invest.

So many questions will be asked, it's not impossible to get that kind of funding, it just needs to be a watertight pitch and you need to spend time finding the investment firms who specifically invest in your market place.

I believe virgin do a yearly competition for this kind of start up, dragons den is a great idea, and then solid investment firms well researched and the ability to give away a large percentage of future profits may see you hit gold.

Take it to Y-Combinator if it's a solid proposal.

www.ycombinator.com/apply/

We started as a start up; finance/investment market. We are also investors in startups now and tbh we wouldn't put that amount of money on an app that has not taken off and is still an idea. Are you yourself willing to make a contribution to that sum? If so, what percentage? Can you not start running this app and then charge a premium for addition content? The thing about start ups, is that unless you have very good investor connections or are crowd funding, investors want to see that it's taken off, that it can work long term and is worth investing in.

The idea might be good on paper but not feasible in practice or not in demand.

You bootstrap it - write an amazing business plan, with a brilliant presentation, think of an amazing name and logo and build as much of the back end of the software as you can on your own (or with a team also working for the promise of future equity). Once you have something that works but is pre-revenue, apply to an incubator and workshop it with angel investors. They will hopefully see the potential in your idea and give you some seed funding. Once you're generating even a small amount of revenue or have potential clients signed up then you can start approaching venture capital funds for help. (Also, if you are a woman or otherwise underrepresented in the tech space there are funds and programmes to specifically help female and underrepresented founders - eg take a look at Ada Ventures or Diversity VC.)

I've consulted for a tech start up who got awarded various funding through going fire to to industry leaders / company directors, Investor angels and their local business community.

The main thing they were, repeatedly, told was to focus on a much lower spec Minimum Viable Product to get something, anything, off the ground before approaching big investors.

Is this an avenue for yours?

If its even tangentially related to covid recovery, there are shed loads of government innovation grant schemes popping up that you can apply for.

@FusionChefGeoff so I can get (and fund) a prototype of the app. The lowest spec MVP will still need to quite a lot of functionality as it faces two sides (say like Rightmove does - estate agent and user - but annoyingly it has to be an app rather than a website).

However the idea is genuinely a very very good one (and I hear dud ones all the time), so am wondering what the chances of getting a couple of investors based on the idea - plus the research etc will be.

I can prove the demand and the figures would provide a decent return within the first year but it really does rely on both a working app and the marketing.

@thecatsthecats ooh it could be dressed up that way yes!

Thanks for some great advice by the way! Hey completed self funded my own business but it’s a different kettle of fish here!

An idea is not worth £750,000.

An idea is a punt - and worth about £25,000. If you had a prototype, you might get more, but that would still only be seed stage. You need to make relevant connections in the angel industry, to include professional services legal, accounting etc and look at EIS platforms. About 60% of EIS investors' money is eligible for tax breaks if they lose it, so that softens the blow and makes your valuation more palatable.

@Manolin I will have a prototype that’s not an issue. However it needs the full app to launch as it’s sort of saas.

So hard to explain without explaining the whole thing.

So the app isn’t completely original - the app is not the “idea”. It’s more along the lines of say - estate agents existed before Rightmove and had websites but rm bought it under one umbrella for users. Others could copy etc so not original (and from memory not actually the first) but the best marketed so got the lions share of that market iyswim.

Hi OP. Could you launch a cheaper we based version first and appify after? That's quite common for saas tools. Also worth contacting others who have successfully done the same to see if they will partner - like the chaps who set up that energy bill comparison thing?

I work in a startup (big now , deca unicorn) and it's a brutal business in VC land !

You are basically valuing your idea at 750k, Angels in the UK are pretty unlikely to touch that unless you have a proven record of success with startups. Its possible to get traction but its more likely to involve several rounds, each of them squashing you down more and more. First round, funds to build out an initial version of the app. Second round proving that it will work. Third round marketing. How much of your equity are you willing to give up for that. Will all your development be outsourced or are you intending to do it in house? How much are you personally putting in or is your contribution the idea. Are you going to run the new company - what about your existing business - VCs tend to want you working 24/7 on the product and they are brutal. However much they say they do they don't care about you, you are just a commodity to them.

@ChorltonWheelie interesting. I’ve done the figures a few times and my most conservative efforts give a turnover of about £3million in the first year (if I can reach 5% of the market). That’s uk only but is purely turnover.

It’s one of those things that, if I don’t do it - someone will, bit probably someone with deeper pockets and better connections

You say it's not the first, the very first question I'd be asking is why did the first fail? Why is yours better? Why will the demand for yours be different? Because if it's just that you're going to market it better I wouldn't invest. There is a lot of tech money floating about but sometimes disrupting the market isn't all that attractive to an investor because people like what they know so trying to change how a sector operates is an additional challenge, even if your way is better.

Hey @Fundingconundrum did you ever do this?