If you’re an entrepreneur with a solid business idea, you’re probably trying to figure out how to get seed funding. Perhaps you’ve used all your own money already or you just can’t seem to get enough of it together to really accomplish your goals.
At some point, every entrepreneur has been where you are: trying to get their business off the ground but not necessarily having all the capital they need. The good news is that technology is on our side. Whereas Bill Gates was writing code for a machine he’d never even touched, we are in a position where we can create mobile app prototypes to demonstrate our ideas without actually writing a single line of code.
In many ways, we are better off than our predecessors — thanks in large part to the hard work and long hours they put in. But that doesn’t take away our need for capital investments or at the very least, some financial assistance from others. So how do you get seed funding for your newest mobile app idea?
Put Your Money Where Your Mouth Is
First and foremost, if you’re wondering how to get seed funding, you should look into your own pockets. They might not be very deep or provide as much help as you need, but investors will ask you how much of your own money you’ve put into your product. The Sharks on Shark Tank always ask (although we suspect the question doesn’t always make it into the final edit). Why should they put their money into your business if you don’t think enough of it to use your own cash?
If your savings account is dwindling (or was nearly nonexistent to begin with), consider selling some stuff. Do you have valuable items in your home that you’re not using anymore? That extra flat screen TV that never gets turned on is worth more in cash for your business than it is just sitting in your spare bedroom. Selling some worldly possessions will also test your own commitment to this venture you’re trying to get off the ground. Some people even opt to take out a second mortgage on a home, but you should only do so if you (and your family) are comfortable with the idea.
Keep in mind that the bigger your financial investment, the larger your share of the company will be. As you grow and really do need to look for backers with deeper pockets, you may be giving up a portion of the business in exchange for funds. If you’re still the biggest financial stakeholder, you’ll always have the most power and your opinion will hold the most weight during decision-making. A substantial contribution on your part during the seed funding phase will pay off later if the company is successful.
Even if your pockets aren’t very deep, they could certainly help you make your prototype, which will impress external investors later down the road. If you’re stressed about how to get seed funding, having that card in your deck will certainly demonstrate some important things about you and your business venture that will be invaluable to investors.
How to Get Seed Funding Using Your Prototype
Show Proof of Concept
Once you’ve exhausted your own resources, you’ll need to figure out how to get seed funding elsewhere. For a whole myriad of reasons, getting someone to invest in your product or service is easiest when you can provide a proof of concept. If someone can actually see how your idea would work, they’ll feel more confident in their investment. They will know that you’ve spent a lot of time (and your own money) developing this idea — not only in your mind, but in a physical space as well.
Think about it: it’s rare that someone will buy something without seeing it. That’s why online retailers like Amazon and Etsy are full of product images — people want to know what the thing they are buying looks like and many people want to touch the product as well. They try on clothes, they take cars for test drives, they use the tester lotions in shops. The sense of touch is closely tied to purchase power and in this instance, your prototype is the thing they need to touch.
Proof of concept is perhaps the most important step in the “how to get seed funding” process. It shows the world that your venture is possible. You aren’t selling an idea anymore — you’re selling a product and demonstrating to investors how it feels to use it. Your functional prototype could very well be the thing that makes investors go from “maybe” to “definitely.”
Show Proof of Commitment
If you’re already making a plan for how to get seed funding, take a deep breath and make sure you’ve really thought through every aspect of your business before speaking to investors. Any potential investor would feel more comfortable handing over a check to someone with a well-developed idea over someone who came up with a “fantastic” one the night before, so make sure you’ve done your homework.
From the business plan to the marketing plan to your prototype and of course, your final product, you need to make sure you know the ins and outs of everything you’re pitching. Your market research should be on the tip of your tongue. You should be able to answer every question imaginable. Ask friends and family to grill you for those answers so you can practice.
Creating a functional prototype is a huge indicator that you’re fully dedicated to this business opportunity. A beautiful prototype shows you’re all in. That you have a clear vision for your product. And before that pitch meeting, make sure you test that prototype until your friends beg you to leave them alone. All that time spent will be incredibly apparent to your potential investors — and will be well worth it in the end.
Sometimes, how you get seed funding isn’t about pitching to a room of Sharks. Sometimes, it’s about making a Kickstarter or IndieGoGo campaign and doing your best to promote it. These days, it’s not at all unheard of for entrepreneurs to turn to crowdsourcing as a means of finding seed funding. Many successful products started out here and there’s no reason yours can’t.
Creating a crowdsourced campaign can be a bit overwhelming. How do you know what will make people want to invest their hard earned dollars in you and your business idea? Well, a prototype will take you a long way. Think of the random people viewing your Kickstarter as the Sharks. They’ll want to see how your product works — and what better way than to show them a working model.
The best crowdfunding pages have a description of the business idea, as well as a video explaining the inspiration behind it and demonstrating the product. This is your opportunity to showcase your prototype. Creating a movie that takes potential backers on a tour of your app is one of the best ways to reel them in and convert them to real investors. If you’re lucky, you’ll end up on a featured list, which will increase visibility and help you reach your goal.
Crowdsourcing is actually a pretty innovative way to get seed funding. Some may look down upon it, but there’s a big upside to using Kickstarter or IndieGoGo to fund your business venture. First of all, you’re drumming up PR for your business before it’s even off the ground, which is a brilliant move. The earlier you can get your product shared, retweeted or talked about among friends, the sooner you can pay back your debts and start netting cash.
Second, you don’t necessarily have to give up part of your business to get funding from crowdsourcing websites. You will have to give something — whether that is one finished product or two, swag from your company, or simply an acknowledgement and a “thank you” when the app launches — but it isn’t likely to be shares of your company, which means you retain total control of your product.
If you’re looking at crowdsourcing to get seed funding, you should definitely familiarize yourself with the best practices for the website of your choosing. Each one will have slightly different guidelines that you’ll need to be aware of before hitting “launch.” For example, Kickstarter only provides funds if your project is fully funded at the end of the campaign, whereas IndieGoGo will transfer funds regardless. Each website also has suggestions based on successful campaigns from the past.
Also, keep in mind that crowdfunding websites will charge you for their services — it’s only fair. So remember to add an appropriate percentage to the amount you’re requesting to cover fees.
Still Worried about How to Get Seed Funding?
It’s understandable to be worried you won’t be able to land all the funding you need. Remember that you are not the first person to ever feel this way. Many entrepreneurs have been exactly where you are, but they made it through because they had one very important thing: confidence.
In addition to a beautiful, functioning prototype, your confidence will be one of the most critical pieces of the puzzle. You might feel completely confident about your business idea, but stammering or searching for answers when faced with potential investors will give the impression that you aren’t ready for such a big venture. The confidence you need will come with practice if it isn’t coming naturally.
In the meantime, focus on that prototype and get it exactly the way you want it. Ask your friends and family to test, test, test. Remember to get a wide variety of people (both in age and technical savvy) to play around with it. If possible, observe them while they do it so you can see the gaps between your expectations and their reality. As you continue to get feedback, your prototype will get better and better — and you won’t be wondering how to get seed funding anymore.
Disclaimer: This is a curated post. The statements, opinions and data contained in these publications are solely those of the individual authors and contributors and not of knowstartup and the editor(s). This article was initially published at Proto.io.