The main reason for my question is that the development is becoming very costly
As a rule of thumb it's better for you to continue investing yourself as far as you can. The reasons are:
1. The later you raise money, the more your business should be worth
2. You are able to retain more control of the business
3. Fundraising is very time consuming and will divert your attention from making your business work
Having said that, if you're getting to the point where you can't continue to move the business forward (or at a good pace) without money then it's worth looking to fundraise.
I'll start by agreeing with what Dan said re: how timing of raising the funds impacts your ownership of the project, and that later (or never) is the best time to raise funds from that aspect. However, it isn't quite that simple, as I'm sure you know.
I would want you to consider 2 simple things (I'm not armed with enough information to analyze it myself - but feel free to private message me with details):
1. Expert validation is great - but how many actual users have interacted with your prototype? If the answer is none - or less than 100 - don't raise funds, get more users on the prototype.
2. Development of the app never stops (software right?) - but sometimes it needs to pause while people use it (so you can observe their use in detail) - or you are needlessly polishing.
Make sure that the "improvements" you make are steeped in findings from actual users, and that it actually improves their experience / outcomes in using your app. Too often, I see brilliant inventors, creators, developers or designers remain on their lab bench tinkering away on something that desperately needs the attention of an actual user.
Anytime you think "one more feature, one more tweak" really question the need for that change, particularly in the case that it is keeping you from releasing your app (or pushing an update live).
I'd be happy to help you determine which side of this curve you currently occupy. Often, all it takes is an objective, removed perspective to provide clarity.
We self funded PopKey (a top 200 Utility app) as one of the first iOS keyboards. We waited until we were in the 6 figure range in users before we raised a dime. However, my business partner and I had to invest close to 1M of our own money to get it to where it is today. Very risky. I'm going to go against the grain here as a guy who has successfully bootstrapped an app and say if you can raise, raise fast and raise early. Just make sure you find right investors. They should be able to help you open the right doors. Also having some capital early will let you hire faster and get more momentum by buying users. Buying users matters more if you're in a winner takes all space and if it's a land grab.
We were lucky that we already had an in-house development team to leverage. We're also generating enough revenue now and have enough financial backing that we can continue to run PopKey independently for a long, long time.
Summary: if you want to go big raise early from the right investors.
My expertise, however is in bootstrapping, growth hacking, and lean start-up principles.
Fund it for as long as you possibly can. Start-ups are pricey ventures we all know this, and no doubt you're going to need some external support some time or another, but as a rule of thumb, it's always best to make that some time, another time for as long as possible. Keeping the funding on your own back will insure you reap what you sew. You sell a piece of your soul every time you reach out for eternal forms of financial aid, be it a loan or an investment. Now, if not seeking this support means not going through with the app, then by all means it is time to take that step. But as I said before, put it off as long as possible, pay with your own pocket and try to progress at the rate in which your pocket can afford it, this will also help ensure that you have enough time to evaluate every business related decision you are required to make, and can feel confident that you chose the correct direction with each and every decision of YOUR businesses development.
Well, you have seen the "bootstrap for as long as you can" answers and I'll just affirm that. Get to actual testing and then only ask for dollars when your tests have shown you match what users want.
If your app is mobile app , then definitelly I would search for investor. Investor for mobile app could be:
1. Business angel
2. Some mobile app company which may be interested in your app, but mostly they want finished product from my experience.
I have done 3 mobile apps, and definitelly you cannot succeed unless you have large funds for marketing or extreme luck to be reviewed on some major sites. The key is to go viral and basically everyone knows it, so its not easy without money. Just to give you idea how strong competition on mobile apps is, one smaller mobile company (considering what companies are on market) invests 150 000 USD per month for marketing only. So, when you release app, you need large amount of installs and that costs.
Now, if you partner with some mobile app company, you can share revenues with them. Note: they can advertise your app from their apps. However, its not easy to find such company, I think best is personal meeting or telephone contact.
Another approach is to find a partner, a developer who would continue developing your app. Then you would need to share revenues with him also. Certainly, it has to be some experienced coder with few years of experience. So, if you have funds, continue on your own, but dont spend fortune on app, don't make yourself broke after completing app. Some apps can be developed for 3 - 4000$ so its not that costly considering future potential earnings. Chances that you will succeed even if you have great app are small, you will need huge marketing budget or some excellent mobile company who can push your app through their apps (though it does not guarantee anything at all).
However, if you have developed desktop app, in your case I would continue self funding and start selling on my own. You could approach few companies as well after you finish product.
Many try to develop apps and many do, but very few succeed. My advise is that even if someone offer you 50-50% profit sharing its a good deal. 50% of something is better than 100% of nothing.
Good luck in your sales.
My advice: Present to investors but do not accept investment unless they offer such an amazing deal that it would be impossible to say NO.
Reason: The most valuable resource that you have is your time. If you see that investors are ready to vote with the money, you get a confirmation that you are on the right path. Later on you can come back to the same (and other) investors and get money when you actually need them.
Any of the above answers are worth to be taken for granted. The only things to consider in case you have no premoney evaluation are convertible notes to be considered.
I would suggest a 2 phased approach.
1: submit to a selection of around 50 Beta users, with the provision that with deep insights on its functionality, you offer them incentives for their feedback. This is a time limited event.
With the feedback you engage the appropriate changes, but pay special attention to monetizing the app, and create a payback chart and a rollout timetable.
Layout on paper rhe target market, how you plan on monetizing, and where your income roi will look like.
Armed with this knowledge, then you can release a preview look to potential investors and have real data and income to show for your effort.
I would suggest a small close group of investors, not VC or Sharks at this point.
Focus on getting your income engine purring asap, and you'll have a winner.
I would stay self funded as long as possible. Then move to testing the prototype with customers. If you merge the results from experts and the customers then you have a high chance to presenting to investors and share the data.
Im available to talk more and help in anyway possible.
Do you have any paying customers? If no, then why dont you get some? You could tell them that the app will be out in the next __ weeks and if they sign up now, they can get a lifetime discount of 30%. This way, you will be able to bankroll though your customers and use this money for your development.
In today's environment, even if you approach investors, they will tell you to come back after you have seen some traction.
As far as your development costs are concerned, I suggest you find some good offshore development freelancers. There are very good developers I know who can help you out.
Do let me know if you need any inputs on this.
Fund it yourself if you can. Secondly, look to family and friends for a small percentage. However, if you can own it outright and it is a hit, you may be much better off.
Best of Luck,
From the Trenches to the Towers Marketing
I will be glad to help as my time permits.