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Top 6 Online and Offline Investment Sources for Your Software

a mobile phone with a coin getting into it

You have an idea for a product. You don’t have anything else. Where to get money for your project? Will you really get some? What if you also need business advice along the way?

This article will answer your questions.

There are three types of investment seekers

If we’re talking startups, founders seeking investment usually fall into two categories. Each has its own investment options. Let’s see which one you are.

You have a general idea of what the product is going to be but you haven’t worked through the details

It all starts with an idea. If you have it already but are still not sure about the details, look into Angel Investment.

An angel investor (they’re also called private investors, seed investors) is basically a wealthy person who can provide financial support for a small business or an entrepreneur for ownership stock in the firm. The percentage is usually up to 25% but can reach as much as 40% or more. It may be a one-time investment or continuous money infusion. 

Angels invest in the products that are just starting off and use their own money for that. So basically any rich person can become an angel investor. However, these are high-risk investments that should not exceed 10% of an angel investor’s portfolio. Meaning they can’t spend more than 10% of their net worth on the investing. 

Angel investors usually also have the industry expertise: they’ve most likely made the money they have themselves by running a business successfully. So they can also give you business advice and guidance in your entrepreneurship as well as be a one of the key participants of the decision making process if their share allows them to. 

To find an angel you don’t necessarily need an old rich aunt or Jeff Bezos as your friend 

Try these

  • Angellist — a free tool to find angel investors or even first employees for your startup. One of the first businesses to seek out angels on Angellist was Uber, in 2010.
  • Angel Investment Network — kind of a marketplace to connect startups with investors.
  • Social media — tell about your ideas on your Twitter or LinkedIn and ask your contacts to share the info. Six degrees of separation and the power of weak ties are real!

Another category is:

You have a detailed idea description and solid understanding of how it will work

For when you:

  • know exactly what you and your business need
  • you know you will grow fast and investors will see it too

Go venture!

Venture capitalists provide funding to startups and small businesses with seen long-term development potential. You can get venture capital from wealthy individual investors, investment banks, or other financial organizations. 

What’s special about VC is that it’s not necessarily money. It can be strong managerial powers or, for instance, technical expertise and skills. 

This is a quite risky type of money allocation for investors, but the prospect for above-average profits is appealing. In most cases venture investors tend to finance high-tech projects, pharma, health, or some kind of brand new idea — anything with extraordinary growth potential. 

Here is what you need to do to win investment from a VC:

1. Identify venture capital firms that invest in businesses similar to yours. You can go both ways: research into what VC funded your concurrent and competitor businesses or look into what startups particular VC invest into. Try CB Insights — it’s a highly-regarded resource that offers data on active VC firms and associated industries.

2. Make sure that the company invests in the stage of funding that you require. Some VC might be looking to fund startups with nothing but an idea and a plan, some only invest into small businesses with an MVP and strong growth potential. Most venturing organizations provide that info along with pitch requirements on their website. 

3. Investigate the firm’s previous deals. This way you can see whether the VC you’ve picked provides the exact type of investment you seek and you don’t get a management team instead of $50k. The research method is the same as in point 1, the info is quite transparent. Or try Crunchbase.

4. Prepare your pitch presentation. You need to literally sell your idea to the investors. Here’s what you should cover.

  • Your target audience
    Describe it as detailed as possible. Include the clear definition of the segment and the TA’s known peculiarities — you must demonstrate you know them well. But don’t confuse “detailed” and “narrow”. Being too specific is not always an advantage.

    You should also research into your TA. The more client-oriented you are, the better. Try out field study for that. 
  • Problem, solution, and product image. Use prototypes, designs, or demo.
  • Technology / Innovation
    You should transparently and clearly show what technology / approach / innovation you put in the base, how it will help you take over the competition, what the value is and how this exact technology / approach / innovation serves your TA’s needs.
  • Monetization model
    This is how you plan to make money with your product and how realistic it is to make money off the product.
  • Team and implementation
    With this info you should prove you’re well aware of what key roles you need to cover in your team to get to the result. Show your current opportunities and strong understanding of the resources it requires.
  • How realistic it is to enter the market
    Explain why you feel your strategy matches the product goals and showcase how well you understand the steps you need to take to get there.

You need a mentor, a network, and support in building your business

No matter what stage you are at, business incubators might be a good solution for you.

A business incubator is an organization that helps entrepreneurs develop and succeed by providing a variety of business support tools and services such as physical space, financing, coaching, shared services, and networking connections.

Private corporations, municipalities, and public organizations such as universities and colleges frequently support business incubation programs. Their mission is to assist in the formation and growth of new firms by providing them with the required resources, including financial and technical assistance. Their office and manufacturing space is available at below-market prices, and their team provides valuable assistance and expertise in building business and marketing plans, as well as assisting in the funding of new ventures. 

Firms often stay in a business incubator for two years, during which time they sometimes share telephone, secretarial office, and production equipment expenditures with other new companies in an effort to lower operational costs.

To find an incubator 

Try the IncubatorList

The main thing to remember — look for incubators in your location and for your segment, since there are narrowly specialized incubators: for education, medicine, or even supporting women). Pay attention to what the incubator wants in return, how much it costs, if there were successful alumni, or if it’s university based.

There’re investment seeking strategies that work well for all three types

Anyone who thinks your idea is valuable enough to generate ROI (return on investment) might help. So fundraise! Here’re possible strategies:

1. Friends & Family

Don’t underestimate your close ones. They know and believe you, so this money is easy to attract. Outside investors need proof you’re serious. But another thing here — if you’re not ready to risk your own and your close ones’ money, you are probably not.

Mail chimp and Github bootstrapped themselves. See who else.

2. Crowdfunding

Make a million stranges who believe in your idea donate a dollar. How to do that:

  1. Create a campaign
  2. Make the content to engage people
  3. Set up and launch the campaign
  4. Promote campaign: e.g. on social media

Reward-based crowdfunding

It’s a form of crowdfunding when people donate money to your project and expect to get a non-monetary benefit in return: a lifetime subscription, a merch, or something else. 

Where to crowdfund reward-based:

  1. Kickstarter 

Crowdfunding platform for creative community. You might want to place your project campaign in the Technology category. There are subcategories for apps, software, and web services

Kickstarter Fees calculator
Kick starter Fees calculator

The mechanic is All or nothing: 

  • set your objective you’re seeking to crowdfund (try their template for objective estimation in .xls). If you don’t get it, all the money goes back to the backers and you get nothing.
  • define the rewards for backers: lifetime subscription, a merch we’ve mentioned before, or an event pass, etc. You can’t set equity as a reward. 
  • set the campaign period — 1 to 90 days. The most effective period proves to be 30 days. The limited time period creates urgency and motivates your community to back your project and spread the word.

Your or your business address must be located in one of the listed countries and have a bank account that meets the platform requirements. And make sure you project is none of this

If a project is successfully funded, Kickstarter collects a 5% fee from the funds collected for creators. Stripe, the payments processor, will also collect a payment processing fee (roughly 3-5%). The complete fee breakdowns are available here.

For example

kick starter project set up page with the list of categories
Kickstarter project set up page

Why is it a good idea to crowdfund on Kickstarter?

  • Can start promotion before everything’s ready by creating Pre-launch page 

Potential backers will be able to find it on Kickstarter, but you should share your pre-launch page with everyone to create excitement and attention around your project before you launch it.

  • Connect Google Analytics to the campaign.

That means you can advertise on YouTube, Google search, or the affiliated website with Google ads.

  1. Indiegogo 

Your project might fit into Tech&Innovation category with Education, Health & Fitness, Productivity subcategories. Indiegogo is mostly for tangible products, yet you still can try crowdfund your software there. Here’s what a successful software campaign is like on Indiegogo: Fluent Forever App: THINK In Any New Language

Check out the legal address and bank account requirements. 

How much can you raise?

Indiegogo offers two funding types: Flexible Funding (keep what you raise) and Fixed Funding (all-or-nothing). Learn about the differences and the pricing for each.

  1. Kisskissbankbank

It’s a French crowdfunding platform where you can finance your project with regular support of your community. Choose a monthly or quarterly recurrence and create your own subscription formulas, offer exclusive content to your contributors and finance the sustainability of your project over the long term!

Equity crowdfunding

It is a form of fundraising where you attract investors that contribute funds toward your business goals in return for a financial stake in the company. You can also allow them into the product making process depending on their investment like voting on marketing or development matters. 

Where to equity crowdfund:

Depending on where you and your business are located, you might want to try one of these platforms:

Worldwide

Canada

USA 

UK

Europe

Middle East

3. Initial coin offering

ICO is a form of investment where funds are raised with cryptocurrency venture. How to get into ICO:

  1. Create your white paper — basically your idea / project description and all its aspects that might potentially catch investors’ interest. Make sure it’s well designed and is truly appealing as an investment opportunity.
  2. Publish it on any cryptocurrency stock market (e.g. Binance) and promote it.
  3. Get crypto donations (mostly in Ethereum) from backers. They’ll get project’s tokens in return.
  4. Once your project succeeds the backers can sell their tokens and profit, so in case of your success it’s a win-win situation.

Here’s top 10 most recommended platforms for ICO

Bad news: ICO involves a lot of risk taking. Good news: risks are mostly for the backers. 

Listing an ICO is not free, though. Rough estimates are in the range of $40,000 to $200,000.  

Conclusion

You might be seeking investment on different stages of your project development. The first one here can be building an MVP. Learn how to save money on that from our article.

And if you already have one and are seeking further stages funding, here’s what you should probably allocate budget to before you spend a penny on the actual development. 

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What Should Come After The 1st MVP Release For It to Be a Success?

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In Fora Soft, when we release a product for the first time, it’s already an MLP (Minimum lovable product). But usually the first milestone in product development is MVP (Minimum viable product) launch. However, it’s not a point to stop. But what to do next? What comes after the MVP release and how do you know the product is ready? The answers are in this article. 

Gather feedback from your users

If you want your MVP to be a perfect product-market fit, it’s a good idea to make sure your clients understand what the product is about and how they should interact with it before promoting the platform. Otherwise there’s a chance you spend a pretty penny on marketing and get no result. 

Sign up for startup websites

Like these:

  1. Product Hunt 
  2. Indiehackers
  3. Betalist 

The scheme here is quite easy yet effective:

Your profit: 

  • feedback from real users = the “Do they need the product?” hypothesis testing 
  • badge on your website = trust level increase
Badge on a website

Test the platform on users

Determine your target audience 

TA is a group of people that are most likely interested in your product. They share some needs and wants or have similar ones. 

For instance, TA for an LMS-system is students and teachers that take and give lessons online. 

Test your product with focus groups

  1. Gather up a group of 10 people
    They shall be as close to how you describe your TA as possible. It’s better if they’re strangers to you — friends and family might not be objective.
  2. Decide what exactly you want to test
    For instance, your goal is to test how intuitively students interact with the platform.
    Describe the scheme: “Download the app, sign up, make basic actions (sign up for a class, attach a file with a completed assignment)”.
    Plan the result: “9 users will register, 5 will sign up for a class, 3 will attach their files”.
  3. Test the platform
    We recommend watching the users as they interact with the product: face-to-face or on a video call. You’ll notice some minor yet important details the user might’ve missed in a written report.
  4. Gather feedback
    Note what users could and couldn’t do or accomplish. What questions and issues have they faced? Were there lags or bugs they encountered? Did they like using the product, why? Would they recommend it to a friend? Would they use it themselves?

Carry out a customer development interview

Customer development interview (Custdev) — a means to get data while in-depth interviewing TA. While carrying out a custdev you discover current top-of-mind needs, preferred means of communication and content types. You’ll need these for the promoting campaign later. 

Tip: If you’re on a low budget and can’t afford a custdev, prepare the questions in advance and ask them while testing the product with the users. And if you’ve already made past-testing amendments, now it’s a good idea to see if the amendments are good and efficient.

Custdev aims at discovering how and where your TA gets information and what particular points for ads placement will be the most effective. 

There’re some Rules:

  1. Gather up a group of 10 people. They shall be as close to how you describe your TA as possible. Again, it’s better if they’re strangers to you — friends and family might be not objective. 
  2. Make a questionnaire. With the same questions for each of the respondents to prove the hypothesis.
  3. Ask open questions: how, what, why. Let the respondents share their experience in detail. Don’t ask them for a particular solution. Just find out what the problem is and why solving it is important for the respondent. 
  4. Ask follow up questions.
  5. Remain in the present. Ask them how they act right now (no woulda-shoulda-coulda and Past tenses). Focus on how they tend to act. And better not ask about the future or wishes. The respondent may subconsciously want to appear better than they are and respond accordingly, but it won’t correlate with how they act in a real setting. 
  6. Record the interview. You’ll get a bigger load of data and will be able to come back to it anytime you need, the data mining will be more effective.

Questions you might want to ask

Process the feedback

Effective feedback processing and eliminating product flaws are two Atlases of successful products. If a user can’t fulfill their needs and wants with a product, or the first-use experience is unpleasant, they won’t waste their time on it anymore. 

How to process feedback correctly:

  1. Discuss the feedback with the team
  2. Brainstorm on possible solutions and improvements together
  3. Make up a to-do list for the next release. Use MoSCoW prioritization method (Must have, Should have, Could Have, Won’t have (this time)) to prioritize: 

1st Priority: features that the product Must have. These are the essentials for the current development stage. If a product doesn’t have them, it won’t be successful. Basically, an MVP already has it. You can only improve them or add new ones if the custdev shows it’s necessary. 

2nd Priority: features that are important for the current stage but aren’t that critical. A product Should have them in the next development sprint. 

3rd Priority: features that could make a product better if there was additional development budget. It’s what the product Could have at its best. 

4th Priority: features that will definitely not be in the product, at least for the next 2 timeboxes. It’s what it Won’t have. 

We recommend focusing on the 1st and 2nd priorities as they suggest most needed improvements for the current period of time. The 3rd and 4th ones are just possible enhancements. When improving the product, you may see it change dramatically so there won’t be any need for the features of the 3rd and 4th priorities. So it’s better not to waste your funds and your analysts team’s time on that. 

Make changes to the product 

Adapt your MVP to be better product-market fit with your clients. Develop and test 1st and 2nd priorities improvements. Besides custom solutions, some common ones are have the same intentions: explain how to use the platform for newbies and keep them engaged. 

Onboarding

Automated platform introduction to a user. The goal is to demonstrate what it is for, how to use it properly, and what the benefit is. It makes the user experience much smoother and leaves a good first impression.

Minor interface adjustments 

Product adaptation is a nice product enhancement strategy. It’s a pretty common thing when a user can’t find the target action button or doesn’t get how to interact with certain functionalities. It’s crucial to keep abreast, keep track of the feedback. 

This is why sometimes it’s a good idea to test how comprehensible and intuitive the interface is to the user if there’s no additional navigation. It’s easy to assess. Let’s say the user scenario suggests that the “Sign up for a class” action takes 3 steps. When testing the product you see that the user takes some workarounds and accomplishes it in 10 steps. Meaning something in the interface wasn’t clear for them. This will help add new useful features and enhance existing UX and UI in the next product version. 

Referral system

It’s a way for the platform to “collaborate” with the user by rewarding the referrer for attracting new users. Nothing motivates better than personal gain. Think of what would be enough of a motivation for one to stick to their friend asking for a favor. 

Notifications

One of the significant metrics of the app effectiveness is user engagement. How frequently they open the app, how much time they spend in it. Notifications will help with the first. Pique their interest with words and emojis only. 

Custom email newsletters will work for web apps.

Text update applying Tone of Voice

If you use texts at the MVP stage (in pop-ups, welcome-screens, etc.) make them consistent in Tone of Voice. These are the rules by which the brand communicates with the users. 

Does your product target teens? Use more slang to be on the same wavelength. Is your TA mostly businessmen and entrepreneurs? Address the users more respectfully and make the communication concise, maybe even formal. 

Relevant ToV guarantees that users will perceive the information better, since they better understand how the product works. 

Moreover, if your brand speaks the same language as its TA, some sort of emotional connection and bond establishes between them, as if they were friends. That’s a significant advantage over competition products. 

Promote the platform

Pick the promotion channels and plan the works

  1. Think of the concept
  • Pick the promotion channels 

Based on the custdev data make a list of the most potentially effective sites for placing advertising messages.
For example, your clients are movie geeks that want to save money on online cinema subscriptions. From the interview we learnt that they visit platforms with vouchers and promo codes often. This is where we will place our ads.

Set up the channels in the single brand identity. Use the same logo and an informative profile background. Let your designer make an entire design system, select color solutions for visual content. 

  • Make your advertisement hypotheses (objectives) to test. Make them SMART 

For example, Facebook users will download the app 100 times within 2 weeks. 

  • Calculate the overall costs

Use forecasting services for digital advertisements. When planning a campaign in Google ads, Facebook ads, Snapchat ads, TikTok ads, Twitter ads you’ll see how many impressions (how many unique users will see the ad) and clicks you’ll get for your budget.

Agree on promotional posts with authors/admins personally. Consider the fees and taxes. 

2. Plan content creation works: make briefs for copywriters, designers, photographers, etc. 

Create the content

Use the information you gained from custdev to determine the best content type for your TA. Write copies, record and edit the video, make pictures, and adjust them to your specific placement sites.

If the campaign includes any social media marketing activity, make up a content-plan, a list of posts topics.

Launch a test campaign

Commence promoting the product and testing hypotheses. We recommend launching a test campaign for 2 weeks — this must be enough. Keep track of the changes. If you see that one of the hypotheses doesn’t prove itself and you don’t get the anticipated result, amend the budget allocation, channels selection, etc. 

Launch the campaign in the most effective channels

Draw the conclusions to the test campaign. Select the most effective ads placement sites. Plan the budget and the results based on the test campaign data. “With the $ X budget I’ll get Y new users, N demo requests”. Use this to better plan and calculate ROI of the project in the long-term perspective. 

Final words

Answering the question from this article intro — you know better when your product is ready. What we can say for sure is that there’s always room for improvement in the post MVP phase. And once you have your MVP and have done all the necessary adjustments, you’ll know the direction. To give you an idea, check out what we do next with our clients in CommunityHill, Janson Media, and AppyBee cases.