What Kinds Of Apps Get An Investment?

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Almost all entrepreneurs, at one point or another during the lifecycle of their business, wonder about raising money for their business, and take some steps to get that money. For apps, the popular fundraising strategies have been crowdfunding and investors.

For now, let’s focus on investors and understand what kinds of apps or businesses have potential to get an investment, and what kinds of apps don’t. Before I start to get into details of what is possible and what is not possible, I want to say that every investor is obviously different. They are usually very smart business people, but they are still people. They can often be wrong. There have been many cases where one investor would tell an entrepreneur that they have a terrible business, and a different investor invested in that business, and the business went on to be a major success. It is also possible that neither
of those investors was wrong. Perhaps the investor who declined didn’t like the risk-reward situation and the ladder investor was more risk tolerant, or liked the entrepreneur more than the business, and after much hard work they were able to create a great business out of the app that once didn’t seem like it would be a great business at all.

Despite the unpredictability and variation of different kinds of apps and different kinds of investors, there are a few guidelines that investors like to use, and will likely use to evaluate your app.

Pound for pound the thing investors prefer most is possibly that your app targets a large (billion dollar plus) market. This ensures investors that your app can potentially grow into a business that can give them returns that are large enough to justify their risk. For this reason, investors seem to invest in what often appear to be similar kinds of apps: photo apps, dating apps, health apps, social apps, fashion and commerce apps, sometimes game apps, and a few other kinds of apps.

Game apps are a bit of a wildcard. Think about game apps. Some games are duds and some games are winners. Even great game development companies can’t consistently produce great hits. The game industry is sometimes called “a hits industry” meaning that
most money is made from games that become huge hits. But creating games that are hits is extremely difficult, and not something that game developers can easily predict. It is extremely difficult to predict game success. Even if a game seems to be successful, the popularity of many games quickly vanes, and there is no certainty that the developer of the game will ever create another hit. That adds unpredictability and extra risk to game development companies in the eyes of investors.

Another thing investors really like to see is high growth. Growth is important for all start-ups, but for apps it holds even more importance because for the most part, apps that win are apps that manage to become very well known and very widely downloaded. This can be understood by looking at the business models of successful apps. Most apps do not generate tremendous revenue on their own, and therefore do not become great businesses on their own. The great success for apps is to get acquired by a larger company. I realize that this is the case for most businesses, but for apps this dynamic is just more glaring.

To get acquired, apps need serious growth. When I say growth, what I have in mind is hundreds of thousand or millions of downloads and/or upwards of 10% month to month growth. If you just got disappointed because your app can’t boast that kind of growth just yet, or has not been launched yet, I am sorry to be the bearer of bad news.

It is very important to understand that investors aren’t there for your sake. They are there to capitalize on your success or potential to succeed. If you have not launched your app yet, there are many apps out there that have launched, are growing rapidly, and are more compelling to investors at that moment. But if you work hard, and achieve growth, you increase your chances to eventually get an investment. Just focus on growing your business without getting an investment if you don’t get one. Most businesses never get an investment, and it isn’t something you can rely on or wait for.

Lastly, I want to mention another thing that investors look for before they decide to invest in an app or not. That factor is your team. Many investors frown on single-member start-ups, which many app companies are. In fact, my own app company is a single person company, and whenever I talked to investors about my apps, they immediately asked why I don’t have co-founders and why I am not growing my team.

An ideal mobile app founding team, or any start-up team for that matter, is one in which the founders have successfully worked together in the past, have experience in the business niche in which the business is in, and have a balanced skill set.

More Mobile App Advice: My Mobile App Business Book

This article is a small excerpt from my book on how to start and grow a successful mobile app business. Check out my mobile app business book on Amazon, or read more about the mobile app marketing book on this site.

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