Pro Tips for Funding Your Software Project
Any successful custom software project has an enthusiastic founder, a solid bit of research, and funding. If you are struggling to secure proper startup funding, then this article is for you. Building custom software is no easy task. Before you secure funding, however, it is critical to isolate the justification for your software. Then, you can start exploring the funding options available for your startup software. Let’s dive in to the options for your organization so you can get your software idea funded.
Justifying Your Software Project
Just like any investment project, you have to justify the value you’re requesting. There are multiple ways to do this.
Go through the idea phase
As a startup founder, you are probably thrilled by this phase of your product development. You know it will be a success. How could it not? You have the best product out there! Unfortunately, your emotions are not a justifiable reason to ask for startup funding. In fact, they do a pretty good job of blocking reasonable objective perspectives. So, what should you do? Start with intensive market research. This should be done during the idea phase. Look at the business value instead of the emotional value of your product, by studying your target audience.
Calculating cost is a good next step after your idea phase. Before you can even get close to launching your software project you have to locate a compelling value proposition. The benefit or value proposition that you come up with will be based on the return on investment (ROI) achieved from the installment of software.
To find the ROI for your product, use this simple calculation:
- Take the gain of the investment and subtract the cost of the investment in your software.
Then divide that by the cost of the investment and multiple this by 100 to get your percentage.
To put this formula into practice, if a company took on your software at an investment of say, $15 million, and then the expected cost savings come in at $25 million. The result would be a 67% ROI.
Now that you can estimate the ROI of your software, you can begin to put together a business plan.
Developing a viable business plan
Having solid numbers on your side creates a good foundation for your business plan. Your first investor will require this information, so its better to gather it now then wait for it to be requested of you. Your business plan should include risks, profits, and investment requirements to make the software viable. A business plan will document your path to success in legal terminology. Through time, analysis, and dedication you can develop a business plan that reflects the strategic advantages of an investment in your software solution.
Now that you have gone through the process of idea creation calculating costs and developed a viable business plan, the next step is to think about your funding options.
Accelerator programs provide a solid foundation for startup software organizations. How? By providing business services, a pool of talented employees, low cost spaces and contacts who will invest in your startup.
Accelerators are selective with who they work with, however. To get accepted by a quality accelerator program, you have to be competitive, which goes back to having that solid business plan. The odds of getting accepted are extremely low, but if you do win the attention of venture capitalists, you get access to all the perks that a venture capitalist portfolio can gain you.
If you do win their attention, you will have three months to build a working software prototype and then you can secure funding through their wide array of investors. Selective accelerator programs give you much more likelihood of securing funding.
Saving Before Launch
Another, potentially more difficult, funding option is to save the investment money you require to launch your idea.
The benefits of funding a software project by saving money are that it takes away a good deal of risk. Saving and using your own funds protects you from going into debt or being obligated to investors.
It also provides you with a clearly defined budget that gives you creative flexibility. Keep in mind that at any point during your development you can open up to investors. However, at the most volatile stage, you can get your idea off the ground with reduced risk if you invest saved funds.
Co-founders. These guys can be a godsend if you partner with the right ones. After your business plan has been written up, you’ve started on your software project and created an official business, it’s time to showcase what you’ve got going.
Your MVP, or minimum viable product, is key here. It’s a great way to get the attention of investors or co-founders. By establishing your idea as an actual business, rather than just a passing idea, you can secure more talented partners.
The ideal co-founder will share your core values, will be as driven and motivated to turn your software idea into a reality, and will be able to fill in the holes of your own strategy.
Incubators can also be used to fund your software creation.
These groups work with you from the outset of your idea. Some of them are made up of Venture Capitalist while others are operated by government agencies, and still others are formed by corporations.
The downsides of using an incubator are you typically will be required to share a coworking environment but that will give you direct access to a greater network. But to your advantage, you’ll be in direct contact with well connected partners.
Moving Beyond Your Idea to Funding
Funding your idea is the first, and most often difficult, part of launching a new software project. But you can set yourself up for success by highlighting what you can do beyond idea development. Growing your business and attracting investor in any form requires you to develop an attractive MVP. It also requires you to come up with an unshakable return on an investment plan. Armed with this information, you can move forward with isolating the best startup funding available.
Have you completed your funding options research and are ready for professional software consulting? Do you need product development support? Or maybe you’re looking for business analysis, whatever you need, we can help.
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