In the context of app development or software development, investment refers to the allocation of financial resources (typically in the form of capital) to fund the creation, enhancement, or scaling of a software application.

Sources of app investments

The 3 major sources of app investments are:

• Personal savings
• Family and familiar people
• Unique funding sources

Personal savings

Many developers or visionaries fund their app design and development endeavors by dipping into their bank accounts. The ones who have stopped working raise money by leveraging their retirement accounts.

These people must be aware that they are investing their money at their own risk. This means that they would incur all financial losses when their app marketing and other endeavors fail.

But the upside to self-funding is that developers or visionaries don’t lose equity or control over their app business. And as Australian e-commerce company founder Sean Senvirtne has proven, self-funders can go a long way in the app business.

Family and familiar people

Family members, colleagues, and friends are relatively convenient sources of investments. Since they are more likely to be receptive to the app’s value, they are also good audiences for validating an app idea through prototype creation.

Though funding from family and familiar people lessens financial risk and legal liability in case of app business failure, it requires an assessment of the risk tolerance of the potential investors. They must be comfortable with the possibility of significant losses and should invest only what they’re comfortable parting with. This is how Jeff Bezos convinced his parents to pool their resources into his now-famous Amazon ecommerce company.

Unique funding sources

There are many unconventional sources of funds for app design and development. These sources include venture capital firms, angel investors, and crowdfunding platforms.

Many of these investment arrangements do not necessarily require cash payback for money procured. Investors sometimes get stock (in the case of VC firms and equity crowdfunding) in return for the money they invested in app development. Other investors get nothing (in the case of donation crowdfunding).

But these stocks or equity lessen app developers’ business control over their mobile or web applications. This is one major downside to acquiring investments from venture capitalists and equity crowdfunding sources.

In the end, the set of investments that app businesses can attract is more diverse and flexible than the one for ordinary businesses. Despite the flexibility, app companies need to use these funds wisely and align their strategies with market demands and funding sources to ensure sustained success.

How app developers benefit from equitable investments

• Resource allocation. Investments provide the necessary funds to hire skilled developers, designers, and other professionals, as well as acquire the required technology and tools.
• Faster development. Adequate funding allows for the acceleration of development processes, reducing time-to-market and enabling the app publisher to stay competitive. The chance of a quick market launch also increases when investments are used to build minimum viable products.
• Innovation and features. Investment enables the incorporation of innovative features, improvements, and updates, making the app more appealing to users and helping it stand out in the market. Innovations also help apps maintain market leadership in the fast-evolving tech industry.
• Marketing and user acquisition. Funding can be used to implement robust marketing strategies, user acquisition campaigns, and promotional activities, increasing the app’s visibility and user base.
• Quality assurance. Investment in testing and quality assurance processes ensures a more reliable and bug-free application, enhancing the overall user experience.

Companies that succeeded due to investments in their apps

Some companies that have succeeded in obtaining investments for app development are Uber, Airbnb, and Snap Inc. (Snapchat).

But one of the most unique companies that attracted app development investments is Vello. The company was able to acquire $1 million in funding by merely showing investors a simple app design. With the funds, Vello was able to produce a unique social app that has reimagined how celebrities and fans interact.