As you will know, creating an app for market these days will require more of you than simply your outstanding developing and coding skills. In today’s world, in order to make it in the app game you need to be a true entrepreneur, and not just a programmer.
This is not something that is unique to app development either. In my industry – writing – the same is true. I haven’t got into the position that I’m in today through my writing skills alone. I’ve had to become a businessperson to boot.
This isn’t natural for me – I’m a writer, right? And, as a writer, I naturally prefer the solitude that the craft requires, the quiet concentration, the avoidance of human contact whilst I’m lost in my work. And I’m not unusual in this regard – in fact I’m rather common. Writers, in the main, are all like me – we love our work, but we love to do it alone. We’re craftspeople, creators, artists. Essentially we’re introverts.
And of course, in my particular line of work and field of interest – tech – I also know that writers share a lot of our stereotypical characteristics with coders. Indeed, coders are solitary creators, too. They’re artists, visionaries, craftspeople. Hell, in essence, they are as much writers as writers are – it’s not described as ‘writing code’ for nothing.
My point is that, as a writer, I know that, as a coder, all you really want to do is write code. Computer languages are your calling as much as the English language is mine. You’re an introvert, too – but unfortunately, in today’s modern world, in order to be successful you’re going to have to at exercise a little ambiversion at the very least, if not a few full-on blasts of outright extroversion.
Ah, yes – the dreaded pitch. For writers – be that of words or codes – there is nothing more scary. But, not to put too fine a point on matters – that’s just tough ink. If you’ve got an idea for an app, and you know that you have the skills to create it, the contacts to make it, and the market to buy it, then, unfortunately, you’re not even halfway there.
In fact you’re not even a quarter of the way there. Not an eight, a sixteenth or a sixty-fourth. No, you have merely taken the first step upon what could either be a very long and lucrative or short and disappointing journey, for unless you can convince an investor (or group of investors) that you can do what you’re telling yourself you can do, then you may as well turn on your heel immediately and head back to dream world once more.
Pitching, like it or not, is an inevitable part of each and every app development project. You may be self-taught, or you may have a degree or some other qualification in developing that proves that you cut the mustard when it comes to building apps. But, unfortunately, your skills as a coder alone are not enough to convince whomever it might be that you have what it takes to build and then market a saleable app.
Indeed, this is the sticking point of many would-be appreneurs. Not least because such people don’t always know where to turn for funding.
What’s Wrong With A Bank Loan?
Since the financial crisis of 2007-2009, banks have found themselves strapped tightly with some extremely burdensome regulations that has meant that they are simply unable or unwilling to lend to fledgling startup business owners like they used to.
This, indeed, has proven to be a rather large obstacle for many SMEs – including developers – over the past 8 years. Without funding, existing businesses are unable to grow, and many startups have simply not been able to get going at all.
To give you some perspective, new study by Amicus Finance Plc shows that 32% (i.e. roughly 720,000) of small business owners have lost out on an investment opportunity due to their bank being unwilling to service their borrowing requirements.
When it comes to first time borrowers, however, that figure rises to 50%, as stated on The Route – Finance blog:
“In the past, when SMEs have found themselves in a position where a loan has been required in order to grow, they have instinctively turned to the one place where they presume such funding to solely come from – their bank. However, in the wake of the financial crisis, mainstream banks have simply not been able to deliver these funds like they have done previously. In fact, as many as 50% of first time borrowers have been rejected finance by their bank, according to the UK Department For Business Innovation and Skills.”
Put simply, the banks are no longer the safe havens of finance that they once were, and this is reflected quite clearly by a number of private and public figures. The Millennials Disruption Index, for instance, provides a rather devastating report on consumer trust in banks. Out of 10,000 respondents to the survey conducted:
- 53% don’t think their bank offers anything different than other banks.
- 71% would rather go to the dentist than listen to what banks are saying.
- 68% say that in 5 years, the way we access our money will be totally different.
- 70% say that in 5 years, the way we pay for things will be totally different.
- 73% would be more excited about a new offering in financial services from Google, Amazon, Apple, PayPal or Square than from their own nationwide bank.
- 33% believe that in 5 years they won’t need a bank at all.
Introducing Alternative Finance
With the banks failing left, right and centre, a space has opened up for a new type of lending model to establish itself. They call it alternative finance, or AltFi for short, and it comes under the financial technology (FinTech) umbrella term.
Put very simply, alternative finance is any financial services that take place outside of the traditional banking system. Now, this, strictly speaking, could describe anything from shaking charity buckets outside shop doors to church collecting the offering from the congregation on a Sunday. However, what we are largely referring to when we talk about alternative finance is the large number of online platforms that have emerged where borrowing and lending takes place between private firms and individuals.
Alternative finance may indeed seem like a brand new kid on the block, due to the fact that it has only been over the past 12 months or so that the sector has started to gain some meaningful coverage in the media. But the reality is that AltFi platforms of this nature have in fact been in existence for over a decade.
Make no bones about it, though – alternative finance is now considered to be a genuine, viable option for business seeking funding, and, increasingly, as awareness grows, developers are turning to alternative lenders to fund their projects, after having been denied funds from their banks.
This may be you – and in fact, there is a pretty strong argument that suggests that you shouldn’t even bother looking to your bank in the first place.
Different Kinds Of Alternative Finance
Pitching to your bank manager might be a scary thing to do. After all you’re a (code) writer, and not necessarily a confident talker. And when you turn to your bank for a business loan, you will ultimately find yourself in front of a very important person in a suit, who will largely – it has to be said – be extremely reluctant to part with the money that you require. In fact, the likelihood is that this person simply won’t be able to, such are the regulations that are now in place, which hinders banks from a lot of business lending to SMEs.
But, when you come to your initial pitch on an AltFi platform, you can often find one that will allow you to write out your plans, without – initially, at least – having to put yourself in front of anybody in person.
I say ‘initially’, because there are certain forms of alternative lending (such as P2P business lending) that will eventually require you to meet with the person who is going to invest in your business. However, by that time, they should be well on board with your plans, so you will be hopefully be halfway there to your required investment. Other forms of alternative finance, however (crowdfunding, for example) might actually mean that you can get away without ever having to face the music at all.
So, let’s now finish with taking a look at some of the AltFi options that are most likely to be available to you as an app developer.
The Platforms Explained
Peer-to-peer (P2P) lending simply describes a process whereby cash rich private investors lend their money to directly to a borrower, normally via an online P2P lending platform such as Funding Circle – i.e. cutting out the bank entirely. Essentially the investor becomes the bank in this scenario, and, although when you first head online to upload your proposal you won’t actually have to talk with anyone, eventually it will of course become pertinent for the two of you to meet.
Also known as crowdlending, crowdfunding is when small amounts of money are raised by large amounts of people (i.e. a crowd). Entrepreneurs will head online to a crowdfunding platform and pitch their ideas to a crowd, who will then decide whether or not they want to invest in the project or not. If they do, rather than offering up the whole amount, the investors will instead lend only a small portion to the ‘pot’, and if the borrower manages to gain enough of these small portions, then he/she will have raised the money needed.
There are 4 types of crowdfunding:
This is a type of funding most used by charity and community based projects. This isn’t lending at all in fact, as the borrower will simply ask for donations to fund their project – i.e. without the intention of paying back the money. Put simply, this is a modern way for people to donate to a charity – Virgin Money Giving for example.
As the name suggests, reward-based crowdfunding is a type of crowdfunding whereby the borrower gains access to monetary funds in return for a set of non-monetary rewards. This is quite popular in the various entertainment industries such as app and software development, and the new music scene. For example, you might decide to reward all of your backers with a free download code for you new app once it’s released in the app store. KickStarter is the best known platform of this kind.
In return for their cash, investors in equity-based crowdfunding schemes receive a share of the company in which they are investing. Indiegogo provides backers with this kind of option.
Debt-based crowdfunding schemes require the borrower to repay all monies borrowed with interest for the investors. Platforms of this kind will organise the borrowing, lending and repaying of the loan, and will often negotiate the terms of the loan and seek to provide securities for investors should the borrower default. LendingClub is this kind of operation.
Have you had any success with alternative finance for your development projects? Let us know in the comments below.