A new startup is built upon an idea and once the idea is converted into a product, often comes a stage where the need arises for Series A Funding to further expand the company, add new features to the product, retain employees etc. Via funding from VCs, companies like Facebook, Twitter and Pinterest have become what they are today.
Let’s say that you have conceived an idea of developing a social casino app for multiple mobile platforms and you have a firm belief in the success of the app. However, you don’t have enough money to even kick off development of the product. As you need a team of developers, graphic designer, product manager etc to develop the social casino app, you need to have enough funds to pay them salaries in exchange of turning your idea into reality. You might think your idea is brilliant, but when you eventually opt for Series A Funding, you must have something significant to show to investors to convince them that your social casino app is worth funding to get good ROI. By the time you gear up for Series A Funding round, your social casino app should also have impact user base to lure VCs into funding your social casino app startup.
How you can arrange enough funds to begin you Social Casino App Development and make it apt for Series A Funding?
You can first seek funds from your friends and family members to get your social casino app development underway. Chances are always high that the money you collect from your friends and family is not enough to keep your startup afloat for long. In such a case, you can rope in a co-founder to get his/her money to support your startup, in addition to skills and enthusiasm to add value to your social casino app. The co-founder will also get more money through his/her friends and family members, thus you can have enough money at your disposal to keep your startup alive for longer time and bear expenses of infrastructure, tools and employees your social casino app development would require.
Role of Angel Investors to help you make your Social Casino App ready for Series A Funding
If the co-founder is even unable to make your social casino app ready for Series A Funding, you can approach angel investors. Angel investors are basically those investors who invest a small amount of money in exchange for convertible debt or ownership equity. An angel investor is different from an institutional venture capitalist, who invests money of other people. Angel investing has seen a rapid rise in recent years since many affluent individuals consider investing in a startup as a better opportunity to earn good ROI than conventional ways of investing.
An important point to note here is that you need to register your company before you go for angel investment round. You can register your company either through a lawyer or online services. Angel investors usually invest in a startup based on how much they believe you startup values at.
How would you figure out the percentage of the company you need to offer to an angel investor in exchange of his/her important funding?
Let’s consider that an angel investor has valued your startup at $5,00,000 and agrees to invest $50,000. Now, you need to apply simple mathematical calculation. Add pre-angel funding valuation to the angel funding, and the resulting figure is post-angel funding valuation of your startup.
$5,00,000(pre-angel funding valuation) + $50,000 (angel funding) = $5,50,000 (post-angel funding valuation)
To obtain the percentage of the company you need to offer to the angel investor, divide angel funding by post-angel funding valuation.
$50,000/$5,50,000= 1/11= 9.09%
So, the angel investor gets 9.09% of your company by funding $50,000 in your social casino app.
Deploying such strategies would take your startup forward to the door of Series A Funding. Although every investment increases valuation of your company, you need to be careful as you could lose control over your company by going for unnecessary funding.
Once your social casino app is ready and has impact numbers of registered users, you can finally go for Series A Funding. Your social casino app might only have Android users as of now as you didn’t have enough money to develop your social casino app for multiple mobile platforms. VC funding will help you not only to do so, but add other important features to your app as well to keep users coming back.
VCs will also invest in your company based on how much they value your company at, which actually depends upon several abstract factors, like feasibility of your idea of social casino app, your previous experience in digital game development, academic background of you and your employees, and many more.
A VC is a very important cog in the wheel of funding, as his/her funding paves the way for your startup to expand when your company do not have access to equity markets. VCs take a big risk of investing in an early stage startup to earn massive ROI. But, it’s very important that your product and the idea is good enough to woo them to fund your startup.