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A start up in the Mobile sector: can one succeed without an investor?

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Many entrepreneurs wishing to launch their own mobile app believe that finding an investor is inevitable and, sometimes, list this thought upstream their project. Worse still, they even integrate the fundraising process into their business plan, without even having a product!

However, investment funds, or the so-called business angels, are not the key to undertake in the mobile app area. There are many alternatives that can limit obstacles and allow entrepreneurs to develop their product comfortably without having to raise funds … at least in the first stage.

Getting started while minimizing risks

Firmly anchored in the growth hacking trend, which consists in exponentially and rapidly developing one’s business, the mobile app market definitely allures entrepreneurs thanks to its high growth potential and strong penetration. For startups, fundraising may seem like a grail. Yet, this option entails severe constraints, such as an exponential growth target, a strong pressure if the start-up does not yet achieve profitability and needs a second round of fundraising to finance its growth, or its share  capital dilution(which is costly when the company has not yet proven its autonomy).

A boost to launch one’s mobile app in France

Employees wishing to go for the adventure can benefit from a favorable environment in France thanks to the Pôle Emploi allowances, whose duration generally extends to two years depending on the job previously held. Something to know about is that jobseekers who plan to start their own business enjoy certain privileges, such as the one-year exemption from social security charges and the Nacre mechanism which is based on assistance for the company creation and development. It includes a zero-rate loan offer.

Added to professional reintegration aids, there are various public aids: Regional and European grants: we should distinguish between the ERDF (European Regional Development Fund), which aims to address the economic disparities at the regional level, and the ESF (European Social Fund), which aims to promote the employment area. Subsidy applications must be carried out online and are capped at 200,000 euros (depending on the project).

The Réseau Entreprendre network also offers financial assistance in the form of an unsecured and interest-free honor loan, repayable over 5 years. Moreover, this benevolent network provides any start-up with a coach over 2 years to help them by sharing his/her experience and his/her network.

The ITC (Innovation Tax Credit) enables SMEs and entrepreneurs to benefit from a reduced taxation. It is easy to get especially when the domain in question is digital and brings a disruptive or incremental innovation.

The PIB aids: the Public Investment Bank can support start-ups in the Research and Innovation area through zero-interest grants and loans.

Finally, despite their negative image, let us not forget banking institutions, some of which have managed to adapt and evolve (such as the CIC or the Peoples Bank). Presently, many banks are able to support innovation and to offer 2-year deferred repayment loans at very good rates. Remember that unlike investor financing, a bank loan does not reduce your capital. This can be very interesting by giving you more flexibility for negotiation when you really need to raise a significant amount of funds.

Why is it advisable to wait before calling on an investor?

Whatever your project in the mobile app field, it will be sound to wait before raising funds. On the one hand, because the search for an investor can take a long time (between 3 and 6 months on average) and because you, initially, need to keep focused on your product development.

On the other hand, because the mobile market is recognized by a strong penetration. Launching a beta version app will allow you to appreciate the initial experience feedback and adapt your offer or service to the user needs, in near real time. Besides, it will be much easier for you to get the support of potential investors if you have key figures and results to lean on.

The optimal strategy in France is to frugally finance one’s project by fully maintaining the capital and using the previous aids to focus on creating a good product, (i.e. which meets its market needs). Once the first positive metrics are obtained, fundraising from investors will enable your start up acceleration.

 

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