How to Get Your Software Idea Funded in 2024

Without a doubt, we are living in the age of technology. Software is constantly changing the way we communicate, how we access entertainment, how we conduct business, the list goes on. This rapid emergence of new technologies is powered by a huge surge in innovation through a continuous stream of new needs and uses for software.

As one would expect, there are plenty of people with brilliant ideas that are able to further satisfy society’s constantly growing need for software. However, most of these people usually lack the resources to turn their idea into a reality.

That being said, there are many ways to obtain the resources necessary to get your software startup off the ground.

Bank loan

One of the more obvious ways would be to seek a bank loan or open a line of credit; However, this would require that you have a solid credit history and/or have existing assets you’re willing to put up for collateral. Because of this, while this may be one of the more obvious options – it’s one of the less accessible methods to acquire funding for a software startup.

The U.S. government will give out grants in order to support new technologies and education. Universities are prolifically creating undergrad and master level education programs of entrepreneurism, getting a grant to attend a university so that you can learn more about the space while building credentials and connections can help bring further resources for your startup. You can also submit your software startup idea to request small-business grant funding from the government. The process of applying for grants takes a while, but it won’t cost you any equity. A good place to start seeking grant funding is Grants.gov.

Crowdfunding

Another source of funding would what’s known as a “crowdfunding campaign” which is essentially the practice of raising small amounts of money from a large amount of people that want to contribute to your software startup idea. This can be accomplished over the internet, some of the more known online crowdfunding platforms include:

• Kickstarter
• Indiegogo
• RocketHub

There are financial investors and software development companies who are always on the lookout for innovative ideas from business professionals to jump onboard with. Getting in front of the right people and pitching an appealing software startup is a viable source of funding.

One way to get in front of these investors and business owners is to participate in an incubator or seed accelerator. These are typically competitions where individuals and companies go toe-to-toe in hopes of winning a chance at success. Doing well in these competitions often translates to a leap in profitability and value; most winners are provided with funding, free services, and even industry connections.

Questions investors ask

But what are the primary questions that investors ask themselves during a software startup pitch to determine whether or not the startup is a worthwhile opportunity?

According to Jason W. Taylor, founder of Code Authority Custom Software and CodeLaunch – an annual seed accelerator which focuses on software startups, “the founder or leadership team is more important than the product idea.” In summary, while the concept to a software product is still relevant, professional experience holds much weight in the eyes of an investor. For example, if two people pitched the same idea, investors are likely to go with the person holding the most relevant experience. Due to this, investors will often ask themselves the following questions (and give them a high weight factor) about the person who’s pitching the idea:

• What is their business management experience level?
• How much business acumen do they have?
• Are they experts in the “space”?
• Who else makes up the team?
• Can they communicate, sell, and lead?

Investors are people with experience that has typically lead them to a point where they are, successful at building and selling companies regardless if they are individual “angels” or seemingly more sophisticated venture capital funds. They have developed an instinct to spot people who are “faking it” and are attracted to people who carry a character that reminds them of themselves at an equivalent stage.

After the person or team has established their credentials during a software startup pitch, they must sell the idea itself. The next step then is to figure out what investors are looking for in a product. Investors commonly ask themselves these questions in regard to the product idea:

• Is the product idea in a growing space?
• Is it innovative and/or inventive?
• Is it patentable and/or provisionally patented?

After investors have been sold on the idea and the ability of the person or team, they will want to look into the history of the startup or idea. Essentially, investors want to see what kind of personal investment the team has contributed to their software startup before pitching their idea. Investors don’t want someone who has a high-paying job and is only working on the startup idea part-time; investors want individuals who have devoted their heart and soul to the cause. To ensure they are getting the right people and not only impressive looking credentials, investors usually ask these questions of the team:

• Has the software startup idea been boot strapped by the founder(s) through money, sweat, and risk?
• What other stakeholders have been established?
• How involved are these stakeholders?
• How much leverage do these stakeholders have?

And finally, after the founder(s) have provided their pitch, established their credentials, and demonstrated determination through providing a history of their startup there is one question left that investors will ask themselves. Will the software startup contribute marketing, revenue, customers, or service to my other holdings? Is it synergistic?

If you are a person who has an idea for a software product but lack the funding, we hope the potential resources in this article gave you some ideas to help you get your startup off the ground. If you plan on pitching your software startup to investors, take these tips to heart:

Focus on your strengths and smooth-out your weaknesses. If you’re not the best communicator, then get to practicing. If you’re not well-versed in the startup’s field, pick up a book and start learning. Essentially, have the drive to become an expert about everything surrounding your idea – if you don’t take advantage of your opportunity, someone else is sure to do it for you.

What are the essential steps for protecting your software idea?

Securing funding is important, but it’s equally crucial to protect your intellectual property. Safeguarding your software idea from unauthorized use or replication ensures that your hard work and innovation remain your own. Here’s how you can protect your software idea:

• Apply for Copyright Protection: Software code can be protected under copyright law. Registering your code provides a legal basis to defend against unauthorized copying.
• Consider Patent Protection: If your software involves a unique, non-obvious process or technology, you may be able to patent it. Patents are valuable in the tech industry as they prevent competitors from using your innovation without permission.
• Use Non-Disclosure Agreements (NDAs): When sharing your idea with potential investors, developers, or partners, always use NDAs to protect sensitive information. This agreement legally binds them to confidentiality, reducing the risk of idea theft.
• Implement Trade Secrets: For certain proprietary algorithms or processes, you may prefer to keep them as trade secrets rather than filing for a patent, as trade secrets have no expiration date.
• Trademark Key Branding Elements: If you have a unique product name, logo, or slogan, consider trademarking these elements to protect your brand identity as your business grows.
• Limit Access and Use: Keep access to your codebase limited to essential team members and implement tracking software to monitor any unusual activity.

Key Insights

• Diverse Funding Options: Aspiring software entrepreneurs have several avenues to secure funding, including bank loans, government grants, crowdfunding, and pitching to investors.
• Importance of Experience and Leadership: Investors prioritize the founder’s or leadership team’s professional experience and business acumen over the product idea itself.
• Product Innovation and Market Potential: Products that are innovative, patentable, and in a growing market space attract more investor interest.
• Personal Investment and Commitment: Investors look for founders who have personally invested time, money, and effort into their startup, showing their commitment and dedication.
• Strategic Fit with Investor Holdings: Potential for the startup to provide synergistic benefits to the investor’s other holdings is a key consideration.

FAQ

1. What are the main funding options available for software startups?

Software startups can secure funding through bank loans, government grants, crowdfunding campaigns, and pitching to investors. Each option has its own requirements and suitability depending on the startup’s stage and resources.

2. How important is the founder’s experience in securing investment?

The founder’s experience is crucial. Investors often prioritize the leadership team’s professional background, business management skills, and expertise in the industry over the product idea itself. A founder with relevant experience is seen as more capable of navigating the challenges of a startup.

3. What do investors look for in a software product idea?

Investors look for product ideas that are in a growing market space, innovative, inventive, and potentially patentable. They assess whether the product can meet a real market need and if it has a competitive edge.

4. How can a software startup demonstrate commitment to potential investors?

Commitment can be demonstrated through personal investment in the startup, whether through money, time, or effort. Investors prefer founders who have made significant sacrifices and have a vested interest in the success of the business.

5. What role does synergy play in an investor’s decision-making process?

Investors consider whether the startup can provide marketing, revenue, customers, or services that complement their other holdings. A startup that can create synergistic benefits for an investor’s portfolio is more likely to secure funding.

6. What are some key attributes investors look for in the startup team?

Investors look for a team with strong business management experience, effective communication skills, leadership qualities, and a deep understanding of the industry. The team’s ability to sell their idea and demonstrate their expertise is also critical.

7. How can a founder improve their chances of securing investment?

Founders can improve their chances by focusing on their strengths, addressing their weaknesses, gaining expertise in their field, and demonstrating their commitment to the startup. Practicing communication skills and building a strong, experienced team can also make a significant difference.

8. What are some effective ways to pitch a software startup to investors?

Effective pitching involves clearly presenting the product idea, highlighting its innovation and market potential, showcasing the founder’s and team’s experience, and demonstrating personal investment and commitment. It is also important to address how the startup can provide synergistic benefits to the investor’s portfolio.

By Astrid Eira

Astrid Eira is a resident B2B expert of FinancesOnline, focusing on the SaaS niche. She specializes in accounting and human resource management software, writing honest and straightforward reviews of some of the most popular systems around. Being a small business owner herself, Astrid uses her expertise to help educate business owners and entrepreneurs on how new technology can help them run their operations. She's an avid fan of the outdoors, where you'll find her when she's not crunching numbers or testing out new software.