How to Fund an App Startup: Options and Investor Prep

Key takeaways

Y Combinator's standard deal is $500,000: $125,000 for 7% plus $375,000 on an uncapped MFN SAFE (Y Combinator's standard deal page).
Techstars invests $220,000: $20,000 for 5% plus $200,000 on an uncapped MFN SAFE, for programs under its April 2025 terms (Techstars' investment terms page).
The SBA does not lend directly. It guarantees loans made by participating lenders, up to $5 million on the 7(a) program (SBA's 7(a) loan page).
A company can raise up to $5 million in 12 months through Regulation Crowdfunding, only through an SEC-registered intermediary (SEC's Regulation Crowdfunding page).
Federal SBIR/STTR awards are equity free. Agencies can issue Phase I awards up to $335,937 without a waiver, as of October 16, 2026 (SBIR.gov).
Investors look for traction. For new subscription apps, median monthly revenue a year after launch is about $72 (RevenueCat's State of Subscription Apps 2026), so most apps need a plan before they need a round.

What the video covers

0:00 Why outside funding is expensive money. Investors take equity for the risk of an unproven idea.
2:13 Four ways to fund an app without selling equity. Bootstrapping, grants, loans and crowdfunding.
5:15 What investors look at. Team, market size, technology and traction.
8:31 What to prepare before you pitch. Business plan, pitch deck, financial projections and valuation.
11:27 Nine places to find investors. Online platforms, accelerators, angel groups, events, competitions, equity crowdfunding, VCs and LinkedIn.

How can you fund an app startup without giving up equity?

You have four main routes that leave your ownership intact: your own money, grants, loans and reward-based crowdfunding. Savings and income from client work are the simplest, and they keep every decision with you. Grants are real but narrow. In the US, SBIR and STTR awards are equity free federal funding for small technology businesses, and Phase I awards can run to about $336,000 without a waiver. Loans work if you can repay them. The SBA guarantees loans of up to $5 million, but a participating lender makes the loan and decides who gets it. Crowdfunding on a rewards platform can fund a product and prove demand at once, as one famous hardware campaign showed. Each route costs something other than equity: your time, your personal risk, a strict application or a public promise to deliver. Pick the one whose cost you can carry.

Route	What you give up	Limit or catch	Source
Savings and bootstrapping	Personal cash and time	Slow if the build is large	None
Federal SBIR/STTR award	Nothing in equity	US small businesses only, competitive. Phase I up to $335,937 without a waiver.	SBIR.gov
SBA 7(a) loan	Repayment with interest	Up to $5 million. A participating lender decides.	SBA's 7(a) loan page
Reward crowdfunding	A promise to deliver	Works best for something people can pre-buy	TechSpot

Grants and loans fit apps with a clear technical or business case. A consumer app with no revenue yet will find loans hard to get, and a research grant is a poor match for a simple utility. Be realistic about which doors are open before you spend weeks on forms. A useful test: can you describe, in one paragraph, what the money buys and how you would repay or justify it? If not, wait.

The reward-crowdfunding example is Oculus. TechSpot reports its 2012 Kickstarter campaign raised nearly $2.5 million, and Facebook agreed to buy the company in March 2014 for $2 billion. It was a hardware product with a physical reward, which is why crowdfunding suited it. A free app has nothing to pre-sell, so pre-sell a service, a lifetime plan or early access. Keep the promise small enough to deliver on time, because a late reward campaign damages trust with the first people who backed you.

How much money does an app startup actually need?

Less than most founders think for store fees, and more than they plan for the build and the launch. Joining the Apple Developer Program costs $99 a year, and Google Play charges a one-time $25 registration fee. Apple takes a 30% commission on digital goods and services, which drops to 15% for qualifying programs such as the App Store Small Business Program. The real costs are the product build and the launch budget, which most plans leave out. A raise should fund a milestone, not a vague runway: a working first version, the first thousand real users, or the first paying customers. Size the round to reach that milestone plus a buffer. The market is unforgiving about what comes after the build. For new subscription apps, median monthly revenue a year after launch is about $72, and only 17.3% reach $1K a month within two years.

The figures come from the Apple Developer Program page, Google Play Console Help and RevenueCat's State of Subscription Apps 2026. Our own guide to how much it costs to build an app goes through build costs, and our marketing budget guide covers the launch side.

One rule helps: ask for the amount that gets you to your next proof point, not the largest amount an investor will wire. A smaller round at a clear milestone usually costs less ownership than a large one with no plan behind it. It also gives you a reason to come back for more once you hit the target.

What do investors look for in an app startup?

Investors look at four things: the team, the size of the market, the technology and the traction. Team means a group that can build and sell this product, with relevant experience and the ability to adapt. Market means a space big enough to build a large company, and a founder who understands its customers better than an outsider. Technology means a real reason this app is different, not a feature a larger company copies in a quarter. Traction means evidence that people want it: users, revenue, waitlists, letters of intent, pilots or retention data. At the idea stage you will not have traction, so you show the next best thing, such as research, a prototype, customer interviews and early sign-ups. The weaker your traction, the more investors rely on the team, and the more equity they ask for to cover the risk. That is why early money is expensive.

This is our summary of the video's "four Ts", and the pattern holds in practice. A pitch with a strong team and no data gets questions about risk. A pitch with data and no team gets questions about who will do the work. Fix whichever side is thinner before you start meeting investors. If the gap is in the team, a technical co-founder, an advisor with relevant experience or a build partner with a track record narrows it. If the gap is in data, run a small test with real users before the first meeting.

In our experience retention is the traction number app investors ask about first, because an app that people use once is a poor business. Prepare your day-1, day-7 and day-30 retention before you walk in.

How much equity do accelerators take?

The two best-known accelerators publish their terms. Y Combinator invests $500,000 per company: $125,000 on a post-money SAFE for 7% of the company, plus $375,000 on an uncapped MFN SAFE that converts on the best terms given to other early investors. Techstars, under terms published in April 2025, invests $220,000: $20,000 for 5% in common stock plus $200,000 on an uncapped MFN SAFE, which Techstars' own example shows adding about 1% more at a $20 million pre-money round. In short, you give up about 5% to 7% up front, and the uncapped SAFE adds more when it converts. You get cash, mentors and a network of investors in return. Whether that trade is worth it depends on how much you value the introductions and the signal.

Program	Cash	Equity terms	Source
Y Combinator (standard deal)	$500,000	7% for $125,000 (post-money SAFE) plus $375,000 uncapped MFN SAFE	Y Combinator's standard deal page
Techstars (April 2025 terms)	$220,000	5% for $20,000 (common stock) plus $200,000 uncapped MFN SAFE	Techstars' investment terms page

Techstars lists Asia-Pacific programs at a different amount: $100,000 on an uncapped MFN SAFE. Terms change, so read the current page before you apply. Both pages say how the SAFE converts at your next priced round, and the way it converts matters as much as the headline percentage.

What do you need to prepare before you pitch investors?

Prepare four documents before the first meeting: a business plan, a pitch deck, financial projections and a valuation rationale. The plan covers your model, target market, competition, revenue assumptions, marketing and team. The deck is the short version, usually 10 to 15 slides, that tells one story: the problem, your solution, the market and your path to growth. The projections break revenue and costs into months, quarters and years and state the assumptions behind each line. The valuation rationale compares your company with similar companies by stage, industry and metrics, and explains the number you propose. Add a short data section: users, retention, cost to acquire a user and the milestone the round will fund. Investors read many decks, so clarity wins. If you cannot explain in two sentences what the money will change, the round is not ready yet, and meetings will go badly.

We would add two items the video does not stress. First, a one-page summary with your best three numbers, because many investors decide from that page. Second, a list of your own questions for the investor. How they have helped founders at your stage matters more than the cheque size.

Do not invent projections. Every number should trace to something you did or measured, with the assumptions listed. An investor who finds one unsupported number will doubt the rest.

Where can you find investors for an app?

Look first where investors already publish how to reach them. Accelerators such as Y Combinator and Techstars accept applications and publish their terms. Angel groups are listed by region and sector, and many hold regular pitch days. Pitch competitions and business plan competitions give you a panel in a room, and some include prize money. Equity crowdfunding lets a broader pool invest: under Regulation Crowdfunding a company can raise up to $5 million in 12 months, and the offering must run through an SEC-registered broker-dealer or funding portal. Venture firms publish their focus areas, so read their sites and approach those that back your category. LinkedIn works for warm introductions and for reading what investors post. Start with five targets that fit your stage and sector, not fifty names. Personalise every message, and ask for an introduction before you send a cold note.

The SEC rule is on SEC's Regulation Crowdfunding page. The video lists nine routes in total: online platforms, accelerators, angel groups, events, pitch competitions, business plan competitions, equity crowdfunding, venture capital firms and LinkedIn. Treat the list as a map, and track outreach in a simple sheet with the date, the stage and the next step. Expect most replies to be no, and expect the useful ones to arrive through introductions.

What we see across 300+ apps

We have shipped 300+ apps since 2015, with 52M+ installs across them. Funding is rarely the first problem. The common problem is that a founder plans to raise money to build a big product, when a smaller first version would get the proof that makes the round easier.

The founders who handle money best do three things. They build the narrowest version that tests the core promise. They budget for launch as a separate line, because a built app with no users does not impress an investor. And they set up measurement before launch, so that when they pitch, they can show retention and acquisition cost instead of hopes. Our MVP guide covers the first step, and our startup marketing guide covers the second.

If you do raise, tie each dollar to a milestone you can name. Founders who raise on a clear milestone tend to raise the next round on better terms, because the first one shows they spend the way they say they will.

One more habit helps: write the round as a plan for the next twelve months, month by month, and review it against actuals every quarter. It keeps spending honest, and it gives you a ready-made update for the people who backed you.

Frequently asked questions

What is the cheapest way to fund an app?

Bootstrapping is the cheapest in equity terms, because you keep all of it. Pay for a narrow first version from savings or client income, test the core promise with real users, and use that evidence for any later raise, grant application or loan.

Should I give equity to an investor before I have users?

Only if the investor adds something besides money, such as introductions or experience in your market. Without traction you are a higher risk, so investors ask for more equity. If you can reach early users first, you usually raise on better terms.

What is a SAFE?

A SAFE is a simple agreement for future equity. An investor pays now and receives shares later, when you close a priced round. Y Combinator and Techstars both use SAFEs. Read how each one converts, because the terms decide how much you give up, and ask a lawyer who works with startups before you sign.

Can I fund an app with a small business loan?

Sometimes. The SBA guarantees loans up to $5 million under 7(a), but participating lenders make the loan and decide on approval. A business with revenue or collateral is a better candidate than an app with neither. Check SBA's Lender Match tool, and keep your projections ready.

How long should a pitch deck be?

Aim for 10 to 15 slides, and make it tell one story: the problem, your solution, the market, traction and the plan for the money. Keep a longer appendix for questions, and a one-page summary for investors who want a quick read.

Is crowdfunding a good option for an app?

It works if you can pre-sell something: early access, a lifetime plan or a physical product. Reward campaigns fund and prove demand together. Equity crowdfunding is different. It sells shares, and in the US it runs through an SEC-registered intermediary.

Planning to build an app?

Tell us what you want to test and how much runway you have. We will scope the narrowest build that gets you proof.

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Sources

The Y Combinator Deal, Y Combinator, 2026. https://www.ycombinator.com/deal
Techstars investment terms update, Techstars, April 2025. https://www.techstars.com/equity-back-guarantee-the-details
7(a) loans, U.S. Small Business Administration, 2026. https://www.sba.gov/funding-programs/loans/7a-loans
Regulation Crowdfunding, U.S. Securities and Exchange Commission, 2026. https://www.sec.gov/resources-small-businesses/exempt-offerings/regulation-crowdfunding
About SBIR/STTR, SBIR.gov, U.S. Small Business Administration, 2026. https://www.sbir.gov/about
Facebook announces $2 billion acquisition of Oculus VR, TechSpot, 2014. https://www.techspot.com/news/56133-facebook-announces-2-billion-acquisition-of-virtual-reality-headset-maker-oculus-vr.html
What's included in the Apple Developer Program, Apple, 2026. https://developer.apple.com/programs/whats-included/
Register for a Google Play Console developer account, Play Console Help, Google, 2026. https://support.google.com/googleplay/android-developer/answer/6112435
State of Subscription Apps 2026, RevenueCat, 2026. https://www.revenuecat.com/state-of-subscription-apps

How to Fund an App Startup: Funding Options Explained