How Do You Actually Boost Your Chance At Funding?

Ben Lee

Ben Lee

CEO and Co-founder of Neon Roots

Ben Lee is the co-founder and CEO of Neon Roots, a digital development agency with a mission to destroy the development model and rebuild it from the ground up. After a brief correspondence with Fidel Castro at age nine, Ben decided to start doing things his own way, going from busboy to club manager at a world-class nightclub before he turned 18. Since then, Ben has founded or taken a leading role in 5 businesses in everything from software development to food and entertainment.

At Neon Roots, we’ve done a lot of work as digital consultants under the traditional mobile app development model. We’ve built products for companies like Spotify, Epson, and Concord Music Group – and we’re hugely proud of those projects. But nothing compares to Rootstrap.

Why? Rootstrap is a fundamentally different model. Traditionally, startups and entrepreneurs who want to create a mobile app – or any digital property, for that matter – are faced with a serious challenge. They need to hire a development shop to build out the app, something that can easily cost hundreds of thousands of dollars. To do that they have to take on investment, which means getting into bed with – and giving away a significant stake of company equity to – a partner they’ve never worked with before. Assuming that they even can secure funding, which is incredibly difficult, they put their app to market.

And what are their odds at market, after completing this expensive and time-consuming obstacle course?

1 in 10,000. That’s right – Gartner’s estimates that less than .01% of apps on the market will be considered a financial success by 2018. Hundreds of thousands of dollars, months and months in development and fundraising, and all of it for less than a tenth of a percent chance at long-term financial success.

We looked at this model and thought that there has got to be a better way. So we started Rootstrap.

A Different Way to Develop

The problem with the way things are done in the app industry is that it’s all guess and check: startups get funding, hire developers, and put their app to market. Only then can they know whether or not they’re in for wild success or if their app was a dud all along.

Rootstrap turns this model on its head. Instead of launching first and asking questions later, Rootstrap puts the focus on market research, customer development, and creating an MVP (minimum viable product) to find out if the idea is even a worthwhile concept in the first place. At the end of a Rootstrap session, the client walks away with detailed market research, a clickable prototype of the app along with an award-winning set of pitch deck materials, and a step-by-step development roadmap that can be developed internally or taken to any agile development house in the world.

Rootstrap doesn’t use the blind guess-and-check model of traditional development. Rootstrap does the legwork to make sure the product will succeed in the marketplace, then builds the full version.

By the Numbers

So here’s the real question: does it work?

Thankfully, the answer is easy: yes. It works beautifully.

Let’s look at some numbers.

Out of all the projects we’ve Rootstrapped, around 13% have gone on to secure at least $250,000 in funding from angel investors or venture capitalists.

funding

Of that 13% subset, about half – which is roughly 6.5% of our total number of projects – secure more than $1,000,000 in funding.

Let’s put this into perspective. The average startup has about a .05% chance of getting funded. That means about 1 in every 2,000 startups actually secure funding.

Rootstrap alumni have a 13% chance of getting at least $250,000 and a 6.5% chance of getting more than a million.

funding

This means that Rootstrap alumni are more than 2,600% more likely to secure funding than an average startup. We would make a graph for that, but it’s actually impossible to see the value for regular startups.

What About the 87%?

We know what you’re thinking. Yes, that’s a much better chance, but there are still the 87% of Rootstrap alumni – the overwhelming majority – who didn’t receive funding. What about them? Isn’t this still mostly creating losers?

Thankfully, we can again answer this question simply: no. Even the “losers” of Rootstrap ultimately come away much better off.

Let’s go back to the traditional model again. Under the traditional mobile development model, a startup has to raise hundreds of thousands of dollars in capital, spend it all with a development firm, then go to market to try to recoup their investment and eke out some profit. Unfortunately, as we’ve discussed, their chances of actually doing that are about twice as high as getting struck by lightning.

If, as is overwhelmingly likely, they don’t achieve sustainable probability, their business is beyond over: they’ve lost almost all their equity in a company that’s spent hundreds of thousands of dollars on a product that flopped. There’s no room for a pivot – the game is over.

Now let’s think about Rootstrap alumni who don’t achieve funding. At the end of a Rootstrap, the company will have everything they need to pursue funding, as well as our experienced (and well-researched) opinion on whether or not the venture is a good idea in the first place. Let’s assume that contrary to everyone’s hopes and expectations, this alum secures no funding and never makes another dollar.

Where do they stand? Altogether, the Rootstrap session cost them a fraction of what development would have and took about two weeks.

Instead of spending hundreds of thousands of dollars and months on end in development, they’ve found out that their product won’t work in less than a month and for a mere fraction of that cost. This means that the startup or entrepreneur is completely free to shut down the business, pivot the company, or come up with a new venture – and they have no investors to answer to whatsoever. They come away with an answer and with their entrepreneurial freedom intact. And who knows – their next Rootstrap might be right around the corner.

That’s a win in our book.

Photo Credit: https://www.flickr.com/photos/togawanderings/