How MVP Development Helps Startups Secure Funding

Did you know that 90% of startups fail? The path to success is paved with challenges, and securing funding is often the biggest hurdle. But what if there was a way to de-risk your venture and attract investors early on?

That's where the Minimum Viable Product (MVP) comes in. An MVP is more than a sketch and less than a final product; an MVP is a functional prototype that addresses core user needs, demonstrates your product's potential, and proves its value to investors. By building an MVP, you can validate your idea, gather feedback, and refine your product before investing significant resources.

In this comprehensive guide, we'll break down how MVP development can help you secure funding. We'll explore what an MVP is and why investors love them and provide a step-by-step approach to building one that resonates with your target audience and drives investment.

What is MVP Funding?

MVP funding refers to the initial round of investment designated to support the development of a Minimum Viable Product. Unlike traditional fundraising rounds, which usually require a high-fidelity product and proof of market traction, MVP funding focuses on building a functional and user-centric “Version 1.” Seeking this type of investment is particularly valuable since it offers startups clarity, direction, and a chance to demonstrate potential without significant cost.

Unlike future investments, MVP funding centers around an early-stage concept. While business plans, an initial user base, and market acceptance might be needed to win future investment, the bar is lower for these early dollars. MVP investment allows startups to concentrate on building a prototype that lays the foundation for future growth and development.

MVP Development Explained

The process of developing an MVP is usually much shorter than building a fully-fledged app. MVP development focuses only on the most essential features. The goal is to launch quickly with a functional product, gather users’ feedback, and iterate based on real-world data. 

This approach gives startups the opportunity to test assumptions, understand customer needs, and refine their solutions without sinking too much money into the effort. In other words, building an MVP helps fledgling businesses focus on delivering value to their users while keeping development efforts lean and efficient. 

How MVP Development Facilitates Funding

One of the core aspects of an MVP is its emphasis on prioritizing key features. By focusing on the product’s most important components, a business can streamline development and ensure product-market fit. Let’s see why this approach is such a powerful tool for securing startup funding. 

1. Proving the Concept

An MVP takes an idea from “imagine this” to “see for yourself.” With a functional prototype, startups can validate a vision. An MVP allows the company to get a version of the product in front of real users. Positive reactions from testing and interest from beta users go a long way toward demonstrating potential to investors. Even a long waitlist for a yet-to-be-released product version can be a powerful tool to secure funding.

Learn more: Proof of Concept: 5 Steps for Successful Software Development

2. Attracting Early Investors

Early-stage investors aren’t looking for a polished final product. They do prefer, however, companies that have demonstrated initial traction and user engagement. An MVP allows startups to showcase real-world use cases and gather valuable feedback from early adopters. This feedback helps refine the product and builds investor confidence in the startup's ability to see its vision through to future iterations of the product. 

Learn more: 7-Step Checklist to Build a Successful MVP

3. Reducing Risk for Investors

There are always some risks in funding new products. Investors know this. Still, they look for opportunities that minimize risk and maximize their chances of success. MVP development focuses on delivering a functional product with core features only. This step reduces the uncertainty associated with building a full-scale product from the start. By starting with an MVP, startups gain clarity and precision which they can apply to future iterations. This transparent, incremental approach helps bolster investor confidence by increasing the chances the startup will build a product that’s well-received by its target market.

4. Efficient Use of Resources

MVP development encourages startups to optimize their budget and resources for essential features. By avoiding unnecessary expenditures or extra bells and whistles, startups can allocate funds more efficiently and use their resources as effectively as possible. This cost-effective approach not only makes the development process more feasible but also demonstrates to investors that the startup can manage its finances responsibly. 

Learn more: How Much Does it Cost to Make an App

5. Faster Time to Market

It might sound counterintuitive, but starting development with an interactive prototype instead of the final product actually saves time in the long run. Efficiency is critical for success when it comes to startups. Launching a product that’s aligned with user needs helps new companies capitalize on opportunities and pivot quickly when needed. Speed to market can be a competitive advantage for a startup aiming to establish a foothold in an industry. This ability to compete and refine based on real-world feedback is a valuable asset to investors. Agile, responsive ventures offer a promising return on investment for prospective funding sources. 

Learn More: How Long Does It Take to Get an App To Market?

6. Gathering Valuable Data

Running full steam ahead won’t get you very far if you don’t know where you’re going. Building an MVP allows you to gain both direction and confidence. An MVP offers an invaluable tool for collecting user feedback and market data, both of which are critical for improvements and planning. By giving you a tool to make data-driven decisions, MVP development promotes strategic feature prioritization and minimizes distractions. All of this, in turn, builds a stronger MVP investment case and demonstrates a startup’s commitment to a customer-centric solution.

Learn more: Most Important Mobile App KPIs to Track

7. Building a Stronger MVP Pitch

When you have an MVP, investors need less faith and optimism to get behind your idea. Showcasing a working product makes it easier to imagine your product’s long-term potential. A tangible MVP enhances the quality of presentations and makes your pitch come to life. A functioning prototype also offers opportunities to present case studies and real-world examples of an idea at work, all of which bolster a startup’s credibility and investor appeal.

Learn More: Win Investment and Buy-In: Pitch Your Idea with an Interactive Prototype

Why Investors Love MVPs

Investors aren't just looking for a brilliant idea; they want proof that your startup can execute and deliver results. An MVP serves as tangible evidence of your vision, showing that you can build a functional product that resonates with users. By focusing on core features and launching quickly, you demonstrate resourcefulness and a data-driven approach, all of which make you a more attractive investment opportunity. The ability to gather feedback, iterate, and pivot quickly are key traits investors seek in a startup. With an MVP, you're not just asking them to trust your idea – you're showing them the early steps to success.

MVP Success Stories

You don’t have to look far to find examples of companies that secured funding through MVP development and have since enjoyed notable success. Here are just a few inspiring stories from startups we’ve worked with that demonstrate the power of an MVP.

Icueity

From her work with leaders and CEOs, founder Rebecca discovered that most people have blind spots. There’s a gap between how leaders see themselves and how their teams perceive them. That’s what gave Rebecca the idea for Icueity, an app that supports ‘continuous 360 reviews.’ She took her vision through the Designli SolutionLab. The resulting fully navigable prototype gave investors the confidence they needed to fund the idea in a friends and family investment round. 

True Load Time

Kevin, a logistics entrepreneur, wanted to solve a vexing problem in the trucking industry: a need for more transparency around loading and unloading times. This leads to billions of dollars of revenue losses at shipping and receiving facilities due to lost productivity. Kevin had an intimate knowledge of the problem and an idea for a solution, but True Load Time took shape in the Designli SolutionLab. The process concluded with a prototype and MVP that helped Kevin secure funding and industry partners. 

Genchi

For Silicon Valley startup Genchi, using an MVP to secure funding was an obvious choice. As a leading tech executive, founder Rowland Savage brought his extensive project management technology expertise to a specific problem—project transparency. Genchi helps create a clearer understanding of project progress and hurdles, minimizing surprises. Through the Designli SolutionLab, the first iteration of Genchi came to be, and Rowland was able to use that prototype to raise funds from angel investors in his region.

Learn More: 4 Advantages of Angel Funding For Startups

Final Thoughts on How MVP Development Helps Secure Funding

Developing an MVP can be a great first step to securing the funding you need to bring your innovative idea to life. With an MVP, startups can validate their concepts, attract early investors, and reduce risks. Building an MVP can also demonstrate an efficient use of resources, speed to market, and willingness to learn and adjust from user feedback. All of these qualities contribute to a strong MVP pitch and make a startup an attractive investment. 

Work With Designli: MVP Development Experts

Designli offers consulting services for startups seeking expert support for building an MVP to secure funding. Our proprietary SolutionLab process results in a fully navigable prototype that showcases the core features of your product. With our expert guidance, you can make a compelling case to investors and increase your chances of winning the funding you need. Schedule a free consultation to learn how we can help you reach your goals. 

You Might Also Like: 

• Win Investment and Buy-In: Pitch Your Idea with an Interactive Prototype
• MVP Development: Formula to Learn What Features to Build into Your MVP
• 6 Strategies to Monetize Your App