How Do Revenue Models Affect My App's Fundability?

A property search app came across my desk a while back with all the right features—detailed listings, saved searches, virtual tours, the works. The team had put together a solid pitch deck, they'd built a working prototype, and they were confident about getting funding. But when they told me their revenue model was "advertising once we hit 100,000 users," I knew they'd struggle. And they did. Three investors turned them down before they came back asking what went wrong. The answer? Their revenue model told investors they didn't really understand how hard it is to build that kind of user base, or how little money display ads actually generate until you're at massive scale.

Your revenue model isn't just about how you'll make money—it's a signal to investors about how well you understand your market, your users, and the reality of building a sustainable business. I've seen brilliant apps with innovative features get passed over for funding because their monetisation strategy was an afterthought. And I've seen simpler apps with clear, proven revenue models secure investment rounds that let them dominate their space. The difference comes down to demonstrating that you've thought through not just what your app does, but why people will actually pay for it and how that scales over time.

Investors don't fund apps; they fund business models that happen to use apps as their delivery mechanism.

Over the years, I've worked with clients across healthcare, fintech, e-commerce, and more—each with different revenue considerations. A mental health app can't monetise the same way a gaming app does. A B2B logistics platform has completely different funding appeal than a consumer social app. Understanding how your chosen revenue model affects investor perception is just as important as building great features. Get this wrong and you'll burn through months of pitching before someone tells you the truth. Get it right and you'll find conversations about funding become much easier.

Why Investors Care About How Your App Makes Money

I've sat through more pitch meetings than I care to count, and here's what I can tell you about investors: they're not impressed by your user numbers alone. Sure, you might have 50,000 downloads and they'll nod politely, but the first real question they ask is always the same—how does this make money? And if you fumble that answer, you can watch their interest drain away right there in the room. It's a bit harsh really, but investors aren't charity workers; they need to see a clear path from users to revenue to profit.

The thing is, your revenue model tells investors way more than just how money flows into your business. It shows them you understand your market, that you've thought about user behaviour, and most importantly that you've got a realistic plan for growth. I worked on a healthcare app once where the founder wanted to charge £9.99 upfront for a symptom checker—seems reasonable right? But when we looked at the data, apps in that space with upfront costs had conversion rates under 2%. Investors knew this too. We switched to a freemium model with premium features at £4.99 monthly and suddenly the whole pitch changed; we could show them a funnel, demonstrate lifetime value calculations, and prove we understood how to acquire users without burning cash.

Here's the reality: investors are looking at dozens of apps every month and they've seen what works and what doesn't. They know that subscription models typically have better retention metrics than one-time purchases. They understand that ad-supported apps need massive scale to be profitable. When you walk in with a well-thought-out revenue model that matches your target audience and market position, you're showing them you've done your homework—and that makes all the difference to whether they write a cheque or not. Having a comprehensive app pitch deck that clearly outlines your monetisation strategy is crucial for these conversations.

Free vs Paid: What Works in Today's Market

I still remember when paid apps were the norm—you'd charge £2.99 upfront and people would actually pay it. Those days are long gone, honestly. The data I've seen across dozens of projects tells a pretty clear story: paid apps now make up less than 5% of successful app downloads, and thats across both iOS and Android. When a fitness client of mine insisted on charging £4.99 upfront for their workout app, we saw conversion rates below 0.5% from the app store page. We switched to free with in-app purchases and conversion jumped to 18%. The difference was mad really.

But here's the thing—investors know this shift happened too. They want to see apps with low friction at the entry point because user acquisition costs are so high now (typically £3-8 per install in competitive categories). A free app lets you build an audience first, then monetise later through subscriptions or purchases. I've worked on healthcare apps where we offered basic symptom tracking for free but charged for premium features like doctor consultations; that model not only got users in the door but also gave us real usage data to show investors. The conversion rate from free to paid users was around 7%, which is pretty solid for healthcare. Understanding why free trials work better than feature comparisons can really help with this transition strategy.

Paid apps can still work in specific situations though. Professional tools, B2B applications, or apps targeting niche audiences who expect to pay for quality—these are the exceptions. I built a construction project management app that charged £12.99 upfront and it worked because contractors expected professional software to cost money. They actually trusted it more because of the price tag. But for consumer apps? Free is basically your only viable option if you want decent traction and investor interest.

If you're set on a paid model, make sure you can demonstrate why your target users will pay upfront. Investors will want to see proof that your audience behaves differently than the broader market—and you'll need data to back that up, not just assumptions.

Subscription Models and Their Appeal to Funders

Investors absolutely love subscription models, and I mean properly love them. In my years building apps across fintech and healthcare, I've seen how quickly a pitch meeting changes tone when you mention recurring revenue. Why? Because subscriptions give investors something they value more than almost anything else—predictability. When you can show that £10,000 in monthly recurring revenue (MRR) is coming in reliably, that's worth more in investor eyes than £50,000 in one-off purchases that might never repeat.

The maths behind this is actually quite simple; if you know your churn rate (the percentage of users who cancel each month) and your average customer lifetime, you can calculate customer lifetime value with reasonable accuracy. I worked on a meditation app where we had 3% monthly churn and charged £8.99 per month. That meant each subscriber was worth roughly £300 over their lifetime with us. When you've got those numbers solid, investors can model out your growth trajectory years into the future—and that's what gets them excited. Tracking the right metrics is essential for demonstrating this kind of predictable performance to investors.

But here's the thing—subscription models aren't easy to execute. You need to provide ongoing value that justifies the recurring charge. One fitness app we built initially struggled because users would subscribe, use it heavily for two weeks, then cancel. We had to completely rethink the content strategy to include weekly fresh workouts and monthly challenges. The churn dropped from 18% to 6% monthly, and suddenly the business model made sense.

What Makes Subscription Models Fundable

Investors look for specific metrics when evaluating subscription apps, and these numbers tell them everything they need to know about your business health:

• Monthly recurring revenue (MRR) showing consistent growth month-over-month
• Churn rate below 5% monthly for consumer apps (below 2% for B2B is ideal)
• Customer acquisition cost (CAC) that's recovered within 12 months through subscriptions
• Clear retention strategies like exclusive content, community features, or progressive functionality
• Multiple subscription tiers that let users self-select their commitment level

The healthcare app I mentioned earlier had three tiers—basic at £4.99, premium at £9.99, and family at £14.99 monthly. About 60% chose premium, which wasn't the cheapest option. That tier distribution told investors that users genuinely valued the product enough to pay more for additional features. Its not just about having subscriptions; its about showing that people willingly pay for ongoing access to what you've built.

In-App Purchases and Freemium Strategies

I'll be honest with you—freemium models are bloody difficult to get right, but when they work? They absolutely print money. I've built apps that have generated millions through in-app purchases, and I've also watched well-designed apps fail miserably because they got their freemium strategy wrong. The difference usually comes down to one thing: value perception.

The freemium approach basically means giving away your core functionality for free whilst charging for premium features, content or virtual goods. Investors love this model because it solves the biggest problem in mobile—getting users through the door. You see, when someone downloads a free app they're taking zero financial risk, which means your conversion rates on installs can be 10-20 times higher than paid apps. But here's where it gets tricky: you need to convert somewhere between 2-5% of those free users into paying customers to make the numbers work. Understanding what makes apps engaging is crucial for keeping users around long enough to convert.

We built a fitness app for a client where users could track workouts for free but paid £4.99 monthly to unlock personalised training plans and nutrition guides. Sounds simple? It took us three iterations to find the sweet spot. The first version locked too much behind the paywall; users felt cheated and churned within days. The second gave away too much for free and nobody bothered upgrading. Version three nailed it by making the free experience genuinely useful whilst creating a clear desire for the premium features.

The best freemium apps make users want to pay, not feel like they have to pay

For in-app purchases, there are two main types—consumables (think extra lives in games or credits in a dating app) and non-consumables (permanent upgrades like removing ads or unlocking pro features). Investors prefer non-consumables because they show you're solving real problems rather than creating artificial scarcity. That said, gaming apps with consumable purchases can generate insane revenue if the game mechanics are solid, though you'll need to consider proper gaming app permissions and compliance from the start.

What Makes Investors Take Notice

When you're pitching a freemium model, investors want to see specific metrics. Your conversion rate from free to paid matters more than total downloads. I've seen apps with 50,000 users and 5% conversion rates that investors loved, whilst apps with 500,000 users and 0.5% conversion got passed over. Average revenue per user (ARPU) tells the real story; anything above £2-3 per month per active user tends to get attention, especially if you can show its growing month over month.

Common Mistakes That Kill Freemium Apps

The biggest mistake? Making your free version so limited that users can't understand why your app is worth paying for. You've got maybe 3-5 minutes to demonstrate value before someone deletes your app forever. Another issue I see constantly is poorly timed purchase prompts—hitting users with upgrade offers before they've experienced any value is a conversion killer. We run A/B tests on every freemium app to find the optimal moment to present premium options, and its rarely where clients initially think it should be.

Apple and Google take a 30% cut of in-app purchases (15% if you're earning under $1 million annually), which you need to factor into your revenue projections. Some developers try to bypass this with external payment links, but honestly? It usually violates store policies and can get you booted. Better to build that commission into your pricing structure from day one. If you're handling payments directly, make sure you understand why apps need special permission to handle money.

Advertising Revenue: The Good and The Bad

I'll be honest with you—advertising revenue is a bit of a double-edged sword when it comes to investor conversations. I've built apps that made decent money from ads, and I've seen others completely tank because the ad experience was so intrusive that users just abandoned ship. The thing is, investors know this too, and they're going to ask some pretty tough questions about how you plan to balance user experience with ad revenue.

The good side? Ad revenue scales beautifully if you've got the user numbers to back it up. I worked on a news app that generated consistent monthly revenue through banner ads and native content—nothing flashy, but it worked because we had hundreds of thousands of daily active users. Investors liked it because the model was predictable; we could show them exact CPM rates (cost per thousand impressions) and demonstrate how revenue would grow as our user base expanded. When you can say "we're getting £3.50 CPM and we've got 200,000 daily users viewing an average of 12 pages each"—well, that's maths they can get behind.

But here's where it gets tricky. Ad-supported apps typically need massive user bases to generate meaningful revenue, and that means higher customer acquisition costs. If you're spending £5 to acquire a user who only generates £2 in annual ad revenue, you've got a problem. I've seen pitches fall apart when founders couldn't explain their path to profitability with realistic user growth projections. Its not enough to say "we'll get millions of users"—you need to show how you'll get there without burning through all your funding first.

The bad side is what ads do to your app experience. Every banner ad, every interstitial, every video ad—they all create friction. I built an education app where we tested different ad placements, and honestly? Even our "least intrusive" ad setup increased our uninstall rate by 23%. That's the reality investors worry about. They know that apps with poor user experiences struggle to retain users, and retention is everything when you're trying to build long-term value. Getting your app layouts right becomes even more critical when you're competing with ads for user attention.

There's also the dependency factor that makes investors nervous. You don't control ad rates—the market does. I've watched apps lose 40% of their ad revenue overnight when Facebook changed their algorithm or when Apple introduced privacy changes with their App Tracking Transparency framework. Suddenly the eCPMs (effective cost per thousand impressions) that were generating £8 dropped to £4, and the whole business model needed reworking. Investors see this volatility as risk, plain and simple.

If you're going to pitch an ad-supported model, you need to show you understand these trade-offs. What's your DAU (daily active users) target? What are your realistic CPM rates based on your industry and geography? How will you maintain user experience while showing enough ads to generate revenue? I always recommend having multiple ad partners lined up—Google AdMob, Facebook Audience Network, maybe some direct partnerships with brands in your space. That diversification shows you've thought about the risks and you're not putting all your eggs in one basket.

Mixing Revenue Streams for Better Results

Here's what I've learned after building apps with all kinds of revenue models—the ones that attract serious funding typically don't rely on just one way to make money. I mean, putting all your eggs in one basket works great until that basket breaks, right? I've seen this play out dozens of times with clients who initially insisted on a single revenue stream, only to pivot after their first funding round when investors pushed for diversification.

Take a fitness app I worked on a few years back. Started as pure subscription, £9.99 monthly. Decent conversion but nothing special. Then we added premium one-off purchases for specialised workout programmes, introduced a marketplace where trainers could sell their own content (taking 30% commission), and layered in partnerships with equipment brands for affiliate revenue. Revenue per user jumped by about 180% within six months. More importantly though, investors loved it because if one stream underperformed, three others could pick up the slack.

The trick isn't just throwing every monetisation method at the wall to see what sticks. Its about finding complementary streams that actually make sense for your users. A meditation app doing subscriptions plus corporate wellness packages? Perfect. That same app trying to sell physical products and run banner ads? Feels desperate and confusing. If you're building B2B solutions, understanding how to scale enterprise apps becomes crucial as your revenue grows.

Common Revenue Combinations That Work

• Freemium base + subscriptions + premium one-off content (education apps do this brilliantly)
• Free with ads + ad-free subscription option (gives users choice, investors love optionality)
• Core subscription + marketplace commission (SaaS apps with third-party integrations)
• Freemium + B2B enterprise licensing (same product, different price points for different markets)

What makes investors pay attention is when you can show how these streams support each other rather than compete. If your free users watching ads are converting to paid subscribers at a healthy rate, that's not cannibalization—thats a functioning acquisition funnel that happens to generate revenue at every stage.

Start with your primary revenue model and add secondary streams only after you've proven the first one works; investors would rather see one stream performing well than three streams all struggling because you've spread yourself too thin.

I've watched apps lose funding opportunities because they had too many revenue streams competing for attention in their pitch deck. Five different ways to make money sounds impressive until an investor asks which one actually drives your business and you cant give a clear answer. Keep it focused but diversified—usually a primary stream generating 60-70% of revenue with one or two secondary streams making up the rest.

Red Flags That Scare Investors Away

I've sat through more pitch meetings than I care to count, and I can tell you that investors have a sixth sense for dodgy revenue models. The fastest way to kill interest? Saying "we'll figure out monetisation later" or worse, "we'll just sell user data." That second one actually happened in a pitch I attended, and the room went cold in about three seconds flat.

The biggest red flag is having a revenue model that requires massive scale to work. I worked with a social app startup that planned to make money purely through advertising, but their projections only showed profitability after hitting 10 million active users. Investors know that's a lottery ticket, not a business plan. You need a model that generates revenue at smaller scales too—something that proves the concept works before you've got millions of users.

Another thing that makes investors nervous is ignoring your competitors pricing. If every fitness app in your category charges £4.99 monthly and you're planning to charge £19.99, you better have a bloody good explanation why. I've seen founders convince themselves their app is worth 4x more without any real differentiation, and it never ends well. Knowing how to explain why your app costs more than others is crucial if you're going premium.

Overly complicated revenue models are a problem too. One e-commerce client wanted to combine subscriptions, transaction fees, advertising, and affiliate commissions all at once. Too many moving parts means too many things that can go wrong, and investors know it makes the path to profitability murky at best.

The last big one? Not understanding your unit economics. If you're spending £15 to acquire a user who only generates £8 in lifetime value, thats not a scaling problem—its a fundamental business problem. Sort that out before you go looking for funding, because investors will spot it immediately.

Proving Your Model Works Before You Pitch

I've sat through more investor pitches than I care to count, and the ones that actually get funded? They don't just talk about their revenue model—they prove it works. The difference is massive. A healthcare app I worked on had a subscription model that looked perfect on paper, but the founders waited until they had 500 paying users and three months of retention data before approaching investors. They got funded in their first round. Another client with a similar idea but no proof of concept? Still looking for investment two years later.

You need what investors call "traction" but what I think of as evidence. Can you show that people will actually pay for your app the way you say they will? Even small numbers matter here—if you've got 100 users paying £5 monthly and 60% of them renew after the first month, thats a story worth telling. Its not about the absolute numbers; its about proving the model functions in the real world. I've seen fintech apps get serious attention with just 200 active users because their retention rate was sitting at 75% and their average revenue per user was climbing month over month. Before you get to this stage though, make sure your app team can actually build your idea.

The best proof isn't a spreadsheet of projected revenue—it's a graph showing actual money coming in from actual users who chose to pay.

Start with a beta launch or soft release in a limited market. Test your pricing, see if people convert, measure how long they stick around. If your numbers aren't looking good? You've just saved yourself an embarrassing pitch meeting and bought time to fix the model before you need funding. I always tell clients to aim for at least 8-12 weeks of real user data before they start pitching seriously—anything less and you're basically guessing, and investors can smell guesswork from miles away.

Conclusion

Look, I've sat through dozens of funding pitches over the years and here's what I know for certain—your revenue model isn't just a box to tick on a pitch deck. Its the foundation that determines whether investors see your app as a business or just another nice idea that'll burn through cash. The apps I've built that secured funding weren't necessarily the ones with the flashiest features; they were the ones where we could clearly show how users would pay and why they'd keep paying.

The healthcare app we built that mixed subscriptions with one-off consultations? Funded. The fintech tool that tried to rely purely on eventual advertising revenue with no clear path to profitability? Struggled for months before pivoting. You see, investors have seen thousands of apps come and go, they know which models have staying power and which ones are basically hoping for a miracle exit before the money runs out.

Here's the thing—there's no single perfect revenue model that works for every app. What matters is that your model fits your users, solves a real problem they're willing to pay for, and shows a clear route to sustainability. I mean, you could have the most elegant subscription structure in the world but if your users don't see enough value to justify recurring payments, you're going to struggle regardless of how well you pitch it.

Before you approach investors, make sure you can answer these questions without hesitation: How much does it cost to acquire each user? How long before they pay back that cost? What's their lifetime value? If you're fumbling with these basics, take a step back and validate your model properly. The best funding conversations I've had started with solid unit economics, not hopeful projections... and honestly, that's what separates apps that get built from apps that get funded and scaled.