Hello, I am developing an app for which I need a more experienced developer to test my code, and also for UI & design work. I personally would hope, doing it all by myself, over the course of the next 3 months, to ultimately make about $50K a year for myself, granted that I can do all the testing and UI work for myself, which I cannot.
Is there a good way to search for investors that would prefer small amounts, say, $25,000? Local newspaper ads calling for investors? An agent?
I think you will have a tough time finding an investor willing to invest in a sole proprietorship. For example, Y-Combinator states in their FAQ, single-person companies are unlikely to be accepted.
A $50K net income would require quite a long time to pay off a $25K investment. I agree with onebyone's comment- find a developer willing to invest sweat equity.
Or you might see if you can get a grant for a business start up. Not sure what it is like in the States, but here in Ireland the government are quite keen on this sort of thing. To achieve this, you would need a solid business plan at the very least.
Out of interest: For such a relatively small amount - doesn't your local bank offer something like a $25k loan? Of course, that is a lot more risky since you have to pay it back, but it also means that if you succeed, you keep all the earnings, and you don't have someone trying to dictate what to do. (On the other hand, VC's often have some really good ideas and/or connections that help turning a good product into a product that actually generates money).
Finding a private investor (not a fund) can be difficult without good connections. Finding a private investor who has experience in software investments can be even harder - try to avoid just anyone who has money, you need to find someone who can understand what he is up against and won't pull away once things get rough.
If you have the option and even if it is difficult, I would strongly advise that you try to continue self-funded and bootstrap your business into a positive cash flow. Check out those links for some good advice from experienced entreprenuers - Guy Kawasaki, entrepreneur.com and Jason Calacanis.
If you are serious about getting funding, you need to start networking. Create some buzz and spread the word that you are looking for funding in all the relevant places - technical blogs, entrepreneur gatherings and conventions, and by doing cold calling to known figures in the business in order to set up meetings.
If you do cold call to known figures in the business, be careful. Some will talk to you and think - hey, that's a great idea and code it themselves or have it written for themselves. Not everyone will do this but it never hurts to be a little cautious.
G-Man
It doesn't look to me like venture capital is the right way to go for you because it doesn't look like your company is the style that they typically invest in. VCs generally look for opportunities where they can deploy a large amount of capital and have a reasonable chance of earning massive returns within 5 years.
They look for companies that, after getting the money, will about about a 1/3 chance of failing, 1/3 chance of building a solid business, and a 1/3 chance of being a real success. A real success is one that returns 10x to 100x the original investment to the VC. They are not interested in a cashflow-type payout. Assuming a solid-business or successful company is produced, they need a "liquidity event" so they can give the returns back to their investors after a few years. A liquidity event is generally an IPO or a merger that lets them cash out.
With some notable exceptions like the aforementioned Y-Combinator, they tend to like companies that need a ton of cash now to leap to a new level. They have gone out and raised billions and need to quickly deploy the capital with limited staff. They need to deploy it quickly because they only tie up investor capital for 10 years. Money that isn't deployed isn't earning returns. A good VC will offer far more than money. They help with sales, with management, with marketing, and anything else that isn't in the core competency area of the funded company. A good VC firm more than earns the 30-60% stake of a company that they take. Deploying only a small amount of capital like $25k is tough for them because it's about the same amount of work as deploying $1-10m, but they have a much smaller potential upside.
On GeoffreyF67's point, a VC is looking to create a company with the best possible team they can. If you have a great idea but they know a much better team to do it, then your idea might get stolen. More likely, they will fail to see your brilliance and they won't bother. Either way, if you're not the best person to do it, you'll end up creating a competitor soon when that person sees your product and decides to take your market. Some care is needed to avoid having ideas stolen, but a proven one with a working implementation generally has a low chance of really being stolen.
I'm assuming that you're out of work and the $25k is for personal living expenses. Alternatively, you may want to quit your job so that you can just finish your product. Here are some suggestions (some from various other posts):
Note that the angel investor, government grant, and VC routes all take a considerable amount of time and effort. For angels and VCs, you really need to do a lot of research and networking to get the right one and to convince them that you're the right one for them. For the government grants, you'll need to find one, figure out how to apply, apply, and wait for a decision. Since you are a lone employee and you only have 3 months of work to have a salable product, these three options probably aren't worth the effort.
The amount you are looking for ($25,000) is a very small amount of money relative to any sort of formal money raise scenarios including even Angels really. Also, thanks to government regulations - so called Blue Sky Laws - there are also many legal considerations (aka barriers) to attempting to "offer" this investment to anybody in any sort of forum. You would be spending a large percentage of the money you are trying to raise just to put together any sort of Private Placement Memorandum (PPM) which is what you need to be able to go after a round of capital in this manner.
Anytime you are trying to raise something less than say $100,000, your best bets are one of the following or some combination based on your financial situation, contacts, and confidence/commitment to the idea/business:
It sounds like you need an angel investor who is most likely to be an affluent individual with business interests and may be able to help financially and with advice or contacts.
For such a small sum, the typical approach is to use savings & seek funds from friends and family.
It sounds to me, however, like you could make do with improving your own skills and doing it yourself, or perhaps asking for a bit of peer-review.
You might also consider open-sourcing your application, then asking people to help you improve it. If people help out, the application gets its developers, you get the credit, and you might still find a way to make it profitable via support or other services.
If you really can't supply a measly $25k yourself (can't you take a regular programming job for a year while living like a grad student?), the best investors will be people you already know.