LIVE FROM APPS WORLD: Advice was provided for developers looking to secure venture capital funding at Apps World today, with a trio of participants from this sector detailing what they are looking for in their engagements with the developer community. Some pitfalls which need to be avoided were also highlighted.
According to Randeep Wilkhu, senior investment manager for T-Venture Holding: “What is really important is your business model. We like to see a clear strategy of where you want to take your idea or product, to turn it into a business that generates a return for all of us.” He continued: “Apps today don’t follow straightforward business models, they try to drive revenue from advertising and freemium models, and there are only a handful of them that have been really successful.”
Joe Neale, principal with m8 Capital, advised that honesty is usually the best policy: “If someone is going to invest in your company, they are going to do serious due diligence on your business. There is no point in coming in and saying things that are not true. It’s best to be honest upfront, and if you know your limitations, to propose solutions for these.” This sentiment was echoed by Wilkhu, who noted: “You really need to be really transparent with us, to tell is if there are gaps in there. It’s better for us to know, as those are the gaps we can help fill.”
Charles Pangrazi, a partner with Equity Plus Partners, argued that generating some early momentum in the app market is a vital tool to spark interest from potential investors. “It’s almost a catch 22: if you are making money before you go out and see someone about getting more money and raising investments, it’s great. The revenue model is proven, you’re on the way. But failing that, go and sign-up a big deal, or go and cosy up with Intel or Ericsson or Nokia, so they are putting it on their portal, because that says that you’ve sold this idea, you’ve proved this idea, and someone else likes it that matters.”
Pangrazi also noted that due to the fickle nature of the consumer app market, potential partners are now looking for something more solid to underpin their investments (echoing the earlier sentiment of BlackBerry Partners Fund, here). “It’s really, really hard to predict what is going to be the next killer consumer application. We’re looking for some enabling infrastructure, and we’re also looking at B2B and B2SME investments… We always look for ways to scale a business. If you are going to follow investment money, then more people are going to have to fit into that business, you are going to have to share the pie. So the business has to scale.”
The shift in focus toward apps other than pure-play consumer propositions was also highlighted by T-Ventures’ Wilkhu, who said that his company’s focus is increasingly on products that fall into more easily monetisable categories, including enterprise products. Other areas of potential highlighted by the panel included high-value consumer applications such as m-health and m-learning applications for children, and opportunities presented by NFC contactless commerce technology. Tablet devices could also present a possible growth area, it was noted: “I haven’t seen a huge amount of really interesting things across Europe for the tablet formats. I don’t know if that’s because people are unsure that this is something they are ready to focus on, but it’s something that would really, really interest me,” said Neale.
Neale was also clear as to which area he believes developers should stay away from: “In my opinion, across all technologies, music is completely over-hyped, its overblown, it’s incredibly difficult. Look at the situation that Spotify is in. I think that Spotify is a fantastic solution, but it’s obviously not doing what they thought it would do. You see a lot of companies getting into the music space, it’s so crowded. There is so much legality, I have friends who are music lawyers who struggle to understand. If I was an entrepreneur, I’d stay away from that area,” he said.
Finally, the relationship between developers and potential investors was identified as a key focus, with Pangrazi noting: “We look at the person — how they present themselves beyond the idea is really important. We’re looking for integrity and passion, and we are looking to see that you are serious about the hard road to being an entrepreneur.” This was confirmed by Neale, who argued that: “You really have to be on your guard, about how you present yourself and how you are coming across, as the smallest indecent can put off the VCs.” But the same is also true in reverse: “You, the entrepreneur, are looking to choose the person you are going to work with, who you can’t get rid of. So you need to make sure that you like that person,” said Neale. Pangrazi agreed: “You are going to be together with whoever is funding this for a long time, so don’t treat this as a transaction. Treat this as a long-term relationship.”