Venture Capitalists Not So Convinced $100 Million Mobile App Companies Exist

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Venture Capitalists Not So Convinced $100 Million Mobile App Companies Exist

We’ve all read the stories: a small developer hits it big with an iPhone app, raking in as much as $800,000 in five months as iShoot’s creator Ethan Nicholas did. These anecdotes don’t seem to be going away, the latest to crop up is the news that the small Australian developer Firemint sold over 700,000 copies of its $0.99 iPhone app “Flight Control” since its March debut, netting the company some $485,000. But what VC’s want to know is if there is a $100 million mobile application company out there, or just lots of “hobbyists”, as the nytimes.com asks.

VCs acknowledge that the mobile and wireless world “is exploding” and that mobile apps can generate revenue. But whether one company can develop the number of hit apps needed to create a $100 million app business—and to keep the hits coming—is a completely different question, that VC’s don’t seem entirely convinced of. Android co-creator Rich Miner, now one of Google (NSDQ: GOOG) Ventures MD’s said the issue was still “a murky one.” VCs, he said, want to be able to sell the company to another company or exit through an IPO to get a return on their investment. “I’m not sure those venture style exits exist,” he said.

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Dianne See Morrison May 1, 2009 6:59 AM ET

Posted In: Entertainment, Gaming, Music, Money, M&A & Venture Capital, Venture Capital, Social Media, Video, Companies, Apple

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Dope

Its funny, how this entire conversation is revolving around the US market. There is life and mobile outside of the US, and by coincidence its a BIGGER one.

So all of you people think for a change outside of the US also which would mean thinking about non BREW phones such as Symbian, J2ME (S40) platform or MSFT phones.

Btw, the single biggest money spinner was Jamster out of Berlin till a smart non-American named Rupert Murdoch bought it.

Roger Nolan

Strange words coming from Rich Miner… is Android really just a way of getting more search hits with a handy developer API for hobbyists?
I I agree that the answer to the question "Is there a Microsoft word for mobile" is no but I think the answer to the question "is there a potential to build something on mobile that is as big as one of Facebook, Twitter, Second Life, Adwords etc." is yes.

Dianne

Thanks for the catch Steve. I've corrected it. D

John

100mil USD company? Gameloft and EA mobile are out doing that figures. Not only with iphone. If someone from VC-sector really wants to invest. They have to invest in companies doing iphone AND the current platforms like J2ME and or BREW. Doing iphone games isnt a big hit and selling an iphone game isnt a big deal thanks to Apple. Doing J2ME and or Brew and selling them is the big issue. You need to find companies doing all and invest in those than you will find your 100mil USD companies.

But most of those companies dont require VC money and thats the problem.

Steve

Apple keeps 70%

.99 x 700,000 = 693,000

693,000 x .7 = 485,000

:-)

FlightControl is a fun game, but it's shelf life is limited without any nurturing. This is true for all games/apps.

Jason O'Keefe

Miner is right, the current VC model may not work. Though developers will likely unify under current native languages HTML5/CSS3/Javascript to write applications for the millions of smartphones built on Webkit technology. To this end Genuitec is releasing a platform called MobiOne in June that will unify this market. Full disclosure, I work for Genuitec. Cheers!

Desmond Pieri

Miner is right. Under the current framework, it's tough for a Mobile App Developer to be large enough, due to platform fragmentation. A solution is to develop apps that run on the BILLIONS of JavaME phones that are out there Can be done with Nemo.