Let me preface this post by saying I’m an unqualified investor, both according to the SEC and generally accepted indicators: I’ve never made a venture or angel investment in my life. However, in keeping with the spirit of the startup/VC community, I see no reason why this should preclude me from confidently opining on the topic. I’ve operated a mobile-first enterprise company for ~3 years, and I so have a pretty good idea what the roadblocks to growth are. There are a unique set of business challenges that come with building a business on this emerging platform. More than this, though, is a highly dynamic landscape of devices, distribution channels, operating systems, and security standards. Welcome to the Wild West!
I see tons of opportunities for software companies looking to deliver mobile-first solutions to enterprise. For my investor friends looking to back companies in the space, these are some of the questions I’d be asking:
1) Has the company found a way to acquire customers from within the app store(s)?
Like it or not, app stores are most mobile customers’ (enterprise included) first stop in sourcing mobile software. Optimizing for this is critical to finding prospects who both have the device and are in market for a solution. App Store Optimization can help you get found, sort of, but people need to be looking first. If the customer finds the app, he/she needs a way to try it out easily and cheaply. In-app onboarding is therefore essential to acquiring customers. If a company can’t onboard customers through the app, acquiring customers at scale will be exceedingly difficult.
2) Can the company acquire and retain customers outside of the app store?
Mastery of traditional marketing methods is critical to driving awareness amongst current and future device owners. Remember, there are still plenty of companies who have not deployed smart phones or tablets to their employees – much less apps. Has the company found a way to reach them at the top of the funnel? And as important, has the company found a way to do it affordably? And after the company has acquired the customers, can it market across channels to drive engagement and ensure retention? Absent these competencies, mobile-first companies will find it hard to reach the addressable market and hold on to the customers it already has.
3) Is the app easy to deploy, but hard to quit?
Easier said than done. Good mobile-first apps can get the user from zero to hero quickly. Great ones do this, but find some way to deeply integrate the product (technically or behaviorally) with important business functions, making them harder to quit. Look for creative lock-in, network effects, or technical integration. Without something else to keep users coming back, apps risk falling by the wayside.
4) Does the company have a relationship with its customers outside of the device and/or the Apple paywall?
This is a biggie. I’m seeing a number of “successful” iOS apps with big install bases and solid revenue. But they have no idea who their customers are because 1) there is no registration process and 2) they have no visibility into the e-commerce transaction. Having a hand in at least one of these workflows is necessary if you want to build an enduring relationship with the customer over time and through device replacement cycles. Failing this, the company will struggle with retention and have no real chance to upsell or broaden the product footprint over time.
5) Does the company have a vision and product framework to support additional features and functionality – and therefore revenue – over time?
This is where the road of bones will be for many mobile first enterprise companies. Put simply, the LTV will be less than the CAC. Viewed from the standpoint of revenue, to generate $100,000,000 in annual recurring revenue the startup needs to have 10,000 customers paying $10,000/year. Or 6600 customers paying $15,000/year. Or 5000 customers paying $20,000/year. These are hard numbers to hit if your app solves a narrow problem retails for $9.95. But these numbers can absolutely be hit if your app solves a narrow problem but is well suited to expand its offering, therefore its revenue, over time. So look for a big vision, but also look for a level of extensibility in the product that already has traction. This can be tricky, given that mobile products tend to have narrow footprints. Product suites on mobile will be trickier than the desktop given the siloed nature of apps.
What have I missed? Feedback is most welcome.