Mobile Startup Where lies the opportunity? Date:   Wednesday , November 02, 2011 According to Gartner, a market research firm, this year alone, mobile users across the globe will pay more than $6.2 billion to buy ‘Mobile Applications’, such as games, social networking tools, productivity and entertainment-based mini programs for mobile phones. This is enough to claim that the mobile space holds a lot of scope in terms of growth and innovation for entrepreneurs. But at the same time, it holds different phenomenal importance in different countries, especially the western countries where the access to internet and its usage are par different from the Indian market. There are several areas in the mobile app segment that is still left unexplored leaving a vast scope for the entrepreneurs to grow. However, before deciding on to the app that it wants to develop, a startup should conduct a short research on the current utility and the future scope of the app. Startups need to find the source of discovery of the app, track its download and the repeat users for it. This will help them find a better opportunity to grab and start with. “In India, where the mobile phone is going to become the gateway to internet, mobile applications should be looked upon as a convergence of m-commerce and e-commerce. In the near future, it is going to be more important to look at your business in that context rather than just looking it as a pure mobile app because the economy are different and even the way people access to internet is very different from the western countries,” says Rajesh Rai, CEO, India Innovation Fund. VCs are also foreseeing a vast scope in this mobile related space, especially in terms of sales force that several companies are growing in order to grab the available opportunities in the market globally. Talking about their investment in Sourcebits, Ranjith Menon, VP, IDG Ventures India, says, “Sourcebits had gradually built a sales force of more than 250 people, representing the huge scope that the space into which they are holds. The key design team sits in the Eastern Europe and the U.S. and one reason to it is because the talent availability is much better in the Eastern Europe than any other place. But one of the other reason for it is that the apps developed there is basically served to consumers in those regions and ait is quite difficult for us to sit here and decide on to what will best suit the market there and its usage pattern.” Talking about the single app and multiple app business, he says “At the end of the day, it is consumers’ app and every business has to see how the consumer reacts to certain apps. So it impossible for one to build the app and be absolutely sure that it is going to succeed. You need to build a portfolio of products that are targeting consumers and it is possible to build a company like this. Most of the mobile applications companies are small, and not of the size of millions of dollars, and the challenge to these is scaling in the market.” Startups who can scale as large as $15-20 million dollar within three to four years have a large potential to grab the attraction of the angel investors and the large VC firms who are initially investing into such startups who has crossed this line. “The mobile startups can be divided into apps for fun and apps for lifestyle business. We invest in such companies who believe in themselves and can scale up to $10-15 million in the next three-four years for us to take them for larger investments and further for IPO,” says Shekhar Kirani, Partner, Accel Partners. Mobile startups based purely on VAS cannot survive in India. A mobile startup should focus on building such apps that can sway people to access internet more from mobile then other sources and scale the users of the apps to more than 50 million to survive the competition and gain spectrum. In the global market, more than 30 percent of the money in the mobile app sector is made through games and then comes the utility apps, but India is an entirely different market, where in people basically long for such apps which can address their pain points. Starting a company in India does not mean one must focus on the Indian market alone. With a great idea, one can focus their target globally rather than domestically. Instead of changing your idea, change the market and see if you can scale on it by figuring out from where the money can flow into your business and build on a business to earn $10-15 million in next few years. For going out to global market, your team needs to know the minute details about how it works. Look at large companies trying to build apps for global market. If the part of your team does not know how the global world operates, then it is already set back to produce a global high quality app. So, if you are going to produce an app, have a team or have some sort of Indianness that will be appreciated globally. There should be something in your app to edge, as you are sitting in India, because the app costs will be less when produced in large number, the produced app will not cost you much. So, it is not a cost advantage for sales in India, it has to be something beyond costs to produce the high quantity gain especially if you want to generate revenue and gain in terms of market. Therefore, to figure that part, you need to have right team and the right people to go after it. In India, until the huge companies such as Airtel and Vodafone reduce their share to some 30 percent it will be a cottage industry,” said Kirani. He further added, “Spending a lot of money just in advertising your app is not enough. It is important to select the right source for promotion. Suppose, you have developed a medical app, it would be wise enough to promote the app through a medical agent or a doctor where in you can reach your niche customer easily and the model selected for promoting your app is quite reliable. Talking about scalability of mobile app builders, Ganesh Ramakrishnan, Associate Vice President, Tata Capital Private Equity, said, “There are few entrepreneurs who have built interesting companies, and once these people scale up significantly in terms of team they have something to leverage for growing. Therefore, we are looking for the companies that have potential and are service provider for telecom companies. It could also be for recommendations agent, where recommendations agent means for those who is trying to increase their ringtone that could be for companies, but it could also be for the mobile companies who are trying to increase the accuracy of the teams. So, you have to find multiple ways to that. In India, even you have scale but you don’t have margin over the scale as the margin between the service provider and app builder is 70:30 as compared to 30:70 in the western countries, making the survival of the app developing companies more crucial. Then how to create a situation for yourself where you can easily scale or ability to control how you can scale over the margin? You need to think of yourself not only just as an enabler of mobile but also as an enabler for e-commerce, just by creating a mobile centric e-commerce services, where you are designing just for the e-commerce for mobile, and this is another way of looking into the business.” There are several other segments of the market looking towards the mobile apps to access them for increasing their productivity and communication, rather than apps just being consumer apps. Hence, we can find that the use of this industry is not only in the consumer side but also from the industrial sections. The app developers have a great potential to leverage these unexplored market for growth.