What investors look for when funding mobile platforms

AppsFlyer MAMA London

Investment from big name venture capital (VC) companies and tech firms is what every startup in the industry is dreaming of. But, as a mobile-focused startup, do you truly know what investors are looking for when they decide to take a gamble on your firm becoming the next big thing?

I would hazard a guess and say that not many emerging startups, with dreams of becoming a ‘unicorn’, do.

“We look at the number of downloads, the return rate, the MAU,” said Nenad Marovac, founder and managing partner at DN Capital, which has invested in apps like Shazam and Happn, speaking at AppsFlyer’s Mobile Attribution & Marketing Analytics (MAMA) event in London. “It’s all about metrics.”

The importance of metrics was reiterated by Matthew Frenchman, managing director at PlayIgnite, a PlayStack company.

“User retention is what we measure,” he said. “Looking at day one, day seven, and day 30 [retention] stats are really important to measure longer term success of the business.”

Of course, these metrics are all well and good, but the way success is achieved is just as important to many VC investors.

“Quality businesses” tend to grow organically and have good traction, according to Candice Lo, partner at Blossom Capital. And this is a key thing that investors look out for.

“If you have users that are committed to your product and are advertising it for you, [this] is key to longer term success,” said Lo.

On top of metrics, the role of AI in a mobile platform has the potential to be something investors keep an eye out for. However, the role of this technology is more likely to be appreciated in the backend of a platform, rather than as something that alters the user experience.

For Accel Partners, AI-first is “almost becoming an expected part of a backend technology” but it’s not necessarily something it would look for in terms of how a product is delivered or consumed, according to Seth Pierrepont, investor at Accel Partners.

One area where AI could catch the eye of an investor for its capabilities in delivering an experience is in mobile gaming. And has become “very important” to that industry but still shouldn’t be the “be-all and end-all”, PlayIgnites Frenchman believes.

“If I meet a mobile games studio, and they’re thinking about free-to-play or a premium game, I think they’re fighting an uphill battle if they’re thinking about doing a premium game,” said Frenchman.

“The consumer expects free-to-play now and that’s their go-to area to look for. They’ve got it in their psyche now that they don’t need to pay for something unless it’s extraordinary,” he continued. “And, if AI is the thing that makes your premium game extraordinary or your app extraordinary, then that can work.

“It’s one thing to build a great AI game, or great next game, or great app, but actually structuring it and it making happen and putting it to practice is a whole other thing. And that’s something, when we’re looking to invest, that we spend a lot of time focusing on.”

The final element that investors are definitely looking out for and, for some, the most important factor beyond the metrics is the team behind a mobile platform.

With Brexit uncertainty still swirling, the strength of teams across the tech industry is in doubt, but businesses are still seeking top talent from the UK and Europe.

“Metrics will start to adjust at different stages of the business but, through all the ups and downs, your team is going to be incredibly important,” said Blossom’s Lo. “Even the US companies are coming to Europe to look for mobile talent, they’re building massive offices here. That’s a really great signalling sign that we have talent here.

DN Capital’s Marovac echoed those statements, calling the team “the number one point of decision-making in our firm”. However, he pointed out that the UK is facing an engineering crisis with the best engineers choosing locations outside of the nation amid the uncertainty surrounding Brexit.

“Talent is going to be one of the big issues that Brexit will affect,” said Marovac. “We’re already seeing people, especially engineers from Eastern Europe – who are some of the best in Europe – they want to go to Berlin instead of London because they’re not sure they can stay here. This is going to be a big issue unless we get this sorted out. Guess what? A lot of the best engineers do come from that region and Berlin will win, if they can’t easily come to London and stay and live and afford to be in London.”