If you have an iPhone app with 1 million daily active users, VCs will be knocking down your doors to write that Series A check. A spammy Facebook app with 1 million "users" is a totally different beast on the other hand. It really depends on your definition of a user, which the author conveniently leaves out of his analysis.
Note, the post I commented on assumed that with 1 million DAU's that VC's would be "knocking down your doors" to fund a Series A.
With the example developer above, they could probably get some kind of funding (ie., seed funding from somewhere) but I highly doubt reputable VC's would be knocking down their doors to fund a Series A.
Likely. But we don't know which iOS/Android apps have 1MM DAUs, and so this makes this debate kind of pointless... unless developers share their stats.
There are lots of apps with 20+ million downloads (total), and if they're good apps they might be pushing 1MM DAUs (of course, tough to tell unless developer reveals that). All I'm saying is that some of them are hits and VC's are clamoring over, but some might be good lifestyle (or less scalable) businesses and VC's aren't "knocking over doors" to fund a Series A with them.
I'm just calling out the assumption that 1MM DAU = guaranteed Series A funding.
Come to think of it, I should retract what I said about most of them not being VC-fundable. I just don't know cause the stats aren't out there.
Astro went from the only decent file manager to the defacto worst. It's awful. So incredibly awful I wanted to write this comment in case any Astro dev sees it. For shame.
That would be my instinct as well. What's the ARPU for a mobile app? Some are strong, I'm sure, but it wouldn't shock me if the number is in the $0-$10 range for a lot of them.
If your mobile app revenue is a steady $1-5m a year, then that's a fine business for you, but I doubt a traditional VC would want in unless you have a plausible reason you can grow 100x.
And even if a VC were interested, I'd hope most people don't take the money. Because now instead of just pocketing steady income and building up a war chest or a retirement fund, you've strapped yourself onto a rocket with "100x or bust" painted on the side. With the odds in favor of "bust".
If investor attitudes are changing as the OP seems to indicate, I actually think this is a great thing. For all the doom and gloom about "Tech Bubble 2.0," the public markets are not valuing tech companies on "potential." You need real profits.
If that trickles down to private investors and makes them more gun-shy about investing in startups who don't have an obvious path to a product that involves someone using their credit card at any point, all the better. It's a much better outcome than losing all valuation rationality for a few years until the bubble pops and catastrophically damages the industry.
Also, if you do have 1 million daily users, even if you can't get the investor valuation you used to be able to get, you will still have a TON of options for a business model.
This seems to be an indication that maybe we're getting past the bogus math of the first dot-com era. In that time a lot of companies were built on the following "business plan": enter a market worth X (where X is large) dollars, posit that even a tiny percentage (say 1% or 0.1%) of X is still a very large number, enough to support a company with many employees, wait for the investments to pour in. The problem with this line of reasoning is that being able to capture any part of a market is difficult, regardless of its size. Earning a million dollars is a difficult proposition whether the market size is currently non-existent or even if it's a trillion dollar global industry.
And that logic transfigured itself in the "web 2.0" and "social" era to something like the following: grow business to X (where X is large) users, posit that even a tiny per-user monetization (say $1 or cents) still results in large revenues, wait for investments. The fundamental mistake is the same. Indeed, consider that a homeless man on a busy street has the same exposure to "potential customers" as a billboard on that street does, but neither are guaranteed to generate even a single dollar in revenue.
It turns out that what's important is pretty much what's always been important in business. Does your company do something valuable? Are people willing to pay for it? How effective is your company at turning potential customers into actual customers? The better your company does those things the more likely it is to be successful.
I'm surprised at the negativity around this article. Chris Dixon is a pretty successful investor, and well connected in the valley. All he's saying is you need a lot more users now if you make money off of ads and if you want to raise a large series A.
Indeed, something I thought too. If they know they can make a higher minimum requirement, or that those exist out there, I am sure they would prefer putting their investment money in those areas. They are potentially bigger markets, and potentially a more successful company. At 10 million users though, even just throwing up some basic ads you can likely make enough money to cover your burn rate..
Not really. Investors need deal flow. If he thought 1MM users was enough he'd be broadcasting that so that services with 1MM users approached him with a pitch. The fact he says 10MM means 1-9MM user startups will skip him. Not a successful VC recipe if you don't believe what you're saying.
Absolutely! I would gladly pay money for my Twitter account each year (in return for them not offering the sponsored tweets). How much is that worth to me? I would pay $20/year for that, easily. I would probably even pay $5/month. But you know what? No one has ever asked me!
More so for Facebook, in my opinion. Maybe it's because I rarely use the Twitter feed -- usually I read individual accounts -- but the noise on Facebook is much more distracting to me.
Yes, and I would pay even more for Facebook if it meant they would not track me the way the do. For this reason I have never pushed the "like" button, and basically only use Facebook for (occasionally sharing) photos (of my dog).
I guess if you are looking to start a company that offers a free service that you try to monetize later, than ten million is the new one million. But if you start a company where users pay right off the bat, then perhaps you only need a few hundred customers. Sortfolio being the perfect example of an app that generated hundreds of thousands dollars/year, and took way less than one person to run.
For consumer startups with non-transactional models (ad-based or unknown business models), you need something closer to 10 million users versus 1 million users to get Series A funded. For consumer startups with transactional models, e.g. e-commerce, the number of users required is often far lower because revenue is the more important metric.
The problems in this space are based on attention ( time on site/ interactions), interest (consumer segmentation/focus), and intent (willingness to make a purchase).
The problem of most ad based apps is that they trade attention for interest and purchase intent. The problem with facebook is that it's so good at getting your attention that you rarely visit facebook with the interest or intent of buying something.
The core difference of google and facebook is that when you go to facebook, you are engaged with your friends and are in a lean back mindset, while with google you are actively pursuing interest in something.
I think VCs should actually come up with standard KPIs around interest and intent than saying lame things like X number of users is worth $y amount. It would be much smarter to say things like, a user with a KPI of K is worth $Z this year, and $Q over a lifetime.
A Dropbox, and Apple user looks much different than a Facebook user.
That's a good perspective. Monetization would thus depend on whether attention & intent are aligned - true in the case of Google search but not so with FB & Twitter.
with hash tags and with twitter search it might be. even pinterest is having trouble with intent. At 10 million users it's also likely you have KPIs vs. some sites at 1million might not have anything more sophisticated than unique IPs/ logged in users.
Advertising budgets growing much slower than number of Internet/Mobile users, therefore having more users don't automatically grow the revenue you can make from advertisement, i.e. it's just divided to more users and you earn less per user.
if your startup provides 80% better targeting, the ad account manager will not pay you 80% more, she probably will pay the same or maybe 15-20% more in the best case.
10 million, 1 million, it makes no difference since everyone has a different definition of the word 'user'.
Stop being so abstract, and cut to the chase! Most consumer startups rely on advertising. Let's assume $1 CPM. The most useful stat to care about in that case is 'Average Users Per Day'. So if you have 10,000 average users a day, you're gonna make $10/day and $300/month.
Stop with this users nonsense. It helps noone, ok.. maybe venture funding, since investors love these buzzwords.
That is not accurate. You can have more average ad impressions per day by putting 15 ads on each page instead of 2, but with the same number of users, the performance of more impressions just gets worse with more ads.
I work in advertising and haven't found that true at all. Obviously there's a limit to how many adverts you van usefully place on a page, but clicks tend to relate much closer to page impressions than uniques. What is important about uniques is that each advert should ideally be frequency cap so nobody sees it too many times to get the best results - therefore unique numbers do impact how many impressions you can show of any one advert.
