High-growth in mobile apps

In our latest instalment of The Deal we spoke to funders about what makes an attractive app, and where they think the space is heading. In light of the recent Mobile World Congress 2016, Barcelona, we look more closely at trends emerging within the sector.

Crowdfunding overtakes Private Equity

The number of equity crowdfunded deals surpassed private equity-backed fundraisings within the mobile app sector in 2015. This reflects a wider market trend, which saw the increasing dominance of crowdfunding. Nonetheless, the mobile app sector enjoyed dramatic growth of almost 150% in the number of crowdfunded deals – increasing, in absolute terms, from 23 to 57 deals.

In some respects this growth is unsurprising. Mobile app companies, with typically low barriers to entry, low capital intensity, and high popular appeal, lend themselves particularly well to the crowd.

Twice the growth for mobile app sector

A 6% decrease in the number of seed-stage fundraisings within the mobile app sector reflected the wider market seed-stage slow-down we discussed in The Deal. But while the wider market saw just 3% growth in the number of equity fundraisings during 2015, the mobile apps sector recorded over twice that growth rate with a 7.5% increase. In absolute terms, deal numbers rose from 422 to 454.

The Big 5

We looked at our data to find the biggest post-money valuations* we’ve seen within the mobile app sector. Here’s the big 5:

Shazam – Music discovery app Shazam has raised 7 rounds of equity finance to date. Early last year there were whispers of an IPO, but we’re still waiting. Based in the borough of Hammersmith & Fulham, the company has a post-money valuation of over $448m.

Hailo – Recently embroiled in a battle against taxi giant Uber, London-based taxi-app Hailo has completed 4 equity deals. The start-up boasts a post-money valuation of over £133m.

Swiftkey – Acquired by Microsoft earlier this month, text prediction app Swiftkey achieved a post-money valuation of just over £87m back in May last year. In February, Microsoft allegedly paid £173m for the app – estimated to be installed on over 300m phones. Swiftkey is the latest in a string of Microsoft acquisitions, which includes apps: Acompli, Sunrise, Wunderlist, and Talko.

Truphone – Based in Islington, London, mobile network app Truphone has completed 3 equity fundraisings since it was founded in the early noughties. After a £75m investment from a cohort of funds including Eden Ventures, Straub Ventures, and Wellington Partners, the company recorded a post-money valuation of £153m.

AlertMe – Energy reduction app AlertMe has completed 4 fundraisings and received two Energy Grants to date. The Westminster-based company has recored a post-money valuation of over £51m.

What’s next?

So what’s next for mobile apps? Well, talking to funders when writing The Deal, we learned it’s the ‘convenience factor’ that’s driving the sector’s growth. And revelations from the World Mobile Congress suggest this continues to be the case. Typically cagey Netflix announced that 27% of sign-ups in 2015 were registered for mobile, while BuzzFeed announced the launch of its first video only app.

But mobile hardware eclipsed apps at this year’s MWC. Samsung launched the new S7 and S7 Edge, as well as the Gear 360 – a 360 degree camera that can play back footage in virtual reality. In fact, VR arguably stole the show, with Mark Zuckerberg making a surprise appearance to back the tech. The Facebook CEO claimed VR will be the next social platform, and announced plans to bring apps to Gear VR. Perhaps, then, we could soon start seeing the migration of mobile apps to VR hardware.