Mobile startups in the third era

Jouko Ahvenainen/Grow VC Group
02 Oct 2013

In 2007 we got the iPhone and with it the apps ecosystem that has opened business opportunities for many startups. An average person has less than 40 apps in his or her phone. They use less than 20 apps on a monthly basis, and there are a few dominating apps, like Facebook, Skype and Twitter. We have over one billion apps available in the world, mainly for iOS and Android.

To bring a startup to that market is comparable to the lottery and there might be better opportunities elsewhere in mobile.

Startups always involve many risks. Technology and market risks are always important components in evaluating a startup. Technology risk with app startups is quite low nowadays, but it also means that entry barriers to the market are low. However, the market risk for an individual app is very high. It is almost impossible to predict which applications can create consumer traction. The only way to really evaluate it is to test market and launch the application.

Internet of Things and services that include traditional physical services or products with mobility are a new emerging opportunity in mobile, the 3rd era as I call it (see: 3rd mobile era can kill or enhance any business). These businesses have typically more technology risk and market risk is especially linked to timing. It is always very hard to predict, when some new solutions and concepts make a breakthrough in the market.

The 3rd era offers a lot of opportunities for startups. They are services or products that need more competence and resources in implementation, than mobile apps alone. But they are probably also easier for investors, when the business and development is closer to a traditional tech company model, where you need competent people, can protect IPRs and it is also possible to create B2B or B2B2C business. The entry barrier is also higher.

Solutions could be, for example, customer service or customer relationship concepts with mobility, functionality for cars or wearable devices, or financial services. In these services mobility is crucial, but the mobile app is only one component of the whole service or product.

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