installment is a little bit slower; we’ll see if we can amp up that
energy. As always, I’m here with Ryan Morel, of PlayPlace, and Ian
Sefferman, of MobileDevHQ. This week, we’re going to talk a little bit
in this segment about fundraising. A lot of people ask us . . . Ian
and I having recently gone through the fundraising process, what
that’s like, how it works, and also, just more broadly exploring the
options available to app developers. Since you’ve been bootstrapped,
let’s kick this off and talk about a basic question: Should app
developers be thinking about fundraising? What’s your opinion?
Ryan: Probably not. They shouldn’t be thinking about it, at least early on,
unless they come from a background of multiple successes where they
have people lining up to invest in them, because clearly, cash upfront
can help you with development and all the necessary things you need to
do. If I were starting an app development business today, I’d be
heavily focused on revenue; get cash in the door, prove it, and do it
over and over again.
Robi: Would you agree with that? Would you have a different take?
Ian: I think I agree with that on the whole. As Ryan points out, every
situation is slightly different, but I think when you’re first
starting out, especially as an indie developer, most of these guys
have the technical chops to build an app, get it into the App Store,
start to get some user feedback of some sort, build some traction of
some sort. Really what you need at that phase is not cash, you need
mentorship, and that’s where . . . for us, TechStars was awesome. We
went in, we got a little bit of cash, but really, it was all about the
mentorship. I think when you’re first starting, you don’t have to go
the fundraising route, do the fundraising route when you’re ready to
kick it into overdrive, but wait until you’ve found that model,
because you’re likely wrong at first.
Robi: Yes, I would agree. I think 9 times out of 10, people in app
development space are better served by finding mentors; I think that’s
a really great point, and just building, making sure they have a team
that can build what they have in their minds. When they get something
built, when they start seeing some customer traction, when they start
understanding what people care about and what’s important, that’s a
time when you can tell those stories and talk about why money would
help you go faster and get bigger. I think the 10% case are situations
like an Uber, for example, where you say, “I’ve got this idea,” and
what it really requires is a number of people and the ability to
establish relationships with other people in the ecosystem in order
for it to work. That’s a place, I think, where businesses that raise
money in app space make a ton of sense, if you actually need that
capital upfront; otherwise, there are a lot of opportunities to avoid
it.
In our experience in having gone through fundraising, was that it was
really lengthy. We started trying to raise money in fall/winter 2011;
we talked to people about fundraising. We had a product out, we had a
couple of people using it, and it just was going so slowly, that we
shut it all down and said, “Screw that. We’re just going to go build
our business, get some customers up and running.” It wasn’t until we
joined TechStars last year that we then kind of ramped the
conversations back up. I think that’s pretty common; would you say?
Again, you haven’t raised money, but from your perspective,
fundraising takes longer than everybody expects.
Ian: Yeah, every time. We kind of had the same thing where we were
thinking about fundraising early 2012. We talked to a couple of
investors, and then it was, like, “Why the fuck does this take so
long. We’re actually running cash flow-neutral right now. Why don’t we
just invest in the business, rather than . . . if we’re a team of
three people, if one person is out fundraising full time and our
capacity is way down, let’s build a business.” Fundraising is all
about momentum anyways, so if we can work on the business and build
momentum on the business, then that makes fundraising easier in the
anyways.
Ryan: That’s what people always . . . we went through the process, we
didn’t actually end up raising any money, but people always
underestimate the length of time it really takes. I think your point
is the right one; every minute that you spend out front fundraising is
one minute you’re not spending on your business. Probably for most
people, there’s a lot of noise out there of like, “It’s so easy to
raise angel rounds.” It’s kind of this self-fulfilling myth. Yeah,
maybe there’s a lot of angel rounds happening, but it doesn’t mean
you’re going to get one, and they’re still hard to come by.
Ian: There’s so many factors; geography matters, timing matters; don’t go
do it in August when every angel VC is not going to return an email or
a call, ever. There’s just so many factors that go into it.
Fundamentally, if you can figure out your business and push momentum
on your business, it makes it 100 times easier to raise. For us, it
was . . . there was a whole host of things: In the first quarter of
2012 we were like, “We totally have this thing figured out. We have
customers coming in the door,” and then investors started asking
deeper questions, and you’re like, “Oh, shit.” Where is the $1billion
opportunity? They’re like, “Yeah, I can actually see a $10 million op.
Where’s the $1 billion?” Then we had to actually take a step back and
think about where we were going in the next couple of years and how do
we assemble the team to manage that? There’s a whole host of things
that we could not have answered unless we focused on the business for
a longer time.
Robi: Right. I think on that point, when you were talking about it, a big
tip for fundraising is that the vast majority of investors, especially
at the seed and angel stage who are going to write a check quickly,
not the people that are going to take 6 months to do lots of diligence
and take a long time, the people who are going to write that check
quickly, I think they are going to get excited. They want you to come
in and say, “This is why this is going to be really big. This is why
we think the world’s changing in some way that we have an insight on,
and we’re going to be able to capitalize, and there’s a lot of
excitement and opportunity.” If you’re in app development right now,
the argument that was working for maybe a couple of years of,
“Everybody is going to want this on the app,” I think is diminishing.
I think that people have started to see, “Wow. Distribution’s really,
really hard for app developers.” Making sure that you’re on the top of
the App Store list is incredibly challenging, unless you’re working
with these guys.
That dream isn’t as obvious anymore. I think more people are skeptical
about that dream where you’re like, “Isn’t this a great idea for an
app? Isn’t it worth $150,000 to invest in?” People are saying, “Sure,
but it’s not live, nobody’s using it, and there’s no way you can point
to how you are actually going to get discovered out of 1 million apps
in the App Store.” Given that, you and I have talked a little bit
before about Kickstarter and some of these things that are happening.
Is that a route that you would take for fundraising? Would you want to
pre-sell a product?
Ryan: If you’re a known entity, probably. We’ve seen people like
Jordan, from Harebrained Schemes be successful there, and
a couple of other people be successful there, but they’re known
entities and known [inaudible: 07:58] a lot easier. If you’re not that
guy, I think it’s probably just a waste of your time. Once again,
you’ll be better off just going and building. The reality is that if
you’re . . . especially if you’re a 1 or 2-man band, your dreams
probably not that expensive at this point, and you’re better off just
sitting down and building it than trying to raise $100,000 on
Kickstarter. That’d be my take.
Robi: Yep. What about friends and family? You’re 2 guys, you’ve got a
dream, but you don’t necessarily have enough cash in the bank for you
and your partner to go work on this for a year. Should you be
approaching friends and family, and talking about what you want to get
accomplished, and raising money from them?
Ian: I can only talk in my personal experience, and I’ve heard good
arguments both ways. I’ve actually heard of somebody who took friends
and family, likes taking friends and family, and had other angels in
their deal who liked it that they took friends and family. The reason
that the other angels in the deal liked it was that they actually felt
like it gave the entrepreneur even more incentive to make sure he
didn’t fail, because you don’t want to fuck up your family
relationships. In my case, I totally turn down any opportunity that
was presented to take friends and family, because those relationships
are separate, they could be cheerleaders for the business, but I don’t
want them as individuals; I want people who are sophisticated. Quite
frankly, I want people who can add value and somebody who’s a family
member, who is totally unrelated but has a little bit of cash, is not
going to really going to help the business in any meaningful way for
me.
Robi: Yep. What about you? Have you ever pursued that or talked to people
about it?
Ryan: A little bit, but ultimately, it was kind of the same as Ian. For me
personally, I would feel horrible if I lost my friend’s and family’s
money. Despite the fact that they would know going into it that they
would likely lose their money, they would still ultimately be upset
about it. I would probably stay away from that. For me personally, and
again, every situation is different; if you’ve done it before, your
friends and family are probably people who’ve also done it before, and
they’re going to better understand the risk they’re making their
investment. I would say, if you are going to do friends and family, I
would look at professional investor or at least known angel investor
friends and family, because those guys at least, understand the risk.
Robi: Yep. We actually did a little bit of friends, no family. A little bit
of friend’s money was our first raise, really. All of the people who
came in were people that had made investments before, and there were
also people we said no to several times before we said yes. It was not
our intent to go sell our friends on raising the money, it was more,
like, “This is what we’re doing. This is how we’re thinking about it.”
As they got more interested, they dug in more, they’re like, “No. This
is actually really good and I’m going to help you.” I think to your
point, that notion that anybody investing in you should be able to add
some value is important to your business. I think that that can
be really a big difference, because you can have conversations
structured around where the business is going, as opposed to
conversations about, “Why am I not rich yet?” I think that’s
important.
Ian: One question I had for you, because I think that you did a
particularly great job of this, was how to turn fundraising momentum
into more fundraising momentum. Any tips or tricks you have around
that?
Robi: Yeah. I think we were fortunate, I don’t know that any of it was
skill; actually, I think we were kind of lucky. I think the thing that
we did which was very effective, was once we had a lead . . . a lot of
people when you’re talking about fundraising, will use the word
‘lead’, or ‘go find a lead’. I didn’t know what that really meant
until we really, truly found one. That means somebody who’s
sophisticated, who’s invested before, who’s going to take a
significant step in your direction from a writing a check; maybe
they’re writing a $75,000 check, maybe they’re writing $¼ million
check, but something meaningful, who is also comfortable setting terms
with you, that you can negotiate. If you have that kind of
relationship with somebody, and theyr’e somebody who’s known other
investors, saying, “Okay. You just agree to this. You’re leading my
round; now you’re going to help me go tell everybody else about why
you’re leading this round. Tell that story, make the introductions.”
That can open up a lot of doors, and that’s really what we ended up
having happen with Founder’s Coop, is when they stepped in and they
led, they were then able to say to a whole bunch of other people that
they know, “Here’s what we’re leading. Here’s what we’re excited
about,” and then I was really focused on taking up momentum and not
letting anything die. Any introduction I got, I followed up with
within 24 hours. We had meetings in a week, and if that meeting was at
all interesting, I gave them documents and moved them to either say
yes or no really quickly. I would say the biggest thing that I learned
out of that is you’ve got to strike while the iron is hot.
If you’re out there as an app developer, you are fundraising, you have
somebody in, if you’ve had a meeting with somebody once or twice and
both times they’re like, “I’m interested; tell me more,” take that to
the next level. Don’t take it for granted. I will say that we had a
few people early on that we were talking to that expressed some
interest, and I didn’t really realize what they were doing was
expressing interest, it’s kind of like dating: Maybe the first time
you’re out with a girl you can’t really tell if she’s interested.
Sometimes, people would be, like, “Yeah, I want to hear more. Send me
this thing”; follow up. That was probably our best thing. As soon as
we had that lead, I was very focused on, “Now we’re going to go fill
out this round, and I’m not going to stop until it’s done. I’m not
going to let it linger.” I’ve definitely seen and heard lots of
stories about people having interest, and then 3 weeks or 4 weeks
later, it being gone. That person being like, “No, I changed my mind.”
Ian: How did you get those intros from the lead? Did you explicitly ask
for, A: Give me intros, B: Give me intros to these people, or C: Did
they just make intros?
Robi: It was one of the conversations that we had as we were discussing
negotiations. It was like, “If we’re going to work together, what’s
this going to look like to be a successful fundraise for us, and how
are you going to help us go achieve those goals?” Then I also, and
fortunately, Chris has seen a lot of this stuff, said, “Here are the
other people I’m talking to. Here are the people that I think I can
get connected to. Help me vet that list.” He’s also very helpful in
just vetting and prioritizing, and I think that’s an important piece,
is making people understand how they can be involved and move it
forward for you.
A bunch of it was explicitly, “You’re going to go introduce us to
these people,” and some of it was, “I need some help [inaudible:
15:18] out who else I’m talking to and where’s a good place to spend
time. I think that the best piece of advice, actually, now that we’re
talking about this a little bit, that I can probably say, is getting
people to invest in you is about creating a movement and getting
people feeling like they’re part of the movement. The more that you
can really quickly bring them in and say, “Here’s how you can help us
right now. It’s not just your check, that’s something more than just
writing a check, and this is how you can help take us somewhere else.”
I think almost everybody wants to be part of something like that, a
movement like that, and that’s a really good way to get excitement and
get momentum going.
Ryan: I would add one thing to what you’re saying, is that everyone should
be careful about the person who asks for too much information, and
ultimately, won’t make a decision. You need to recognize who that
person is, and move away pretty quickly.
Ian: Yeah. We had one of those happen. Oh, my gosh. It is a time suck,
competitor threats, all sorts of weirdness happened.
Ryan: This is true for fundraising, and also, just any process that you’re
going through. Someone’s repeatedly making requests for the same
information or just delaying things; just move on. Again, every minute
that you’re focused on doing something that’s not building your app or
your business, then that’s bad.
Robi: Yeah. Again, speaking to the app developer audience, especially if
you’re early-stage and you’re just starting to think about
fundraising, if the first couple of times you meet with somebody,
their main focus is getting lots of numbers and details. You’re early,
so you don’t have any of those things; you’re not a good fit. It’s
okay to politely be like, “I’m not sure that we fit right now. We can
follow-up later, but this is not a good fit.” If you spend your time
devoted to them, they will continue to ask the questions, like you’re
saying, and they will go on for 6, 9, or 12 months.
We met somebody early on, and every time we talked, they wanted more
data, and more data, and more data. I was, like, “I only have X-data.
I don’t have a ton, so there’s not necessarily . . .” What about,
should you be worried about unscrupulous investors? You were talking
about the competitor threats. How much should our audience be worried
about talking too much about their idea? They’ve got something super-
secret that’s crazy.
Ian: Never worry about talking about your idea. Certainly, for any
entrepreneur out there who’s like, “I’m going to have all your
investors sign an NDA,” the answer is, “No, you won’t.”
Robi: You won’t get any investment money.
Ian: Yeah. It’s not even a good idea. All of the meat of what’s going on
in your business is the execution and not the idea anyway, so talk
about the idea freely, talk about your business freely. That being
said, reputations of investors go around. Don’t mess with the ones
whose reputations are shaky. Find people who you want to work with
because you know their reputation, you know how well they do, you know
what other sorts of investments they’re in, all of that.
Robi: Have you ever gotten burned?
Ian: There’s one case where I actually don’t know. There’s an investor
who’s asking a lot of questions over a long period of time, that I was
continually providing info for. We got to the docs, essentially ready
to be signed, and then was like, “Okay. I think this might actually be
competitive with something I’m in. I’m really sorry,” and seemed
really, really legitimately sorry. It’s actually somebody that I’ve
known for a while, so I have no idea if that was all planned or not, I
hope I can take your word for it. That’s the closest that I’ve been,
and it was like, all that Ryan says about don’t give out data for too
long, is exactly . . . If they’re there and they’re not making
decisions, just don’t bother.
Ryan: The analogy I always go with is: You want to fuck or not? We’re
either we’re going to do this, or we’re not. It’s perfectly okay if
you say no, but we’re going to make a decision right now. I think
that’s true with a lot of different things. Move to the close.
Robi: Man, first dates with you must have been fun. Of course we’re the
single guys here. Have you ever had unscrupulous dealings?
Ryan: It’s hard to know. I take a lot of people . . . I don’t really think
there’s people who go out of their way and spend their time to get
information from early-stage startups. It just doesn’t make a lot of
sense, at least in my opinion. If they are, you’ll know who these
people probably are. That’s not stuff that I worry about.
Robi: It’s not typically stuff that I worry about. We’ve now been burned
twice by VCs. In both situations, it became clear that they had
different motives in the meeting, and they were trying to figure out
information for different reasons. The thing is we’re still around, we
raised capital; it doesn’t matter, I don’t think. I really, truly
believe that, especially if you’re picking a market that’s big and
you’re really excited about it, and you’re leading, people copying
you, people finding out information, maybe that leads to another
competitor or something. A: They’re not you. They’re not going to
bring your gear to the market and continue to execute the way you do.
B: If it is big market, big fucking deal; other competitors are going
to come along anyway. It’s not going to matter, just keep executing,
because the vast majority of customers won’t see all that stuff going
on, they just see whether or not when you meet with them or they come
across your product, if it meets their needs.
Ryan: Yeah.
Robi: That’s all that matters. I would say, wrapping up this conversation
about investment, that’s the thing: Large or small, if you’re thinking
about fundraising, if you have a better sense of your customers, if
you actually have customers or people who are using your stuff and who
can tell that story, then you have something you go raise money on.
Until you have that, just go figure that out, because there’s no
reason to invest in any business unless they actually are customer-
focused.
Ian: Yeah, that’s right.
Ryan: I agree.
Robi: Be sure to Like this, share it. Subscribe to our channel on YouTube.
I know that a lot of people have fundraising questions, so ask
questions in the Comments, we’ll try to get back to you. Thanks.
Trustworthiness is a core value that all companies need to embrace. People do business with the people they trust and the more trust a company can earn from its consumers the higher the customer loyalty will be.
App Developer Conversations: Google Play allows developer responses – good or bad idea?
In this week’s App Developer Conversations we led a conversation about Google Play enabling developer responses to comments in the app store.
We had a few key takeaways:
Also, be sure to see the other two segments from this week:
The Transcript:
Robi: Good morning. Welcome to another installment of App Developer
Conversations. As always, I’m joined by Ian Sefferman, of MobileDevHQ,
and Ryan Morel, of PacePlay. This week, we’re not talking about the
Seahawks, fortunately. We are going to talk about Google Play, more
broadly, allowing developers to make comments in the App Store.
For those of you who don’t remember, about 4 or 5 months ago, Google
Play said the top developers were going to be able to respond to
comments in the App Store. Last week, they announced that they’re
[inaudible: 00:33] more broadly and allowing more of the developers
overtime, in order to respond. First question for you Ian is: You hear
about this? What’s your reaction? What do you think?
Ian: My reaction is that it’s potentially a bad thing, which is that app
consumers now have this ability to talk to a developer publicly. The
review section of Google Play should be reserved for more subjective,
‘This is why you should download this app,’ advice to others. Now if
the developers can respond, my concern is that consumers will be using
that as a feedback mechanism to get personal help making the review
section, essentially, worthless.
Robi: Yeah. What do you think, Ryan?
Ryan: Now I’ve had some time to think about it, and I think this is going
to be an epic disaster for everybody, except for you. For you it’s
going to be like, “I read about this guy this morning who found a 12-
pound gold nugget, and Google just brought him a metal detector and
said, “Search in this 4×4 area. You might find something, you like”;
because this is going to be bad. I think it sounds great in theory.
People have always complained about not be able to respond to
comments. I think they were always saying, “We want to be able to
respond to comments privately, but not publicly.” Every developer who
responds is opening themselves up to further criticism. Yes, I think
this could be really bad.
Robi: I’ll reserve some comments for the end, because I think that we’re a
little biased in this. Let’s move on to another aspect of this, which
is the recent move from Google is that you have to use your Google+
account in order to make comments, to give feedback, to rate a review
and app in App Store. Is this commenting capability actually a play on
getting on more action for Google+ or getting more data?
Ryan: I’m sure it’s a play for get more data; it’s always a play to get
more data when you’re Google. Do I think that the commenting system in
particular is a huge impact on that? Certainly, I liked the idea of
making this Google+ integration, mostly because it takes away the more
anonymous qualities of the reviews, and that’s a plus, in my book. You
see quality go up when people can’t hide behind a fake name.
Robi: Right.
Ian: Yeah, that’s . . .
Robi: Then if we think about this from the aspect of Facebook, what they’re
doing in order to help app developers. Last week, we were talking
about Facebook app installs and their advertising programs going to
mobile developers. They’re helping you try and understand who among
your friends is using what app, and then they’re also trying to help
display apps that you should discover. Google is over here getting
more data and comment reviews, that sort of thing. It seems that these
guys are fighting on so many fronts, and now the mobile app space is a
big part. What do you think about that?
Ryan: It’s hard to think about it, because a lot of it all revolves around
identity; who owns the identity? Now we’ve got 3 people involved on
iOS, and there’s Google over here. I don’t even know. You sit back and
go, ‘It’s Google here, it’s Facebook, Twitter and Game Center over
here. I don’t really know what to do.” It’s just mind boggling. I
don’t necessarily understand the play, I guess, ultimately what I’m
getting at. I don’t get it.
Robi: Got it. I wonder if it will lead to more activity with Google+ just
because so many folks who have an Android phone now by default have a
Gmail account, a Google+ account, and a Google Play account; they’re
all linked. It seems maybe this will draw more people in the
ecosystem, give them more of a reason to come back, help strengthen it
and attract more attention.
Ryan: I wonder, you could check, but where does the conversation happen?
Does it take place inside of Google Play? If I leave a comment, and
you as a developer respond to me, does that go to my Google+ page and
I respond there?
Robi: I think that, as I understand it on the face of it, the way it works
is I can respond to your comment, and then you as the consumer have
the option to actually respond via email to me, and then it can
potentially go to email. I’m not sure that that’s default activity.
The way that Google+ files it, it’s not really clear that Google+ is
bringing this activity public. If it is, or if that’s an option,
there’s a whole other access for you as a consumer to be thinking
about, “Did I make this comment publicly across all my Google+?” It’s
confusing.
Ian: Yeah.
Robi: I’ll talk a little bit about how we’re thinking about this, because
we’ve been hearing from developers over the past several months since
this has rolled out. It’s generally like you said, they did drop a
really big gold nugget in front of us because a lot of developers,
once they start playing with this are like, “A: I’m in multiple app
stores, so now I have to treat Google Play different than the rest of
these.” That’s frustrating and pretty annoying, so they come to us,
and they look at one management console with all their apps across
platforms with similar inboxes and it’s a much easier experience. B:
This notion that the App Store ratings and reviews are now going to be
hijacked and turned into these feature conversations. In particular,
the squeaky wheel getting the grease in this scenario is really bad.
The incentive is so negative that you could be a very popular app
developer and have a ratings and review section that ends up being
just full of 2 or 3 really noisy people. People are very concerned
about that.
Ryan: Yeah.
Robi: I think the third thing is that there’s definitely a notion,
especially in public commenting spaces, where vitriol and being loud
is rewarded, so you more likely have that, actually, that cycle and
the wheel spin faster. People are going to be like, “I’m going to be
noisier than that other guy because I’m now going to get some
attention from EA.”
Ryan: Right.
Robi: I think that’s concerning. We’ll see. The other side is I’m really
glad to see somebody, one of the app stores, innovating around ratings
and reviews, and trying to think about how to get developers closer to
the customers. I think that, fundamentally, is really exciting; that’s
great. Kudos to Google for trying something there, but I think it’s
going to be really challenging.
Ryan: Yeah. I’d rather them not try; that’s how bad I think this could end
up being.
Robi: Yeah.
Ryan: Great, you tried. Congratulations on screwing it up for a bunch of
people. My biggest worry would be some developer gets skewered because
of 1 or 2 people who are assholes.
Ian: This actually brings up a really interesting question. Maybe it’s not
the right time for it, but we all 3 agree immediately that it’s a bad
idea, but 6 months ago or 3 months ago, everybody is like, “People are
leaving the terrible reviews and developers have no way to comment on
it.” What would you have done if you were Google? Just been like, “No,
not at all?” Or would you have been like, “Partner with Apptentive”?
Ryan: I would have maybe done that. Frankly, if I were Google, given how
much they screw some of the stuff up, I would have gone, “Let’s just
wait to see what Apple does and then we’ll copy them.” If Apple hasn’t
done any apps, there must be a good reason for that, especially with
the . . . I don’t think it’s a secret; they just don’t know what
they’re doing yet, they’re learning as they go, and that’s perfectly
okay. They’ve created a really thriving and growing ecosystem, but
they’re probably not the ones to be driving decisions, as far as I’m
concerned.
Robi: I could see that. I don’t think that Apple’s going to lead the way on
customer communications. I don’t think that the DNA of Apple is going
to embrace your customer base and go talk to them on a regular basis.
I don’t know if they think that way.
Ryan: I don’t know. We see evidence that they suggest that they do that.
It’s always about protecting the customer. Preventing people from
changing screenshots, which were leading to people screwing up, and
that was definitely done to protect consumers. There’s a bunch of
stuff now around preventing kids from getting access to an app
purchase, so people have to turn it off and all this stuff. I don’t
know. I’m fanboy-ish, so it’s okay.
Robi: It’ll be interesting to see how this plays out. I don’t know that I
have great answer to what I would have done in Google’s spot, aside
from partnering with us, of course. I’m excited to see more people
realizing that it’s important to have conversations with the
customers. There’s no doubt in my mind that this will raise the
importance of doing that, and we’ll learn along the way. Hopefully,
it’ll end up being a better place for us as consumers, as opposed to
something that we feel like we can’t trust anymore because it’s just
too noisy.
Thanks for watching this installment. Be sure to Like it and share it
with friends. Check out the other installments from Ryan and Ian this
week. Thanks