There is No VC Money for Just Another App, The Underlying Service Is Important

Alok Mittal, Managing Director, Canaan Partners
Alok Mittal, Managing Director, Canaan Partners

For app developers, there is some easy money from outsourcing gigs or from folks at Microsoft or BlackBerry eager to get developers on their side. But then, if you are in it for the big deal, venture capital is something to look at. This money doesn’t come easy. In this two part series, we are trying to share some investor perspective around the app ecosystem in India. Alok Mittal, the Managing Director of Canaan Partners which invests in early stage companies sheds light on how he sees the space through an investors eyes. “What will swing my investment interest is not the fact that there is an app, but what the underlying service is,” said Mittal. Edited Excerpts.

How do you look at investing in the mobile app space?

I think of apps as another interface to a service, just as the service may already have a web interface, or a voice call interface. In that framework, what will swing my investment interest is not the fact that there is an app, but what the underlying service is. The attractiveness and scalability of that service is important. In that sense, we feel more comfortable on focused companies that are enabling one or two areas of service than a myriad of those.

What are the key challenges you see for the app ecosystem?

The key challenge in the Indian app ecosystem is lack of monetization mechanisms. Many of the apps globally monetize by in-app purchases and micro-transactions. Such a micro-payment facility is currently not available on a cross-platform basis, and hence charging users is hard. Other monetization mechanisms include advertising or ecommerce. We think that advertising is a more ready means of monetization – we recently invested in a location based mobile ad network called Adnear, which is based on this thesis, and represents a mobile-first company taking advantage of unique location capabilities of mobile networks.

Where do you see skill gaps?

Another key skill gap remains in the design capability. Mobile user experiences need to be far simpler and intuitive compared to their web counterparts, and that design sensibility has taken time to permeate. What makes this even more challenging in markets like India, because one is not just talking about mobile-first apps, but mobile-first consumers – and these consumers without prior experience of web tend to perceive user interfaces very differently relative to experienced web users.

» If you are an app developer, come over for bigMobilityConf (scheduled for Aug 31st). Lot more insights on app ecosystem will be shared by Industry bigwigs.

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