Grow Your App Business With European and US Venture Capital

by Jonathan Tarud
Blog Post

For many app startups there really is no better way than gaining venture capital to grow their business. No loans. No savings accounts. Just a solid business plan and funding to make it happen.

Although VC funding does require loss in ownership and control to certain extents, it is highly viable way to scale your app.

So… Is getting VC funding easy right now?

Business Insider AU recently asked a top European venture capitalist if investors are currently overpaying for businesses:

“He admitted to me, on the condition of anonymity, that the funding market right now is completely nuts.”

The answer is clear from this European Venture Capitalist. It is nuts! New technologies are like gold for them.

But it’s not just Europe. Many firms in USA and the EU seem to be cashing in on tech and raising as much money as possible right now.

Venture Capital At a 15-Year High

Since the dot-com peak in the 2000’s, no other year besides 2014 looked as promising. Not only did 2014 match the latest rise in VC, 2015 is proving this to be no anomaly. According to Spectrum.ieee.org:

“Venture capitalists poured US $48.3 billion across 4,356 deals with U.S. startups last year, according to a new report by Pricewaterhouse Coopers and the National Venture Capital Association. That’s 61 percent higher than the $30 billion startups got from investors in 2013 and twice the $20.4 billion invested in 2009.”

Many thanks to the tech industry and mobile apps for playing a big role in this rise. Europe venture funding, just like the U.S., is also at it’s biggest since the dot-com days.

This article shows how Europe hit a 13-year VC high in 2014:

“According to data published this week by Dow Jones VentureSource, European startups raised $8.9 billion (€7.9 billion) last year across 1460 deals, up from €6.3 billion in 2013. That’s the largest investment since 2001, when European ventures secured €10.6 billion.”

These are both great news… EU and US venture funding look promising.

While the United States got a head start and has a stronghold due to that, Europe is now doing well to play catch up. At the Nice European Council meeting in 2000, 15 EU Head of States decided that entrepreneurship was a focal point of employment policies, calling venture capital industry development a vital component.

Almost all developed, industrial countries know that VC and tech funding creates employment and a better economy. So right now, with tech knowledge being strong worldwide, it is becoming an open game.

European Venture Funding Is On The Rise

Europe is partially relying on app development growth because seeing how smartphones are reaching saturation, the opportunities are endless.

For example, Stockholm is on a fast rise as we speak. And this is partially due to Spotify and many smaller promising tech and app startups. CEO of Spotify, Daniel Ek, was quoted in a Telegraph UK article regarding the VC scene in EU vs. US:

“The US has 320M people and has produced Amazon, Facebook, Google, Apple, Microsoft,” he said, adding that it is “insane” that Europe has a population almost twice as large and doesn’t have any of these companies. “Statistically, that’s an anomaly.”

But Sweden could help to change that.

“This small country is really punching above its weight in creativity… There’s a new wave of entrepreneurs, we’re at a breaking point,” he said. “Europe can do the same.”

Europe has an app economy that adds up to 19% of global revenue. VisionMobile has estimated that close to 1 million EU jobs have been made from the app economy.

To keep this trend up, policymakers will need to support mobile app developers even more and more in the coming years.

That same VisionMobile, predicts enterprise mobile apps to hit rapid growth and by next year to reach up to $58 billion globally.

On top of this prediction they also identify five key areas that mobile app developers and mobile app startups can run with for a business model and to add value in the enterprise business apps sector.

These are the five key areas:

  • Vertical market specialization
  • Productivity/BYO apps
  • Mobile SaaS
  • Bespoke enterprise apps
  • Mobile application and device management

The US is better funded and will continue to lead in all these mobile app areas and more, but Europe is coming in strong as well as a distant rival with promising technologies and talent.

Enterprise Might Be Best

Yes, Facebook paid Instagram $1 billion dollars for their social photo sharing app, but enterprise, not consumer, offers greatest opportunities in mobile application innovations.

Venture Capital firms and investors are looking for mobile SaaS that create new ways to conduct business. They have their eyes on the business-to-business market.

B2B is not nearly as alluring as fun, but VC firms today see much more value to be had in the B2B mobile app market.

Kevin Spain from Emergence Capital stated in a ReadWrite article how massive the opportunities are right now on the mobile platform, and how B2B is where you need to be for the best chance at big app business success:

“Mobile is a new platform, fundamentally. The Web was the last platform; client-server was the platform before that. So, if you think about client-server, there were entirely new classes of applications that came into being. You think about spreadsheets and word processing programs,” Spain said. “Whole new mobile-centric B2B application categories [are what] we are much more energized and excited about. We think that is where the really, really big wins will probably come from.”

Healthcare is one vertical, as described above in the five key areas, that has more than enough promising potential. Same with automobile technologies like infotainment systems, telematics, GPS and more.

Although not considered B2B, Health and Fitness apps that come with the multitudes of the latest wearable technologies, smartphones and fitness trackers are also ripe for business opportunities.

B2B Mobile App Opportunities In Europe and USA

If you’ve got an app that is already pleasing customers, you are in a great place. Getting VC with a proven app should be easier.

But the question is…where to get funding? There’s US VC and there’s EU VC funding.

If you are looking to grow an app startup, or currently are in the process, you would be better armed for success by exhausting all your options because VC funding doesn’t have to come from United States anymore.

Europe is growing more reputable by the day thanks to places like Stockholm. If you are comparing tech hubs worldwide, Stockholm-Sweden is second in per capita to Silicon Valley.

Germany is getting much better as well. A 2014 report on German Venture Capital trends shows that during last three years, 64 Billion EUR was invested in U.S. based startups.Europe has become a viable source of Venture Capital.

If you want to know what Venture Capital firms are looking for, both in Europe and the U.S., then you have to check where they are investing. CBInsights.com found that there are 464 apps in the iTunes App Store that have ranked in the top 1000 every day for the past 6 months. Of those 464, 91 are investor-backed.

CBinsights

Both Europe and USA prove to be beneficial markets to get VC funded for mobile startups. CB insights also found the biggest app backers on the Apple Top 1000 rankings.

The list shown above shows the 15 investors with over five app businesses funded that are constantly in the top 1000. Sequoia Capital and Kleiner Perkins are at the top of the list:

“Sequoia Capital and Kleiner Perkins top the list of investors with 9 companies each. Sequoia’s companies include Plain Vanilla Games, Houzz, Whisper and Evernote while Kleiner’s include Shazam, Flipboard, Duolingo and MyFitnessPal.”

With this ever-evolving mobile app market, one thing’s for certain: mobile apps are not going anywhere. Technologies will improve and new app innovations will fuel us into the future.

We hope this can help you find the best opportunities to make your business grow!

Tweet this out or shoot us an email at mvp@koombea.com we will be happy to help your app succeed.

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by Jonathan Tarud
Blog Post