Nauta Capital is delighted to have recently led the $5m Series A investment into AppFollow and its team. The fully remote company has built an all-in-one platform allowing teams to manage, develop, and market mobile apps more effectively. Below we give a brief overview of why we believe AppFollow will be a great investment for our fund, with a particular focus on topical elements and the wider market trends behind app stores and digital marketplaces that make this such an exciting opportunity.

The underlying market trends — a history of Mobile App businesses

As businesses have gradually moved online over the past decades the world saw search engines replace traditional channels as the battleground for many competitive markets. However, as consumers switched to mobile, the app stores, namely Apple and Google’s, have become a new battleground for internet businesses of today.

Recent UK data suggests that ~70% of our time online is spent inside Mobile apps (1) …

…which gives an idea of just how far consumer behaviour has shifted. With that in mind, it is easy to see the significance of the recently publicised competition lawsuits that position app-first businesses (Spotify (2), Epic Games (3), etc.) against Apple and Google.

However, despite the consumer adoption and numerous examples of enormously successful mobile-first businesses (Uber, Deliveroo, Snap, Instagram, etc.), there is still a lot to be done by companies in adapting to operating on the mobile app channel. For years businesses have found themselves under pressure to develop an app in order to maintain touchpoints with customer…

… but in order to succeed businesses have to transition from not just 'having an app' to instead building parts of their business around a mobile app delivery channel, fighting for attention and serving customers via their apps.

In the same way that the telephone lead to the creation of customer service call centres, companies are now having to create Mobile teams and rebuild their operations around the app stores. Where R&D teams used to hold focus groups they now read app reviews; where customer services used to receive calls they now receive questions through the app stores; where a national product launch used to cost millions can now be done globally with zero spend by correctly navigating the app stores’ search and recommendation algorithms. The changes in customer behaviour and app usage are not new, however, the organisational change that is needed by most businesses to properly orient themselves in this new battlefield is still far from complete. AppFollow’s vision is to create the all-in-one armour, sword and shield for these teams to operate effectively.

What comes after the App Stores?

App stores are not the only digital marketplaces that businesses have been forced to adapt to in recent years, with teams around the world struggling to adapt to everything from Amazon’s eCommerce store to Steam’s game store. These digital marketplaces all have the same problems as an app store for companies that have to reorient their business and change how they operate. AppFollow and others have an extremely exciting opportunity to create the all-in-one platform and tools for businesses to operate on many of these digital marketplaces.

What we liked about AppFollow:

Beyond the market opportunity, what about the company itself? Well, there were three aspects of AppFollow’s team and business that we found particularly impressive:

A team with extensive Product and Mobile experience: The founding team have all worked in Mobile and Product teams historically and understand the problems they are solving. The importance of this is shown by their customer satisfaction and success to date, where they are solving the most prominent pain points based on their experience of working in mobile app teams

Data-driven culture in a completely remote team: The founders have built an extremely data-driven culture throughout the entire company, for example, every employee receives a weekly report of business metrics and every new product feature and project are tested with focus groups before launch and then measured continuously.

The company operates as an all-remote, distributed team where performance is measured by people’s actual output and the outcomes they achieve, rather than “just showing up to the office”.

The team was as ready as it could have been when the COVID lockdowns struck the world and the resilience of their performance demonstrates how much of a difference a data-driven remote culture can make.

Highly capital-efficient growth due to a scalable business model and product-led growth: AppFollow’s business model and products are built to suit customers of all sizes, from hobbyist app developers all the way to enterprises with £100bn+ in revenue. This is important for two reasons, firstly because companies of all sizes need a robust mobile app strategy and secondly because it has allowed AppFollow to exemplify a capital-efficient product-led growth strategy. The company’s products are built to scale and grow with customers by offering new features and additional benefits as the mobile teams of clients develop and mature, increasing the value of each customer over time with little to no spend. This goes some way to explaining how the team has built AppFollow to its current size and maturity with a very modest amount of funding to date.

AppFollow’s position in our portfolio and thesis

AppFollow has parallels with our investment in NumberEight which helps deliver personalised content inside of mobile applications using contextual signals. Both investments support our overarching thesis that delivering mobile experiences and products in a personalised and data-driven way presents a huge opportunity for the future.

‍

References & links:

1. UKOM Q2 2020 UK Digital Market Overview report https://ukom.uk.net/digital-market-overview/115-q4-2018-uk-digital-market-overview-report.php
2. The Guardian; Apple braces for EU investigation after Spotify complaint; https://www.theguardian.com/technology/2019/may/06/apple-eu-investigation-spotify-iphone-app-store
3. Polygon; Can Epic Games actually take on Apple and Google? Experts weigh in; https://www.polygon.com/2020/8/14/21369277/epic-games-fortnite-lawsuit-apple-google-expert-opinion