How Venture Capital for App Development Models Are Changing

March 19, 2015 - 2 minutes read

venture capital business model

Considering that the average day sees about 1,600 new apps go on sale, software developers are under the gun to generate awareness and interest among consumers more effectively. The intense competition has put considerable strain on traditional funding models, forcing developers and venture capitalists alike to seek new approaches.

One particularly influential trend has seen the costs associated with user retention increase by 34 percent over the past year. For mobile app developers, another pressing problem is the sheer number of apps that are available; it’s extremely difficult to get noticed, and it’s next to impossible to sell an app to a user if the user isn’t aware that it’s out there.

To venture capitalists, these two trends mean increased risk. Right now, venture capitalism models in the software development industry are making heavier investments in user acquisition strategies. This approach hopes to secure a loyal base of customers with strong growth potential supported by increased awareness of the app’s availability.

However, more creative models are also emerging, one which iOS app developers in San Francisco and across the U.S. will want to know about. Cross-promotional approaches are creating synergy within the app development industry by incentivizing the marketing of third-party software products by smaller players and indie developers.

A new platform known as Tapdaq offers an excellent example. In the Tapdaq model, developers accrue points that function like currency by publicizing, using and reviewing apps created by other software designers. Those points can later be spent to raise the profile of the developer’s own creations.

This model also helps software developers minimize the effects of a common funding pitfall. It’s essential to reinvest early earnings into marketing and user acquisition, something many developers aren’t able to do because app stores don’t pay out revenues right away. As such, indie developers hit funding brick walls and aren’t able to follow up. The Tapdaq model provides a unique solution that is likely to become more popular as competition in the mobile software world intensifies.

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