In January, 50,750 apps were submitted to the iTunes app store.
That number is proof of the growing role apps play in our lives, but ask yourself this: If 50,750 made it to the store, can you imagine how many did not?
Mobile app developers face more intense competition to reach the marketplace, Mark Loranger explained.
Mr. Loranger is a co-founder of Aprenita, a unique, Capital-as-a-Service financing platform for mobile app developers.
More than 500,000 active mobile app developers regularly publish to app stores, Mr. Loranger said. It’s an amazing total.
When you look at the funding obstacles developers face, it’s even more amazing to consider. Angels and venture capitalists fund less than five percent of companies they see. Banks and traditional lenders struggle to comprehend the dynamics of the new industry.
One of those unique factors is a longer than usual lag between the time an app is purchased, Mr. Loranger explained.
“It may take three months before a developer receives revenue from a purchase or advertising.”
Rent and payroll cannot wait that long so finances are stretched to cover those areas, leaving less for marketing. This problem is especially acute with early stage companies who have yet to generate consistent revenue streams.
Mr. Loranger and co-founder Sergei Kovalenko saw an opportunity to create a more responsive funding solution for mobile app developers, one addressing the unique characteristics of an industry projected to generate $120 billion in revenue in 2018.
The solution is Aprenita, a platform with a similar feel to a software service, one which uses advanced algorithms and data integrations to provide financing in as little as two days.
The opportunity behind Aprenita was so strong because even very well-run businesses cannot access the capital they need to grow top-line revenue, Mr. Loranger said.
“Traditional lenders require some form of collateral, and when you are not producing a physical product, that is hard to provide.”
That capital shortage limits sustainable growth, Mr. Loranger explained, because companies have little cash to invest in the types of marketing which generate a positive return on investment.
A new industry with clear demand, strong revenue potential, and fairly consistent revenue generation patterns needs a financing solution reflecting its unique characteristics.
“This is an ideal opportunity for short-term financing,” Mr. Loranger said.
It is also one not nearly as risky as traditional underwriting systems may suggest, he explained. The app development business model is clear, executives tend to be well educated and their companies capital efficient.
Their model also lends itself well to advanced statistical analysis, Mr. Loranger added. App developer business activity can be measured in real time and their revenue is produced in transparent, organized marketplaces. Important company data is standardized and can be accessed via integration.
“That allows for predictive, algorithmic lending with on-demand capital deployment,” Mr. Loranger said.
Because a developer’s capital needs are based on their development stage, Aprenita offers different financing packages, Mr. Loranger explained. Younger companies with at least $5,000 in monthly revenue can receive weekly advances on earned revenue from the App Store and advertising networks at fees ranging from two to five percent. They are repaid when the developer receives revenue from those sources, usually within 45 to 60 days.
Once a developer reaches $15,000 in monthly revenue they can obtain a simple term loan for as much as three times the previous month’s revenue at 15 to 25 percent APR. They have between six and 18 months to repay.
If a developer has an existing relationship with Aprenita and produces at least $200,000 each month they can work with Aprenita to structure a minimum $250,000 loan on mutually agreeable terms.
The developer begins the process by linking its App Store, ad network, user and marketing analytics, finance and business intelligence accounts with the Aprenita system. Data updates occur hourly or daily and are kept in a data warehouse where Aprenita can access it to perform risk assessment, forecasting, credit analysis and ongoing monitoring.
If any further validation was needed, the results of its closed beta provided them, Mr. Loranger said. Several hundred mobile apps received amounts between $50,000 and $300,000, with a few securing $500,000