We often get asked the question “Why do we need a crowdfunding platform just for mobile apps?”. It’s a very good question, and we wanted to spend some time to share our thoughts on this important question. So, here it goes:
No Pre-Sale Proposition: Most mobile apps are free, or at least less than a few dollars, so you can’t make the economic case for the pre-sale, which is what typically helps most crowdfunding campaigns to exceed their goals. On AppStori, users understand the challenges of creating benefits that don’t exactly fit into this mold. We have experts who can help you find the benefIts that are best for you and your team given this unique dynamic.
App-Specific Features: When people think of a crowdsourcing platform, they immediately think of funding. However, there is much more value that a crowd can bring to the app development process. For example, your crowd can be beta testers, they can follow your app’s progress, and they can be early adopters as you hit the app stores. Harnessing this app-specific value can only be maximized from a dedicated community.
App-world Ecomomics: Building and marketing a successful app often requires understanding how to manage your crowd. Getting early awareness and riling up your community for your launch will help you gain a better position in the app store, which will help you get more “eyeballs”, which will help you be more successful. Understanding this dynamic and providing resources that enable this, is one of the value propositions of the AppStori platform.
Service Providers Become your Partners: There is an economic value proposition and incentive for service providers that target mobile app developers to get involved with your app early that justifies them contributing to and “investing” in your idea. Therefore, we go out and target the best of breed providers that matter to our community. This way, they get great and dedicated app developers as prospective clients, and you get deep discounts, and sometimes direct cash incentives to help you be successful. In addition, they offer direct mentoring from experts in their field, which is a hugely underrated benefit.
App Enthusiasts Unite! People with common interests often hang out together. We are going to continue to evolve the platform, not to target the largest audience, but rather to add as much value to app developers and the app enthusiast community. This is why you often see us and our partners at the major App events; because we hang out there too ;)
Of course, there are more reasons, but it all boils down to the fact that focusing on one community, one interest set, one ecosystem, and one value proposition enables everyone involved to reap more benefits than if you targeted the masses.
So what does this mean to you? If you’re an app developer and considering making an idea a reality, think of all these benefits (not to mention the thousands of dollars in cash and services) and get started with AppStori. We think you’ll find it worthwhile.
Creating an app is hard. People think anyone with a Laptop and Wifi can make a million bucks developing an app out of their garage…we know better. Creating a successful app takes a lot more than a power cord and some sleepless nights. It takes expertise in marketing, front end design, back end infrastructure, community management, and above all…it takes passion.
As we continue to grow AppStori, it’s the passion of our developer community that amazes and inspires us. It is our goal to help make developers successful by helping them to deliver great apps. One of the ways we do this, is by injecting “the crowd” into the development process. Well, today, the crowd just got bigger. We’re excited to announce that AppStori is partnering with Amazon, provider of Amazon Web Services, the premier infrastructure provider, and Appboy, a the most comprehensive customer engagement platform for mobile apps, to provide developers with services, cash, and mentorship. Both AWS and Appboy share our beliefs that supporting developers and the developer community is extremely important to the future of mobile.
These new partnerships, along with our existing relationship with Millennial Media mean that developers who list on our platform will get literally, thousands of dollars in cash and services from some of the leading providers in the mobile space. On top of the financial and service benefits, qualifying app developers will be able to tap into our growing mentorship program, where experts in the field of monetization, user engagement, and infrastructure will be sharing their knowledge to ensure that you create the best possible app you can. We’re extremely excited about growing the crowd and we hope you are too.
Find out more about these new partnerships or Start now by clicking on “Post an App” (login req’d).
The AppStori Team
Thought we’d follow up with more valuable content from the NYC Gaming Conversation: Monetization, the New York Gaming Meetup’s November 8 meeting, as it was a very informative and well run session focused on games but applicable to any app. The panel Q&A session generated great take-aways that we at AppStori want to pass along to all of our community.
A special Thank You to the panelists, who’s input is represented in the summary of questions and responses below: Wade Tinney (CEO Large Animal Games), Glen Nigel Straub (Monetization, Millennial Media), Deepa Muralikrishnan (General Manager, Global Payments at Live Gamer, Inc.), led by Paul Canetti as moderator.
1. How has the Internet and mobile shifted gaming monetization?
These days, everyone carries devices at all times where all is accessible but there needs to be considerations for connectivity and the “snacking” culture.
2. When developing games, is it important, common to think about where a person will be playing it? (play patterns)
Yes, it’s very important. Consider not just where they will be playing but what that environment is like: is there connectivity, how much time will they have in that place, are there others around? For example, in NY, people play in subways where there is no connectivity, likely have 1-2 minute stints of time at once, and there are others around so they likley don’t want to be creating audio or video.
3. Monetization has become what seems like an ongoing process, no longer only on acquisition - is that true?
Absolutely, it’s become a service business. When online, there’s the added flexibility of dynamically using user data to change in app advertising and in app purchase experiences to cater to the user. Interestingly also, many apps are not really “finished” when they release; they are releasing knowing they will continue to grow and expand with users (and therefore leading to more monetization potential) as users get to know the app and progress through it.
4. Is AB testing popular with game apps?
It varies - it is common during testing with design components (button labels, etc…) and in terms of launching with different pricing strategies but it’s not common for games to release in multiple versions.
5. What’s the trend with console gaming?
It’s trending up; gamers are on mobile, online, and consoles. PCs are dominating mostly but more so, gamers are cross platform.
6. If I’m starting out as a new game developer, what should my goal be? Is it bad to just go for a bunch of users and not worry about money?
It’s best to think about how you’ll build a business from it from the beginning. Monetization should be a consideration early, during game design: what kind of advertisers will be interested, where will you put ads, what kind of goods make sense?
7. What are best practices besides paid user acquisitions as part of developing a game or after launch that will create a network organically? What network effects drive money?
a. Publish across multiple platforms first - that initial upfront investment is important to boost marketing, see where the app succeeds but pull back after evaluating where the highest value is and is not.
b. Social hooks: Games that inherently encourage recommending, sharing, competition are a natural way to boost the network.
c. Make the user want to come back the next day. It’s much better for retention and monetization whether that be in app purchases or advertising to have someone play a bit everyday rather than all one session. Games can then use user’s interest to tempt with new purchases and show success through longer term popularity. Hooks may include time delays/constraints to access something valuable, gated (daily) content, or asynchronous playing.
8. What In-App purchases are most effective?
Virtual currencies and consumables are the most popular. Players will buy virtual currencies in bulk to exchange for other in app purchases. Anything that helps a user go to the next level, succeed better/faster is a win.
a. Know your customer, price it right for them, and figure out the right timing to offer them an option to buy.
b. Hit on the emotions a game generates in a user, whether it be frustration to get to the next level, curiosity to see more features, competitiveness of playing with more people, status…
c. Put purchases in places in a game that makes sense to what the user needs or wants then. Users will buy more as they are more loyal and buy more when their emotions are higher but the game has to integrate it well.
9. What are the leading predictions for the world in 2016 and monetization?
There are a few key ones:
a. Cross Platform: There will be more cross platform apps, where a user can start on one device and seamlessly pick up from that spot on another. Related, funds and digital wallets can be used across any.
b. Digital - Reality bridge: In game purchases and real world purchases relating to, creating each other - imagine buying a virtual good and getting a physical product? Cool stuff…
c. All apps will be free to play, no more purchasing for the app itself, monetization will be from advertising and in-app purchases.
We hope you are able to take something valuable away from this; we certainly did and look forward to sharing more with our great community. Comments or questions? Please share!
The New York Gaming Meetup’s November 8th meeting, A NYC Gaming Conversation: Monetization, was led by a strong panel, moderated smoothly, and thanks to a great audience, generated a really informative discussion. While the focus was on gaming apps, all the content is extremely relevant for any app developer or team. Thank you very much to the panel of Wade Tinney (CEO Large Animal Games), Glen Nigel Straub (Monetization, Millennial Media), Deepa Muralikrishnan (General Manager, Global Payments at Live Gamer, Inc.) and our moderator, Paul Canetti.
The best part of the evening was its conclusion of key best practices that are really more like “must do’s”. They’ve been summarized below, we hope you find them useful and use them!
We encourage our community to get involved in Meetups like this and are happy to do what we can to share the wealth. Enjoy!
When we started AppStori about a year ago, we had one goal in mind: to create a platform that would help mobile app developers and consumers collectively bring the best apps to market. We chose to accomplish this by harnessing the power of “the crowd” very early in the development process and prior to the app hitting the app stores. In addition to crowdfunding, we added engagement tools including ‘Follow’ for ongoing engagement, beta tester outreach for QA and UX support, social tools to spread the word, and a blog to track progress and communicate with a growing community. Today we announced the next big development in fulfilling our vision, and it’s likely to be the biggest and most impactful one yet.
Millennial Media, the leading independent mobile advertising and data company, is partnering with AppStori to support the creation of the next generation of great mobile apps. Millennial Media will be contributing $500 in funding, and a $500 advertising credit to qualifying AppStori projects.On top of the financial contributions, Millennial Media will be providing a dedicated mentor to help with questions and strategy as developers seek the best ways to monetize their apps, and grow their base of users.
This is a significant statement to the mobile consumer and development community. Beyond the financial benefits that Millennial Media is adding to the mix, they are leading the charge in a shift in the way mobile apps can generate market feedback and support to catalyze successful launches. In an environment where more of the core development functionality is being trusted to cloud and other external providers, and where the landscape is increasingly complex, developers need true partners to help them succeed. We see the support that Millennial Media is providing to the development community as a huge step, particularly as the relationship will begin before an app ever hits the market. For developers that do not have the big brand names behind them, they can consider Millennial Media a partner from the beginning.
We are delighted that Millennial Media shares our vision, and are excited by the prospect of what relationships like this can bring to developers and consumers of mobile apps. As we end many of our blogs and articles, stay tuned for more…
The AppStori Team
At AppStori, we are all about creating a dialog between developers and their consumers before an app even hits the app store. As part of this dialog, you told us that you wanted to make sure that not only are the conversations about raising funds, or finding beta testers, but also about gathering feedback from the community.
Today, AppStori is releasing the first of a series of updates to help developers request and gather this feedback, and to easily allow consumers to share their opinions and comments on the projects they love.
We’re calling this release Thumbs Up/Thumbs Down. TU/TD allows AppStori listers to ask a question of their audience and capture their votes. For example, considering a new icon? Post to your blog and ask your community whether they like it or not. Is Facebook integration important as a login mechanism? Ask your community.
All of the votes are anonymous, unless the voter wants to share additional advice and/feedback on the post. All you have to do is click on the “Thumbs Up” or “Thumbs Down” icons to express your opinion. Project listers will have the ability to choose whether a post includes the voting mechanism or not. Also, as project listers, you will get proactively notified when users share their opinion, so you can keep a real-time watch on the action from your post.
This post was originally published on Trey Smith - The Blog; it’s a great read and we both want to share it with our Developer Community!
by on OCTOBER 16, 2012
Next month will be the two-year mark of creating my first game, or at least starting to create it. Not only was it my first game, it was also when I met my lead programmer, Nik. Nik is from the Ukraine and has worked on about 10 games with me since and he’s actually coming to visit next month for the first time.
I decided to find out how much the first source code has made and was shocked to see we just crossed the $28,000 mark and it’s still cruising along to the tune of $1,345.82 the last 30 days. I created this first game because I am a geek, not because I thought it would turn into a real business with employees and now over 6,000,000 downloads. This was all just a hobby originally, but looking back each one of these little games I created is a Digital Investment. A small asset that keeps returning money, month after month.
This blog post is going to take a look back at my first digital asset, an unlikely investment named…
This first game I created was called Kolo’s Journey:
I say “was” because if you search for Kolo’s Journey in the app store now, you won’t find it. See, after a while Kolo’s Journey quit getting many downloads which is pretty typical. Usually your game will get a lot of downloads, then slowly trail off until it plateaus with a few coming in each day. This is when it’s time to SHAKE things up and bring life to this dying app. Now I have a few different tricks I do to bring life back to these apps that I’ll go over in another blog post, but back when Kolo dipped hard, I didn’t know much, so I tried something kinda crazy.
I noticed a few people using a little app store trick. They were naming an app one single keyword and it would start ranking super high for that keyword, so I decided to give it a whirl. I changed the name of Kolo’s Journey to…
Yup, I literally remamed it “Music.” (with a period at the end because “Music” was already taken).
Low and behold it worked:
Now, unfortunately this trick doesn’t work after the “Chomp” changes and even though it dropped my revenue I think it’s a GOOD thing. The fact I could rank #1 for the search term “music” by naming my app “music.” is quite a large and ridiculous loophole :). But Music/Kolo’s Journey is STILL plugging along. In the last 30 days it’s made $677.67.
Here’s the breakdown:
In App Purchases:
Currently Revmob is the biggest money maker for Music and the revenue is not too bad, but it gets even better. After seeing that Music was a success, I figured what the heck… I’ll make a clone of this and call it something else that people search for.
I sat back for a few minutes and thought, “What would be the most searched phrase in the app store?”
Here’s what I ended up with…
I figured if people searched for Music, then more searched for Games, and they most definitely did.
I was ranked #1 for Music but #4 for Games. This meant the traffic was only slightly better in Games. Of course now this trick doesn’t work and both apps do about 400-500 downloads per day each (instead of 1500 per day) but still bring in a good amount of income. eCPM’s were not as high when the trick was working at its fullest potential, so revenue back then was only slightly higher than it is now.
Now I’m ranked around #25 when searching music and nothing for games, but people keep finding them both somehow!
Games is pretty much the same game but with different music and a couple small new features, like an unadvertised sequel. What is really strange is how CLOSE the financial data is on Games and Music. Maybe it’s because the icon, gameplay and description are all similar.
Here’s how much it’s made in the past 30 days:
In App Purchases:
$10.23 – IAP
(Again RevMob is the main bread winner here. I use Chartboost successfully in other apps, but in this one I have it turned off as it doesn’t convert as well)
My first digital investment (Kolo’s Journey) turned into two games (Music. and Games.). In a second I will breakdown all the details and show you how much revenue both games made and what was most profitable, but before we do that let’s check out the hard cost and see what I spent to have these made.
Kolo’s Journey was my first game and I spent $1710 to have all graphics and programming completed:
That’s actually a direct screenshot from Nik’s old odesk account as he was helping me figure out the dates and amounts from all of this stuff.
This was before Nik worked for me full time, so I asked him how much to create a clone of this game which ended up being Games. There are two different accounts of this; he says it was around $150 and I think it was around $300-$500. I know it didn’t take him long so we’ll go with $350.
That puts us at a TOTAL cost of $2060. It’s also good to note I never spent any money promoting these games. I’ve never used TapJoy, bought installs from Chartboost, etc.
Now let’s dive in and check out the numbers.
Below I’ve compiled all data on the two games. Amazingly they’ve come EXTREMELY close to each other in total revenue. It’s very odd because Games was launched 30 days later than Music. Also, Music was a paid app for a while (when it was Kolo’s Journey), therefore it has much more in app purchase revenue. I thought it was pretty cool I happened to do this research post right when they were so close in revenue.
Here’s the full data:
The games have been live for about 22 months and made a total of $28,623.86 with no signs of slowing down. Not bad for a $2200 investment… actually looking at it from an ROI perspective, that is pretty amazing. That’s a 1289.5% ROI:
Over 1.8 years that is a 733% Annual ROI… Not bad considering the current CD rate is 1.1% at the time of this writing
Thanks for checking this out. I really enjoyed breaking this all down as I wasn’t sure of the revenue on these. It’s been a blast.
Thanks for reading and talk soon,
P.S. – Ok, going back to play Dishonored now… this game is so good!
Over the past couple of months, there has been a lot of rhetoric on the crowd-sourcing and crowd-funding phenomenon, particularly as it relates to mobile and gaming. A few highlights we’ve seen: KickStarter’s updated rules to keep project listers accountable; emerging platforms to invest in games; and how crowd-funding even works. But the post that caught my eye was the one featuring Chris Crawford, and his failed attempt to reach his funding target for his Kickstarter project, Balance of the Planet.
Chris’ experience highlights the strengths of crowd-funding platforms, as well as their weaknesses. There are a variety of reasons why most mobile app or gaming projects don’t reach their targets, but the biggest one of all is dead-simple: generic crowd-funding platforms, like Kickstarter or IndieGogo, while they work very well for many types of projects, are not designed for the mobile app developer in mind. Period.
This is why you’ll continue to see innovation shift from just how products are funded to how they are funded and designed as they come to market. Gaming/mobile apps are no different, and are already part of a trend toward more “vertical” crowdfunding solutions. How can these help developers tackle their specific challenges? By building a deeper, more relevant connection with their community, and providing utility that they can’t get anywhere else.
For mobile developers, the challenge goes beyond just funding; it’s also about validating a vision and generating market support for it. In fact, getting a mobile game out to market is getting easier, as technology gets cheaper and better. The greater hurdle is developing a product that’s engaging, can break through the clutter and get traction. It’s less about raising money for $100K+ campaigns, and more about building community engagement and support.
Mobile developers uniquely need to address a variety of questions early in the cycle of developing a game. For starters, what are the best tools at their disposal to design, build, test and measure the progress of their app? Where to find beta testers? Is there a way to acquire early adopters and app “ambassadors”? The list goes on, and it’s one that’s thought about by every developer whose vision is to create an app that has legs.
When you think about it, it’s remarkable that there are more than one million apps in the app stores, with gaming and entertainment apps driving most of the activity, yet, the process of bringing an app to market is opaque. It’s also disjointed, with very little connection to the end customer, at least until launch, which is when the marketing fury typically begins. But, what if the developer opened themselves up more to the crowd – consumers, companies and other stakeholders – not just for hard dollars, and some sales, but for genuine feedback and support?
This is the promise for crowdsourcing 2.0. Stay tuned…
This post originally appeared on 10/2/2012 on our column on Gamasutra.
You’ve done all of the prep work. Your video is awesome. Your benefits are compelling. And you’ve clicked the big “PUBLISH” button. Now what?
One of the most important times in the life of your project will be the first week of it’s existence. This is when people learn about what you’re doing, why you’re doing it, and how they can help. However, this is also when you need to be the most vocal. At AppStori, we believe in a philosophy of over-communicating. It’s kind of like the week before a special airs on TV, every other commercial is about that special. This is your special.
Asking for help is not easy for everyone, but in the end, it’s worth it. The most successful campaigns are built on a balance of asking and giving. Asking for help (money, testers, followers, etc.) and giving information: creating the story behind your Stori. We always say it’s creating the reality show that is your app.
So, in order to get you started, here are 8 thing you can do during the first week your project lists on AppStori to maximize the chances of reaching your goals:
Send an intro email to EVERYONE
Email is still one of the most effective forms of impactful communication. As a medium it allows you to tell your story in more detail than most any other push mechanism. We recommend using either your personal email, the AppStori email platform, or MailChimp. Each one has it’s benefits. Your email platform is generally where you’re most comfortable and where your contacts are stored, however, most email platforms will cut you off at 25-50 recipients for a single email. So you will have to batch the blast into smaller groups. The AppStori email platform provides a design template, and some sample content. You can upload your contacts and then see who subsequently becomes a user. Finally, the Mailchimp platform offers up to 10,000 emails/month for free. One of the benefits of mailchimp is that you can track delivered emails, who opened it, and who subsequently clicked through.
No matter what platform you choose, content will be key. Your email should answer 3 questions:
● What is your product (i.e. my app is going to do XYZ for the world)
● Why are you asking for help (ie, what is the goal)?
● How can your community help (what are the different ways they can support you)?
There are some sample emails on the AppStori email platform, but the best bet is to tailor a message to your own personality, product, and needs. (Follow-up Tip: Send a separate personal, follow-up email to close friends who are likely to respond)
Post to facebook three times with differing messages
Facebook is a great medium to garner in-line and immediate feedback. There are many ideas on when to post what messages, but we like the following process:
● Announce your project and ask for help. Tell users that you are raising funds, looking for beta testers, and/or looking for help and/or even followers of your project. And, of course, make sure to include a link to your AppStori page.
● Send a bulk thank you to all the people who helped after the initial post. This will let people know that people are joining your community and helping you out.
● Offer up some information. Send a pic of the team at work, a screenshot of what the app will look like, or even something about a great benefit. This post is about maturing the dialog and creating a storyline
One other thing you might consider is creating a facebook event and inviting everyone you’re comfortable inviting to it. The event could be “Support MyApp, Follow us now” or something that will draw attention.
Post to twitter every other day
On twitter, the Average lifespan of a tweet is 1.5-3 hours and rapidly diminishes after that. They are the easiest to create and the easiest to share (and they have the potential of reaching the largest audience). Simple posts like “Support our #app on @AppStori, Become a beta tester
Update your AppStori blog at least twice in the first 7 days
The AppStori blog is one of the most underutilized resources on the platform. Every time you update your blog, everyone in your community gets an email with that update. This means that those that are casual observers waiting increase their engagement (i.e. add funding) get reminded that you exist. It also serves as a platform for you to communicate with your audience. People love personality. Use the blog to show the personality. Post pictures. Upload an ad hoc video. Say thank you. Write a manifesto. Just say “Hi”. The blog is the best medium to communicate directly with your existing community, and recruit casual observers to join.
Embed your AppStori Widget into your website, and encourage others to do the same
Believe it or not, the AppStori widget is super-easy to embed in any website/blog, and will drive significant traffic back to your AppStori page. With just a simple cut and paste, you can extend your AppStori campaign to any site. To do this, just click on the Get Embed Code on the right hand side of your detail page, and cut and paste the IFrame into your own website.
Reach out to journalists, bloggers, and others who have an audience to help you get the word out
Not everyone has a direct line into the NY Times, but chances are you know someone, or know someone who knows someone, who would be interested in writing about your story. Whether it’s a school editor, a local newspaper, or a nationally syndicated columnist, the press will drive attention to your efforts. If you are having trouble with this, please let us know and we’d love to help.
Send public “thank yous” for those who publicly contributed (and private thank yous for those who contributed anonymously)
It sounds simple, but saying thank you goes a long way. Remember, you are building a brand and a customer service organization even before you launch your app. Every interaction is an opportunity to do a great job at what you’re good at. Creating a delightful experience for one loudmouth goes a VERY long way. Say thank you for every contribution, every follow, and every shout out. Note also, that some people prefer to remain anonymous, please respect that. Finally, beta testers are not publicly disclosed on the platform, so unless they tweet it, you may want to be sensitive to publicly thanking them.
Let us know any major happenings with your project, we’ll be happy to spread the word through our social channels as well
AppStori is about creating a community experience around the currently opaque development process. We love to spread good news (and people love to hear it). If you’ve recently had a great article written about you, if your app reaches and app store, or if you recently released a significant upgrade, we want to tell the world about your success.
Running a successful AppStori campaign can catalyze your development efforts in many ways. The end goal is to make sure that when you are ready to hit the app store that you have a herd of people who know what you’re doing, love what you’re doing, and will spread the word about how great you, your team and your app is. The first weeks set the groundwork for the rest of your campaign. Thats why we believe following some or all of these steps will pay off, not just in dollars, but with a community of followers and advocates what will take your app to the finish line.
By Patrick Lee
Patrick Lee is the CEO of alivenotdead.com, an online community for artists and their fans. Previously, Mr. Lee co-founded and served as CEO of Rotten Tomatoes (rottentomatoes.com), a leading entertainment website focused on movie reviews and news and one of the top 800 most trafficked sites in the world (according to Alexa). Mr. Lee also co-founded and served as CEO for Design Reactor (designreactor.com). He holds a BA in Cognitive Science from the University of California at Berkeley.
We raised a small angel round for Rotten Tomatoes back in January 2000 and shortly after, everything went to hell. At the time we had identified over a hundred potential competitors in the entertainment space including companies like Den.net, Entertaindom, and Pop.com with all-star teams and huge backing. After the bubble burst, competitors started going belly up left and right and within a few years nearly all of them had gone out of business. Some spectacularly so. During that time, rather than hoping your company was covered on a site like Techcrunch (which didn’t exist back then), your goal was to make sure your company was NOT covered on F^*%&d company.
Watching all those companies go under, I learned two important lessons:
#1: Bigger Isn’t Always Better.
When times are good, the well-funded startups can hire more people, be more aggressive, and buy market share to get big fast, raise more money, and go for an IPO. When times are tough, these tactics often lead to an early grave. Which entertainment companies survived the crash? For the most part the companies fell into one of two types — the ones already bought or owned by the big players, such as Yahoo! Movies, movies.com (Disney), or IMDb (Amazon); or the lean independent websites run by a handful of enthusiasts, such as Ain’t It Cool News or Dark Horizons. If you don’t have unlimited funds at your disposal, you can’t maintain a huge burn rate in tough times and not expect to get burned. Which leads me to my second point…
#2: What You CAN Control
Especially for young startups, revenue can be hard to predict and even harder to control. One month you might be pulling in some decent revenue and the next month might be completely dry. What not every startup realizes is there is one thing you can control 100%, and that is your expenses. How many people you hire, what salaries you are paying, your office space, etc … all of these things you can control. If you want to get to breakeven, your revenue has to match your expenses. If your expenses are double your revenue, you can either double your revenue or half your expenses (or some combination thereof). Guess which one is easier?
For Rotten Tomatoes, we transitioned our 20+ person team over from our web design firm and within a year had to cut back to just seven people with reduced salaries. We subleased out half our office space to a friend’s startup. We renegotiated our hosting, licensing, and other recurring monthly fees. We got ourselves “ramen profitable”.
When you are breakeven or ramen profitable, you have an unlimited runway. You don’t need to raise more money in order to survive because you can’t die. At that point your challenge is to figure out how to grow and scale the business into something big without dipping into the red, but at least you’ll have some breathing room and the luxury of time to make mistakes and figure things out.
Times Are Changing
These days, it’s easier than ever to get funding to get started. There are incubutors and accelerators all over the country that will provide you with initial capital, connections, and (sometimes) office space. There are crowdfunding and consumer discovery sources such as Kickstarter and AppStori. More importantly, it’s cheaper than ever to start a startup so it doesn’t take much to get to breakeven. I know of some bootstrapping companies that have gotten to ramen profitability just by subleasing out their excess office space! The only reason why startups should be going under these days is because the founders decide they don’t want to do it anymore. Point being: you have no excuse. You only fail when you give up.
For those of you that want to hear more, here is a talk I gave to a startup club in Hong Kong (appropriately named StartupsHK —www.startupshk.com) about the ups and downs of all the startups I’ve been involved with, including Rotten Tomatoes: