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Early-Stage Mobile App Investment Litmus Test

Earlier this week, a friend asked me what my “mobile app thesis” would be from an early-stage investment perspective. I finally got around to replying, and here’s what I wrote, largely based on my short time evaluating so many of these for the past six months — he encouraged me to post this. It’s pretty raw, and there are some others parts to flesh out later, but here goes — tell me what you think.

First, is the company trying to:

  • (a) build mobile infrastructure; or
  • (b) build a mobile ad-network; or
  • (c) build directly for consumers (including enterprise)?

If the answer is (a), this then enters a more routine investment analysis, with specific attention devoted to the technical and mobile pedigree of the founding team.

If the answer is (b), this then enters a more routine investment analysis, with specific attention devoted to the founding team’s ties to ad networks and ability to sell.

If the answer is (c), then proceed below…

If the app is intended to go direct-to-consumer, I’d apply this framework of questions:
  1. Will the app be designed to be used on a daily basis?
  2. Is the founding team bringing new technology and/or design to the mobile form factor?
  3. Is there something specific about the app that leverages a mobile device’s sensor that wouldn’t be possible or as cool on the web?
  4. How crowded is the app category, and do the founders have the mettle and the moxie to be aggressive, from Day 1, on distribution, retention, and improving their product in an app environment they don’t fully control?
  5. Are the founders savvy enough to know that being mobile first is cool, but that the web can also play an important part in virality and growth?
  6. Can I visualize old friends and classmates using this app, and if so, how, when?
  7. If appropriate, could the app smartly leverage social signals? (I’m not talking about stupid social sharing buttons.)
  8. Does the app hide its complexity behind a dead-simple, fast interface that isn’t over-designed for design’s sake?
  9. And, if the app has already launched, have the founders taken the steps above before launch, and what do the distribution and retention metrics look like, week over week? (Hopefully the team is measuring these!)

If the answer to most of these questions is “yes,” there’s a very good chance this would make a good seed or Series A investment. Of course, this is a simplified framework, but also a good framework to exclude potential choices.