A StartUP Experiment
I started thinking about this due to recent Northwest Indiana start-up activity. Or you might say lack of Northwest Indiana start-up activity as the late fall start-up incubator that ran did not result in any start-ups receiving funding.
Typically, a full start-up push runs into problems in Northwest Indiana because some of the resources as far as having a new and different internet investment thesis and other view points are not there in the form of VCs or Angels holding those view points or private individuals who invest in VC LLC fund vehicles with those view points. And the marketing push to address those obstacles is just not there as the people involved in the Northwest Indiana start-up scene believe, wrongly, that the marketing part is some part-time activity that they can check off like punching a time clock ticket rather than the full-time marketing push that is infact needed in Northwest Indiana.
What if we could do start-ups in a different way that served to better couple these broken resources in places like Northwest Indiana and boot-strap up at the same time to get to the Billion dollar start-up point or phase?
Bear with me, I promise it is very good and you will go aha-ha at the end. First, it helps to understand that the application stack sitting on top of the internet protocols is royalty and patent free. Or to put it another way, we do NOT have to target the billion dollar market immediately as we can take the gem of the core and re-think it for mobile and do a mobile application that addresses a small part of that billion dollar market as there is no direct barrier to the popularity and viral-ness of the mobile application unless someone does something exttremely bone-head and let a non-mobile developer come up with the tech and business implementations(that is anotherrant for a different easy sometime later).
But every VC states you cannot make money in mobile. Bullshit! Those that state that did not engage their effing brains in the following thought experiment:
1. Pick a Billion dollar market with the idea that we are choosing a billion dollar market that has fragmented data-sets. What is a fragmented data-set? A fragmented data-set is a data-set spread out into different containers that has yet to be organized in a way that makes it easy for a target audience to use that data-set in the target activities.
You are also matching up the pick with some human trends that are showing up as SEO term searches. Why? Because while mobile app store discovery is broken, users using Google and Bing to search is not broken.
2. Re-implement as a FREE mobile application that takes that fragmented data-set and re-organizes it for the target set of activities. Here is the kicker, in-app purchases conversions can be gamed to a 25% conversion rate or higher just by choosing the correct free features and in-app purchase features. The other bonus is that most data-sets update on a yearly basis which means in that in-app purchase revenue mix will be a large amount of recurring income.
Remember, in mobile except for gaming we are taking a fragmented data-set and re-organizing it to couple it to a set of activities to transform those activities into something enjoyable and pleasant and thus those activities become somewhat desirable to keep doing. THAT IS WHAT MOBILE DOES FOLKS! IT IS A HUMAN TRANSFORMATION ENGINE! HEAR THAT HUMAN TRANSFORMATION ENGINE ROAR!
What are the Numbers? Here is some numbers:
2–10 million downloads per year based on the name of the mobile application matching a SEO-lized human trend that potential users search for in Google and Bing.
IN-App Purchases conversion rates range from 5% to 50% depending upon how the free and paid features are chosen and implemented.
IN-App pricing tends to range from $1.99 to $3.99.
2 Million downloads times 5% is 100,000. 100,000 times $1.99 is 100,000 plus 90,000 plus 9,000 which equals $199,000 gross.
Assuming a 50% update rate, the recurring income is 50,000 times $1.99 which is $50,000 plus $4,500 plus $450 which equals $54,950 gross.
Total gross revenue after 12 months would be $199,000 plus $54,950 which equals $253,950.
Now, of course certain fragmented data-sets if set-up right in the mobile application will trigger multiple IN-App purchases per each user. The set of mobile applications I am implementing in fact do trigger multiple IN-App purchases per user. Thus, due to me targeting at least two IN-App purchases per user my estimates for my own mobile applications are at $507,900 gross per mobile application.
Half a million dollars does not sound like much to most people. But, consider this. There are approximately hundreds of thousands of fragmented data-sets just waiting to be exploited on-the-path from entry mobile application to full billion dollar platform.
The second point to consider is that for start-ups targeting billion dollar markets and building platforms we tend to strive for $500,000 in seed capital for 3 co-founders with the assumption of a salary of $50,000. That does not mean no outside seed capital. What it means is we are going to use that leverage to make some high-quality choices in outside capital investments. It also means that I have reduced the 100% seed capital speculation down to somewhat 10% or lower. That is the other aspect of fixing broken start-up resources in non-Silicon Valley areas in that if we reduce the percentage of speculation on that seed capital investment down to double or single percentage points it helps convince non-believers and than that leverage becomes a leverage multiplier.
The third point is that the numbers above reflect the USA mobile application market. The particular set of mobile applications I am building happen to target a set of activities that 25% of the human population do and thus that number of potential users is at somewhat approximately 600 Million. That means by time I do all the foreign application versions that there might be an estimated 60 million downloads per year or in other words almost $7 Million gross in revenue.
So I am not in Silicon Valley just like the other 98% of people wanting to do start-ups. Why can’t we, based on the fact that we have hundreds of thousands of fragmented data-sets waiting to be exploited, take the broken resources in our areas by the effing-guts and get the effing leverage we need to build our Billion Dollar Platform start-up by boot-strapping in the way I have indicated above?
But that is crazy, one mobile application with one developer at a potential of $7 Million in gross revenues yearly and with the potential to build a billion dollar platform just by re-organizing a fragmented data-set into something extremely useful. Is it crazy? Or is it time to disrupt?