Why did we invest in Kala Gato?
KalaGato is a data-driven app acquisition company that acquires fast-growing, unfunded mobile apps globally and helps them reach a wider audience.
The company raised $4 Million in its pre-seed round in 2021 from several institutional investors including 9Unicorns, Village Global, and Anicut, apart from Eximius.
The following reasons compelled us to invest in the company.
- A Storm of Apps
Source: data.ai
The smartphone has to be a defining moment for the 21st century. The technology brought people together in an unprecedented manner and enhanced their lives to make it more convenient and productive. As smartphone became more intertwined into people’s lives, this new landscape was leveraged by new kind of product: mobile applications.
While users could only access certain preinstalled apps initially, it wasn’t until Apple’s launch of the App Store that the market was truly opened to developers. Ever since then, the market has been flooded with a myriad of apps for a myriad of purposes.
In 2022, the mobile app economy is powered by over 7 million apps across the play store and the app store that powered it to generate $167 billion in app store spend and $336 billion in ad spend globally. In a year marked by rampant inflation and cost-of-living crises worldwide, the market remained relatively stable to indicate how indispensable apps have become for smartphone users.
While the market has been dominated by games for a while, spending on other apps has increased considerably over the past year to indicate the formation of a much more competitive and heterogeneous market.
The Indian app economy is also slated to go through a buoyant time in the near future. As per a recent report, the Indian app economy is expected to reach $800 billion by 2030 with a CAGR of 32%. While revenue from the domestic app economy is estimated to be $195 million currently, huge multipliers in the form of greater smartphone and internet penetration. India is likely to have 900 Mn active internet users by 2025, up from 622 Mn in 2020, while the quotient of smartphone users will be nearing the 1 billion threshold. The above factors will undoubtedly enhance the market. However, as the user base increase drastically over the next half a decade, so will the competition amongst applications for user’s attention and retention.
2) Massive App Mortality
Apps usually enjoy low user retention number. As per Business of Apps, 80–90% of mobile apps end up being abandoned only after a single use. Further, an average mobile app can expect to lose around 77% of its DAU after just three days. To address this, Gartner conducted an intensive study to understand the market in greater detail. As per the findings of the report which indicated that of every 10,000 apps in the market, only one was commercially successful in 2018, and the degree of competition in the market has only amplified since then. This is only further illustrated by the fact that 485,000 apps were downloaded every minute in 2022. Therefore, to attain success, apps need to not just capture lightening in the bottle with their ideas, but also be completely optimised to perform better.
Referring to Gartner’s report again, while inadequate problem statement was by far the biggest reason for app failures (42%), the top 5 reasons were rounded off by operational factors like imprecise business model (17%), ambiguity in deciding the correct marketing strategy (14%), a weak product core (19%), incorrect launch time (13%).
This indicates that while a lot of apps might even start with a great idea or a relevant problem statement, they might be let down by inefficient operations. Therefore, if these operational woes were to be sufficiently addressed, the aforementioned apps might be able to garner success and attend to large user base’s needs.
3) A Prescient Team
This unique opportunity was identified by the team that would go on to found KalaGato; Aman Kumar and Himanshu Dhakar due to their exceptional pedigree and multifaceted professional journeys.
Aman is an ISB alumnus with a very unique skillset — the ability to blend his founder’s instinct with his VC perspective. Prior to starting KalaGato, he had already attained stellar experience both as a founder of Jobshikari, and as a VC during his stint at advantEdge.vc. This allowed him to not just envision a business that can scale sustainably, but also be more methodical in execution.
Himanshu, an IITD alumnus, is a master at dealing with data — the heart of KalaGato’s model. Having previously worked as a Data Scientist at TransOrg Analytics where he was able to assist large clients like Times Internet in their relationship with data.
Together, they are able to form a holistic team that is not only precise in their convictions, but possessed of a skillset that is exceptional.
4) An Innovative Model
As illustrated above, there is a market for apps that were based on a cogent idea, but couldn’t scale due to operational handicaps. To tap this massive market, one needs a meticulous discovery process that allows them to find out promising apps consistently and a well-developed competency in optimising and streamlining them. This is the very backbone of KalaGato’s approach.
Their model is centred on a comprehensive data analytics platform that provide KalaGata a granular look at the market. They use the same to discover promising apps with defined traits that meet their portfolio criterions. Given the competitiveness that pervades this market, Aman and Himanshu are extremely diligent on finding only the most relevant of apps that match with their portfolio approach.
Once these apps have been identified, KalaGato acquires them from the developers using leverage. They seek to rid an app of its operational shortcoming by working quickly to rectify any imprecisions in the underlying business model, refining the interface using data to make it more user-friendly, altering its marketing strategy, and optimising the overall cost and revenue structure to make the app more profitable. Through these extensive processes and an overarching data-led approach, KalaGato enables these apps to overcome their operational shortcomings and become more lucrative. Once they have been turned around, KalaGato creates a network to sell the advertising space of these apps to offer them an additional source of revenue.
Their extensive data-led approach allows KalaGato to undertake the aforementioned actions seamlessly and flawlessly. Since data guides them through the entire journey, KalaGato can ensure that they are being as objective as possible at every step of the way.
Conclusion
Ever since the App Store’s launch in 2008, the app economy has been rampant. Powered by 7 million apps across Android and iOS, the global market generated $167 billion in app store spend and $336 billion in ad spend in 2022. The Indian market is also projected to reach $800 billion by 2030. Powered by powerful multipliers like increasing internet penetration, and rising smartphone penetration, the market is only projected to increase in the future.
While the app economy is flourishing, the increasing vibrancy in the market is also bringing about increasing competition in the market. About 80–90% of mobile apps end up being abandoned only after a single use, while being expected to lose around 77% of their DAU after just three days. Considering that 485,000 apps are being downloaded every minute, apps need to be really optimised to attain success. While identifying a problem statement to build an app around is the biggest woe, operational factors often let down promising apps. Should they be allowed to turn a corner, there is a ready market to receive them.
This problem was identified by Aman and Himanshu due to their exceptional pedigree and multifaceted professional experiences. They are one of the few teams in the ecosystem that can successfully intertwine an entrepreneur’s hunger with a VC’s prudence to navigate the company forward. Through this approach, they were able to create a unique model that could successfully cater to this market.
To make use of the opportunity, one needs to be able to identify promising apps, and enable them to optimise themselves while being as precise and objective as well. To achieve this, Kala Gato uses an innovative business model that is based on a data-led approach. They use their comprehensive data analytics to find promising apps that meet their portfolio criterions. Post their acquisition of these apps, they ameliorate their operational issues like terrible UI, imprecise business model, etc. to make them more viable. This allows them to allow these apps to scale to their true potential and reach a much wider user base.
We are delighted to be a part of KalaGato’s journey, and wish them the best!
