How much equity is normal for a programming VC to take for developing a mobile app?


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I'm in the process of developing a mobile app for a niche industry B to C. We have an established brand in 17 countries (hard goods)and significant credibility in our industry. It's not, but as an example lets pretend its motocross. I've developed a mobile app game for our industry having little to do with our product except possible brand integration into the game itself. I've secured LOI from two other large brands for integration, a number of pro athlete endorsements, and have the contacts to secure significant website features on industry relevant sites and tech blogs (pr 6 and higher). I'm able to use the online footprint of our brand to help leverage the app to market as well. Currently with brand integration partners our reach is 1.8 million on facebook, 1 million on twitter, 100k Instagram,etc.

Just one problem. None of us know dick about programming an app. The app idea is fairly specialized and will likely take a team of programmer, from what my friend who owns a software company tells me.

Originally we were going to build a formal marketing plan and go to VCs to raise money. We still might. But I came across a number of VC firms offering programming in exchange for equity. How much is an appropriate equity stake for this type of deal? Where is my "no deal" line, or where should it be? Also, do I make the VC sign a NDA? I'm scared doing that might push them away.

Even if we raise money through a traditional VC how do we value the potential of the app? I'm having trouble finding any analytics to determine how many downloads we might see. How do I figure out our potential market penetration rate? How do I then use that to determine inter app sales for them buying items and currency to continue playing? How do I know whether to charge for the app or not? Without knowing these things I'm having trouble placing a value on the company! Any suggestions?

Ohh yeah, and how do I know whether to launch on iPhone or Android first? I know Android has a larger market share but how do I know if that translate to my industry?

Equity Venture Capital Analytics Iphone Android

asked Feb 25 '13 at 23:17
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Anonymous
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1 Answer


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Given that you have, ahem, limited experience with mobile apps, how did you scope it as being fairly specialized? Platform specific apps can be expensive but are highly influenced by the level of complexity you wish to achieve. Branding apps typically are not that challenging.

Equity for development? If you have prior experience and a strong working relationship with the development firm that could work. The reverse side is that if the deliverable is sub-optimal and you move development elsewhere you have a non-participating shareholder.

Whether android or IOS is the correct platform for you depends on your analysis - many in the US choose IOS first then Android. A worldwide market may be different.

answered Feb 26 '13 at 06:54
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Jim Galley
9,952 points

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Equity Venture Capital Analytics Iphone Android