iPad and Apps Economy

We all now know officially that Apple launched iPad. It is an interesting new concept between mobile phones and laptops. And definitely it will have and need a lot of applications to be successful. We saw already some games, books, and newspapers that are available.

The next step is to get developers to make much more apps. Paul Grim, a General Partner at venture capital firm SunBridge Partners, commented the apps business from the traditional VC point of view in Venturebeat’s article, An investor’s take on the iPad — how to parse the hype. In this article Paul Grim says:

“Although I do believe there will be many successful apps on the iPad, I don’t believe they are generally venture-backed material. As with most of the iPhone apps, this will be a hits-driven business with little capital intensity; most of the successes will likely be angel or self-funded.”

This is the same point Grow VC has emphasized many times (like yesterday). We have actually divided the mobile startups now into two main categories (there are of course much more segments inside these categories):

1. Hardware and more demanding technical platform startups
2. Application startups

The first category includes companies that have been funded by traditional VC’s. But many of those firms also need seed funding before a VC round. The second category is not really for the traditional VC’s. But it doesn’t mean that they are not good business opportunities. But the capital structure and risk profile is different from VC’s targets. They can start with small money, and it is not technology risk, but much more market risk, i.e. can they really get loyal users.

This is one reason, why new models for seed and startup funding are needed. And we believe Grow VC’s concepts, which we have now in beta and especially new ones we launch in this year, will offer a new way to fund these companies.

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