Remember the 1990s…dotcoms were the rage, everyone everywhere was only and always talking *DOTCOMS*…investing in them, making pots of money…companies were going public daily and people were buying stocks like a pack of chewing gums.

Then the bubble burst, it was pandemonium, the stock market crashed and all hell broke loose! Times aren’t very different now…Analysts fear the next bubble to burst is here…Just that this one is called the “App Bubble”. With the trend and paradigm shifting, smartphone is a new-age reality, over half of the global mobile users will have smartphones by 2018(eMarketer).

This has led to a colossal growth in the Mobile App development market, the new age mobile users, call them millennials or whatever you like – are instrumental in making these a success, as in, they pick some apps which start trending and it spreads like wildfire…just that this doesn’t always ensure that any signification ROI is being generated.

From entertainment to utility all sorts of apps exist in the market, one can get almost anything done using your smartphone – Anything from helping you keep tabs on your kids to figuring out cheap hotel fares! Apps are being valued very highly, Whatsapp which was valued at $19 billion, SnapChat at $10 billion…the list goes on…where more than 50 startups have valuation of $1billion or more.

And, all the investors in the market believe the next big idea will be an app. Result – a dotcom bubble like situation where all investors are looking for cool startups to invest in. And, they are getting blindsided in search of the “Next Big Thing”. In fact app companies even use it to advertise – “Come make the Next Big Thing” – in a bid to attract well-funded ideas.

While I certainly do not think this is like the other bubble, the problem I see is that with the increase in production in the mobile applications, the need for an investor to build a relationship, connect and partner with the app developers is lacking.

I don’t think investing in app ideas which have no possibility of generating any revenue or profit is really the way to go. Investors need to know what is happening with their money and ask themselves questions like –

#1 Does this App or product idea have real revenue generating potential to provide me with any significant return on investment?

See there are two things that make an app successful, the user base of the app and how they monetize the app. One is useless without the other. Say you have millions of followers but you are unable to generate any revenue/profit. It’s same as buying a Ferrari with no engine. It just doesn’t work!!!

#2 Do Entrepreneurs have the background or the necessary skillsets to succeed?

Today investors are investing in apps and developers who don’t have that much experience and are failing to deliver the desired product. It’s like putting all your eggs in one basket and give it to someone who is doing too many things at once! The results can be horrific. An intelligent investor will figure out how to help the entrepreneur get the skills needed to execute the product.

#3 How much skin does the Entrepreneur have in the game?

This is something I’ve seen and learnt over the years. Investors MUST ensure that the app or product in question is the entrepreneurs primary source of earning income and that they would be significantly vested in ensuring the products success. Jumping ship when the goings tough shouldn’t be a viable option. Only then will the entrepreneur in question be motivated to pivot or innovate to adapt to market need and ensure the products ultimate success!

I think this collaboration is not impossible to achieve. It’s an upcoming trend, a lot of companies do it, and we at SourceFuse do it. While taking up a project we become a part of it, make a long term investment & hold equity in that project and get some of our own skin in the game! With our expertise of delivering the products best suited to our clients’ needs, we create something that is meaningful and profitable at the same time. Thus, helping eliminate some of the risks that have extinguished many a product prematurely!