Thursday Mar 21, 2013 by Dennis Keohane - Contributor, VentureFizz
Late in 2011, Eli Sapir and Jonathan Kay realized that there was no viable (or profitable) endgame for app creators, so they decided to start Apptopia, a marketplace for the buying and selling of mobile apps.
Back in 2009, a period that Kay referred to as the “Wild West App Gold Rush,” Sapir created GPush, a highly successful and heavily downloaded Gmail alert app. At some point, Sapir decided he was done with the app; but even after making a huge profit, he wasn’t sure of an exit strategy for the business. The company was making money, but Sapir had no idea what it would be worth or how to even sell it.
The problem Sapir faced was multifaceted. “Apps are little businesses,” Kay pointed out. “There are assets, they have expenses, revenues, and people who are working on them.” Without having any idea on how to get value out of GPush, Sapir felt tied to the app, a common problem for app developers. Even highly successful app founders have never had a clear route to cash out and benefit from the asset that they have created. As Kay said, “People just ride apps down to zero.”
So Sapir, Apptopia’s CEO, joined with Kay, the company’s COO and former Buzz Ambassador at Grasshopper, to establish a platform to help app developers. With Apptopia, they created a new financial marketplace for a class of products whose only path to making money, up to that point, was through the Apple or Android app stores.
Apptopia originally received funding from New York real estate VC firm Expansion VC, who was taking a chance on the technology market for the first time with their investment in Apptopia. However, the company’s largest and most eye-opening investment came in the summer of 2012 when Dallas Mavericks owner Mark Cuban became an investor in Apptopia.
While at Grasshopper, Kay had successfully helped the Cuban-backed finance app Chargify with its marketing. Kay and Sapir sent an inquiry to Cuban about his possible interest in their latest company and received a simple, unforgettable response: “I love it, tell me more.”
The two Apptopia founders were shocked when, previously spending over a year raising $350,000, after two weeks of emails with Cuban, they raised $500,000 from the Maverick’s owner. Based on the number of companies pitching him, Cuban uses email as a way to make everything more manageable and allows him to set certain standards.
Kay added that Cuban’s style was very direct with no fluff and he knows which questions to ask to get to the core of your business and idea, which in return, allows him to make a quick decision on the investment. Kay felt that Cuban made the investment because of how “binary” the opportunity was… either it gets big and Apptopia becomes THE mobile app marketplace or the market just doesn’t exist, but ultimately he’s backing the team who has the best chance of making it succeed.
Having Cuban on board with Apptopia has been great in Kay’s opinion. For one, he has been impressed by the investor’s involvement in the company, checking in every month and wanting to learn of any new developments with the website. Second, Kay loves how Cuban is not like a typical VC. “He is more like an entrepreneur,” in Kay’s mind; he often contacts the Apptopia team, one of the first mobile companies in his portfolio, to ask their opinion on the relevancy on other tech companies he may be looking to fund.
The website’s success in the first few months of 2013 is starting to make the investment in Apptopia a shrewd one for Cuban. For one, the company saw its revenue double in January and February, and the numbers are projecting even more profit in March. Second, in the next couple of weeks, Apptopia is going to launch a major redesign, which, for Kay, will make Apptopia a central financial market comparable to Morningstar.