The decision by Steve Jobs and Apple to allow 3rd party applications on its iconic devices has changed the entire ecosystem of web applications industry.
These staggering numbers are a testimony to the growing importance of apps in our lives. It also highlights the massive business opportunity behind these apps. But till today, mobile app developers face intense difficulties and competition to reach the marketplace. Only 2% of the app development companies are funded by VC firms, underlining the struggle behind making an app successful. Debt capital is even more difficult to come by because banks just do not have the domain expertise to understand the potential of a particular application. The cash flow mismatch is aggravated by the fact that it might take almost 60 days to get your money from the app store. So an app developer which can grow on its own has to dilute its shareholding for getting permanent equity when this could be easily solved by working capital funding. To fill this gap, Aprenita was started in 2014 with a seed capital of $500,000. Its co-founder Mark Loranger was COO at Updater and was responsible for its rapid growth and several rounds of VC financing and before that he was VP at Square1 Bank. Sergei Kovalenko is the co- founder and is an avid investor and entrepreneur and has over 18 years of experience in IT and software development. The New York-based startup has a team of 5 in its HQ and also has a development team of 6 engineers based in Eastern Europe. The first half of 2015 was spent on Beta testing the platform and in September 2015 customer onboarding process was initiated.
In the mobile app market, most of the companies spend 60-80% of their monthly budget on the acquisition of paid users. But there is a lag between spending the money on customer acquisition and developer being able to monetize the relationship. This created a need for short term loans for developers. But the current financing system did not have enough tools or expertise to evaluate the risk of new digital businesses and was not able to understand the pain point of this 51 billion dollar a year business.
Aprenita has developed a powerful and innovative scoring model to help analyze risk and predict revenue in order to understand when and how companies will be able to pay back the loans. In order to get the loan, developers have to grant access to business data like number of downloads, the number of users etc. They use popular analytics platforms services like Flurry and Mixpanel and access to the developer’s app store account to perform analytics on past numbers and forecast future cashflows. It continues to monitor the developer’s progress during the loan period, to see whether they will be able to pay back the loan installment or not and also to keep improving the predictive algorithm based on real-world data.
Aprenita has two products:
- Aprenita Advance- It is a traditional product which speeds up payments from marketplaces and ad networks like Google and Apple. The time period of the advance is usually 45-60 days and it charges 2-4% of the amount advanced.
- Aprenita Accelerate- It provides quality companies (usually those between a turnover of $0.1 to 1 million) a term loan and additional working capital facilities at an average APR of 24%. Loan amount usually ranges from 50,000 to 500,000 for 6- 18 months.
Aprenita offers specialty financing and lending platform for developing mobile businesses and it has a massive first mover’s advantage. Direct integration of various analytics accounts and real-time analysis of various KPIs by using state of the art algorithm and software for predicting the sales and revenues of these companies is what makes Aprenita and its products stand out from the rest of the crowd. It uses innovative credit score mechanism and model in estimating the risk and underwriting the loans. Numbers achieved by the company proves its model is successful in real market conditions. Ever since it started its operations, around 80% of its customer base has shown a growth rate of a few hundred percent and one of the companies exploded by more than 1000% in a 6-7 months period. Unlike another traditional lending, it does not require any collateral security or personal guarantees or for that matter, FICO scores to make a lending decision. This is a huge competitive advantage as founders would be hesitant to provide personal guarantees for a startup business
With its ability to analyze various KPI in real time, it helps them to predict the default rate. By keeping track of KPI over a period of time, it is able to figure if a certain loan is becoming riskier and can make adjustments accordingly, which is very different from other SME lenders. But if there is still any default, it uses revenue collateral from app stores and ad network. So basically it will own future revenue until Aprenita is fully compensated. Founders of the company initially invested their own money and have a network of friends and FIs funding the platform. But now the company is growing at an astounding 30-40% month over month and lending about $2 million/month and is looking for new partners and fresh capital. What will make the platform, even more, appealing is the fact that the company has not had a single default till date.
Aprenita has ventured into a completely different kind of lending and is creating a new cottage industry. It wants to build a digital mechanism which can be used by investors in finding new ventures and simplifying the process of lending to mobile and other digital businesses. Aprenita has a treasure trove of data to analyze: the number of subscription, renewal rate, the number of downloads, time spent on the app, which enables it to understand the pattern and can use this information for future revenue predictions. By accessing the ad account through integration with FB, it gets the cost of acquisition and lifetime value of users. This is a massive analytics moat which should allow it to aggressively grow its lending book without taking on significant risk.
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