Is the iPhone app gold rush in full swing? There's certainly evidence pointing to that.
Consider: Just this week Amazon.com purchased Lexcycle, maker of the popular electronic book application Stanza. Two days later, Seattle's Urbanspoon -- whose iPhone restaurant locator application rocketed to success in less than a year -- announced that it had been acquired by Internet giant IAC. That same day, Zillow.com revved up the marketing engines on its new iPhone app, a product launch that CEO Rich Barton said was so important that it was essentially a relaunch of the company. And then The Stranger, Seattle's irreverent alternative news weekly, jumped into the market with its own iPhone app to help Seattleites find nearby happy hours.
It's certainly been a busy week, and the events showcase the energy and enthusiasm building around the iPhone. But is it a gold rush? And do iPhone app developers make for large, venture style business opportunities?
Let's start with the second question first. The Urbanspoon story is a good place to start. Three former Jobster employees bootstrap a new online restaurant Web site, and then last spring get the kooky idea to build an iPhone app that mimicks a casino slot machine. It takes off virally, and then goes mainstream after Apple features it in a series of TV commercials.
Urbanspoon didn't need venture money to do that, just some smart developers who could invest the time into learning how best to leverage the device for their service. It paid off, big time.
Urbanspoon co-founder Ethan Lowry told me this week that the iPhone app was the catalyst that sparked IAC's interest in the company. He wouldn't disclose the financial terms of the deal. However, when your startup costs are close to zero an exit even in the single digit millions can pay huge dividends.
And this is the problem facing VCs who are looking to make money from mobile applications. It's just not that hard to develop the apps, which means it doesn't require a lot of money.
In fact, that very issue was the topic of a conversation at the National Venture Capital Association annual meeting in Boston this week where Rich Miner of Google Ventures reportedly said that mobile applications will make some entrepreneurs and angel investors happy. But VCs?
“I’m not sure those venture style exits exist,” Miner said, according to The New York Times.
If that's the case, this gold rush may be an interesting one where the grunts -- the developers and software engineers with the picks and shovels on the front lines of the mobile mine -- reap the awards if they strike the right spot. (In this analogy, think of Apple as the owner of the land.)
That doesn't mean the VCs aren't trying to figure it out too. Madrona Venture Group sunk $1 million into a new Seattle startup called Zero260 last fall, which is essentially a studio for new iPhone apps. Kleiner Perkins Caufield & Byers set up the $100 million iFund last year, bankrolling startups such as Seattle-based Pelago.
And venture-backed companies like Zumobi, Mobui and Melodeo have turned their efforts to mobile application development in hopes that they too can get a piece of the wealth.
Will those efforts be successful? Maybe. But the entrepreneur in the basement or garage -- guys like Michael Schneider who quit his job as a lawyer to start developing iPhone apps full time -- have just as good of a shot.
This much I do know. After this past week's events, the gold rush is on. And there may be a new rallying cry.
"Go mobile, young man. Go, mobile."
[Flickr illustration via ToOliver2]
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