Why do VCs continue to fund "photo app" startups?


0

Except for the 2-3 outliers (Instagram, Snapchat, etc), most of the photo sharing apps fail and close doors. Or get acqui-hired.

Yet why do VCs continue to fund them? Is there much more to be had in this space that another startup can still come in and get marketshare?

The bigger problem from the value-based perspective is that these apps are hard to monetize. The little monetization that can be done still won't ever make them profitable.

Funding Venture Capital Photography Mobile Apps Instagram

asked Jun 19 '14 at 16:41
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Cheryl Guynn
2 points

2 Answers


2

I'd suggest two things:

1) Photo-sharing is a great foothold for a social app to expand from. Social networks get a ton of valuable data from their users, but it's really hard at this point for a social network to start as a social network. You have to back into it by providing non-network-based value (or small-network-based value, like Snapchat) with social features on top / growing from it.

2) They're good acquisition targets on number of users alone. It may not be a 10x return, but if a VC is getting two bites at the returns apple (one from a big vision that could provide a 10x+ return, the other simply from user numbers that can get them acquired for a 2-3x return), that's a better opportunity than many other potential investments they could make.

answered Jun 24 '14 at 18:58
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Jay Neely
6,050 points

1

Because of the chance that another one turns out to be the next homerun like Snapchat or Instagram. VCs are in the game for the outliers. Thats where they make their returns. Not the smaller exits or acqui-hires.

answered Jun 20 '14 at 13:42
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Patricia Wright
638 points

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Funding Venture Capital Photography Mobile Apps Instagram