As app is only as successful as its monetization strategy. And an app’s monetization strategy is only as successful as a developer’s cash flow.
But sometimes it takes Apple and Google 30 or even 60 days to compensate their developers for paid downloads and in-app purchases.
“That money’s just sitting there in the bank of Apple or the bank of Google and developers can’t use it to fuel their growth and pay for ads,” said Martin Macmillan, CEO of Pollen VC, a London-based company that gives app developers quicker access to liquid cash they can use to fund their paid media efforts.
There’s a lot of money floating around out there. According to a forecast from research advisory firm Digi-Capital released Monday, revenue from mobile games alone is on track to grow from $29 billion in 2015 to $45 billion by 2018.
Pollen, which was founded just a little over a year ago, acts as a sort of guarantor for developers waiting for their app store payouts. Rather than having to dip into their venture capital or pre-pay on credit cards, developers take an advance from Pollen against receivables, which they’re then free to spend on advertising.
Ad networks hook up with Pollen’s app developer clients because it cancels out the credit risk. An ad network might want to advance money to a startup, but there’s there no guarantee that startup won’t go bust. Pollen assumes the risk because it can peek inside the app stores and see exactly how much money a developer has coming.
When the app store paycheck finally arrives, Pollen keeps a 5% cut.
App developers aren’t hamstrung and ad networks are able to do more business. By acting as the middleman, Pollen enables ad networks to extend credit to developers who otherwise would have spent less on advertising, while developers don’t have to compromise their user acquisition plans because of credit constraints.
As Jerry Neumann, a venture capitalist with Neu Venture Capital, pointed out, “Growth takes money. An early-stage startup that is losing money or is break-even often has to raise outside money for nothing else but to finance its working capital.”
In some cases, Pollen is able to help app developers increase their spending by 10x or more, Macmillan said.
“Ad networks are in the business of selling ads, not taking credit risks on early stage companies,” he said. “But from our point of view, we’re talking about Apple and Google. These are some of the most highly creditworthy companies in the world and the funds they owe developers are contractually payable. An effective app or game funds its own user acquisition. That’s the goal we want to help developers achieve.”
Macmillan, who spent the early part of his career as a short-term credit trader at UBS, homed in on the idea for Pollen after co-founding Soniqplay in 2010, a company that sells white-label technology to power interactive music apps. The experience gave him a front-row seat to the developer’s dilemma – you need to spend money to make money and the money you need to spend is locked away in a digital app store coffer.
Macmillan and his co-founders took that problem to potential investors in the UK, but they were stymied by the lack of a paper trail.
“The digital billing systems that enable the app stores don’t generate invoices and traditional financial services companies got hung up on that and they refused to fund us,” Macmillan said. “There was a disconnect between the old world and the new world. The way you apply for credit around physical goods in the physical world just doesn’t work here.”
Pollen’s developer customers log into a proprietary dashboard that displays the ad networks Pollen has relationships with – 10 and counting – alongside sales data feeds coming from the app stores. From there, it’s just a matter of deciding which ad networks to spend with and how much to commit where. Developers can optimize and tweak their allocations based on ad network performance from the same dashboard.
It all works smoothly – if an app developer has a fruitful user acquisition strategy.
“There are developers that can’t do UA because they don’t have the money. We help with that. But it’s extremely expensive to acquire users and that’s something we can’t help fix,” Macmillan said. “It all comes down to the Vegas formula. If you put a dollar into user acquisition and you get $1.50 of [lifetime value] out of it, you want to do that as much as you can as quickly as you can until the numbers narrow. But if you put a dollar in and you only get 90 cents back, then you shouldn’t do it at all.”
In addition to its London headquarters, Pollen, which has 15 employees, maintains a second office in San Francisco. Most of Pollen’s developers are based in the US, Canada, the UK, Germany and the Netherlands. Clients include full-service app developer Locassa, fantasy sports app Flip Sports and Zeme, an app that lets users add free music and text to Vines.