How To Build An App That Gets Acquired Within 2 Years

Building a start-up is not a cakewalk. The challenges are immense, but the rewards are great too.

A daily life problem can have the best business idea hidden in it; all you need is to keep your eyes and ears open and sniff it out when the opportunity strikes.

Sometimes, the product clicks immediately, but oftentimes it takes long term effort and constant iteration to get it up and running.

While most entrepreneurs build a business for the long haul, there are many that are open to near term exits (meaning M&As) as a strategy. You may be an acquisition target for your team’s skills or the technology that you have built out; whatever be the reason, if you are open to an acquisition sometime in your company’s lifecycle, this article should be of great interest to you.

We talk about 6 startups that were acquired (for different reasons) within the first two years of their launch and the reasons that prompted the acquisition.

#1 Periscope acquired by Twitter

Live streaming of video has a distinct visual advantage that engages more users and makes interactions easy. An app called Meerkat that caught the fancy of the techies, VCs and journalists across Silicon Valley. This analysis by Danielle Morrill highlights the traction that Meerkat has received versus SnapChat, Yo and TurnTable in their first 14 days of existence.

Twitter knew live streaming had the potential to be a huge bet, but didn’t have it in their fold yet. Their six-second video platform Vine is good for capturing and sharing recorded video, but isn’t helpful for sharing anything live. They were clearly looking for an opportunity to leverage in this space. During the company’s Q4 2014 earnings conference call, CEO Dick Costolo said, “Twitter video was created to provide users the same instantaneous experience with videos that they have with tweets.”

Twitter saw an opportunity in Periscope, a live streaming app. A pre-launch startup which live streams video and also plays recorded broadcasts. A live streaming app integrated with Twitter can provide brands and content creators greater scope to experiment and possibly monetize content.

The app was sold to Twitter during its testing phase for somewhere between $50 million to $100 million, as stated by different sources.

#2 Zite acquired by CNN and then by Flipboard

Zite, a free personalized iPad news magazine app was launched in March, 2011 and differentiated itself by personalizing categories based on reader’s interests through algorithms such as user’s tweets and Google Reader subscriptions. The articles were presented in reading mode and had a facility to be archived for offline reading.

These algorithms became more valuable as readers turned towards consuming content through smartphones and tablets. It naturally made sense for the media companies to leverage the space with their own app. Now, you can either invest in building a solution ground-up (which most have), or simply acquire one that’s doing exceedingly well.

Instead of developing their in-house technology, CNN took a leapfrog by acquiring existing technology with immense traction. Putting emphasis on personalization tools, CNN bought Zite for $20 million within 6 months of its launch.

Zite delivered for CNN and became a threat for competitors. After 3 years, popular digital magazine app Flipboard bought Zite from CNN for around $60 million.

#3 Sunrise acquired by Microsoft

Sunrise Calendar iPhone App was launched in February, 2013 and quickly topped the chart of calendar apps. In May 2014, Sunrise launched on Android and Desktop.

Owing to its powerful features and the simplicity of using it, Sunrise was called the Swiss Army knife of calendar apps. The New York Times called Sunrise a favourite among the “Best Calendar Apps for setting your Agenda for the Days Ahead.”

Meanwhile, Microsoft was in a process of reinventing itself by investing heavily in the mobile productivity space. The company wanted a pie of the smartphone users’ market.

In the process of executing a strategic shift, Microsoft released a touch-friendly version of its most popular products ‘Office’ for iOS and ‘Outlook’ for both iOS and Android.

To yield better output, Microsoft wanted an organiser in its kitty. Sunrise app caught its eye.

Exactly after two years from the launch, Sunrise was sold to Microsoft. As Microsoft neared the launch of Outlook app, it purchased Sunrise, the maker of calendar app for reportedly $100 million.

#4 Mailbox acquired by Dropbox

Mailbox, an app that simplifies your Gmail experience, was launched in February 2013. Within a short period of time, it started delivering over 100 million emails every day.

Around this time, Gmail rolled out a feature that let users attach files to emails seamlessly using Google Drive.

Dropbox, a cloud based file sharing service, felt immediate threat and rising competition from a strong brand. While there were no signs that Dropbox would announce its own email service, receiving Dropbox attachments inside messages from Mailbox users proved to be a smart idea.

Dropbox foresaw that opportunity and acquired Mailbox for $100 million within two months of its launch.

Mailbox remains a standalone app as Dropbox wanted to acquire a product, and not just talent. Furthermore, Dropbox used Mailbox’s technology to enhance its own features, including handling email attachments.

#5 Instagram acquired by Facebook

In October 2010, a photo-sharing iPhone app Instagram was launched.

The app was a fun way to share photos with friends. Users can click a photo and add filters to transform the look of the shot. They could then share the photos with followers, where they can post comments and ‘Like’ recommendations.

25,000 users showed up on the first day and the app hit one million users in the first three months. Launch of iPhone 4 gave more momentum to the app and it soon touched a 10-million user base.

In contrast, Facebook, the bigger platform for social networking and photo sharing was very clunky and complicated on the mobile front. In 2011, TechCrunch acquired secret documents that suggested Facebook was building an iPhone photo sharing app.

Seeing Instagram’s success, it only made sense for Facebook to abandon its own efforts and acquire Instagram, which comes with a built-in community of photographers and photo lovers, while simultaneously squashing a threat to its dominance in photo sharing.

The deal was done in April 2012 for a whopping $1 billion for an app with no revenues!

#6 Sessions acquired by MyFitnessPal

Behavioural health app, Sessions, provided a more personalized approach to fitness by connecting users with individual trainers to set realistic long-term goals and follow up to see how things went day-to-day.

On the other hand, US digital health giant, MyFitnessPal (MFP), a health and fitness platform had over 50 million users and a large set of health data and tools but lacked personal coaching initiatives.

Acquiring Sessions gave MFP a team that’s been thinking about coaching for years to help them jumpstart their own coaching initiatives. In fact, the company claimed, 90% of existing Sessions members have continued with their selected programs through completion. MFP acquired the two-year-old Sessions app for an undisclosed amount in February 2014.

Nidhi Shah
 

Nidhi is the head of content marketing at Arkenea, a mobile app consultancy building experience rich apps for startups and businesses.