David Barnard: Welcome to the Sub Club podcast, a show dedicated to the best practices for building and growing app businesses. We sit down with the entrepreneurs, investors, and builders behind the most successful apps in the world to learn from their successes and failures. Sub Club is brought to you by RevenueCat. Thousands of the world's best apps trust RevenueCat to power in-app purchases, manage customers, and grow revenue across iOS, Android, and the web. You can learn more at revenuecat.com. Let's get into the show. Hello, I'm your host, David Barnard. My guest today is Josh Peleg, head of M&A and Business Development at Blue Throne, a VC-backed portfolio of consumer apps that acquires and partners with the best consumer apps in the business. On the podcast, I talk with Josh about red flags that tank app valuations, why subscription-only apps are leaving money on the table, and how bootstrap founders are cashing out for millions in months, not years. Hey, Josh, thanks so much for joining me on the podcast today. Josh Peleg: David, great to be here. David Barnard: So, you and I were hanging out in Austin Friday and had such a great conversation. I think I said multiple times we should have just set up cameras and mics and recorded that conversation, and you were like, "Hey, I'm still in Texas for a few more days." And so here we are in a podcast studio in Austin, recording a podcast. Josh Peleg: Yeah, it's super exciting. David Barnard: So, the first thing I wanted to talk about is Blue Throne, the company you work for. So, you do business development, M&A at Blue Throne. So, what is Blue Throne? Josh Peleg: Yeah. So, I came from mobile gaming where I did M&A and then jumped into Blue Throne about a year ago. And their strategy is really interesting. So, essentially, Blue Throne's goal is to become the number one app acquirer in the world. And the way it started is pretty different to the way it looks today. So, the way it started was a kind of spray-and-pray approach. Blue Throne saw all these little apps doing decent revenue, and we're talking about QR code scanners, flashlight apps, the small radio apps that we all know and saw back in the day. And the play was to go wide. So, initially, Blue Throne raised a bunch of VC money and they bought almost 100 apps, the smaller ones, and it was a very much go-wide approach. And what we learned at that point was that so many of them have been pumped full of revenue at the time of sale. So after you buy them, they start to die. But also, because they're quite shallow products, their longevity is very limited. And we learned the lesson the hard way. So, following this, we had a new shift in strategy. We went from Blue Throne 1.0 to Blue Throne 2.0. David Barnard: So, before we get into 2.0, I did want to dig into that first phase because there are still a lot of buyers in the market. And not that they're going to ignore the signs of a pump-and-dump, not that they're only going to buy crappy apps or whatever. There's a lot of players in the market who are using Blue Throne's previous strategy of buying a lot of apps that are doing decent revenue and building that kind of portfolio, which now Blue Throne is not interested in, but there's a lot of players in the market who do. So, before we get into the new strategy, what kind of apps were you looking for during that time? And what were the signals of a decent acquisition? What signals said, "Hey, don't buy this app"? Because a lot of people listening to this podcast, maybe they spun up a side project and, "Hey, it's doing 20k in MRR," and maybe they want to flip it. What does that look like? Josh Peleg: So, I would never push someone away from flipping it at the early stage. It's definitely doable. And the ad market today, in terms of buyers and sellers, is in a very liquid position. There are lots of sellers and there are lots of buyers. So if you do want to sell, you'll probably find the right price point. Now, when we were doing the strategy, a lot of things we were looking for were financial based. So we were looking for strong EBITDA and strong revenue, and we were less concerned with the core app metrics, things like the retention, the churn, conversion to paying, et cetera. David Barnard: Okay. Josh Peleg: And you're looking at me and you're smiling because you're like, "That sounds kind of stupid." And we realized this the hard way because we saw the apps as purely financial assets back then, because we were looking at shallow products, like, for example, a flashlight app. This is what led us to the next step. But essentially, back in the day, we were viewing them more as financial products. And I think a lot of buyers at that price point think of apps as financial assets that deliver returns over X period of time. David Barnard: Yeah. So, in that case, you're probably looking more for organic acquisition. And when you say EBITDA- Josh Peleg: Earnings before interest, tax, depreciation, and amortization. David Barnard: I always forget all the parts of the long acronym. So, essentially, if you're spending 40k a month on user acquisition and you're making 40k a month, you have zero EBITDA. You're not a good financial asset. So, what y'all were looking at was apps that were great at ASO, that had some kind of organic growth mechanism that were just spinning off cash. So, if you've built a side project app and you're making 20k a month in MRR and you don't have a bunch of expenses, that is attractive as a financial asset. Josh Peleg: Literally. Yeah, it's exactly what you just described there. We should also kind of identify that the time period we're talking about, which is kind of three to four years ago, this whole trend of doing crazy organic on TikTok didn't exist. So when we say TikTok, we're really talking about ASO keywords. And if you picture it, it's really those apps that were the title. So the apps that were called flashlight app or the apps that were called QR code scanner. It's really trying to maximize that ASO. David Barnard: Right. And these days, a lot of people talk about organic TikTok as if it's free, but they're actually paying a ton of creators. So, similarly, if you're making 20k a month in MRR and you are spending 20k a month on organic TikTok or that's your full-time job, it's like you're just churning out assets. If you're going to sell that to somebody with this more kind of financial asset approach, the buyer is going to say, "Oh, well, wait, 40 hours a week of a great marketer's time creating these assets that go viral on TikTok," or whatever kind of organic motion that you have, if it's a high either cost because you're paying creators or a high time cost, acquirers are generally going to look at that as a cost basis and not look at that kind of an app as a financial asset, right? Josh Peleg: Correct. I think us in the industry labeling this TikTok strategy as organic is very misleading. And even though you could pay $5 for a single UGC video that shows off your app with a nice CTA at the end, and you may as well get a million, 2 million views, which may convert into a 10% conversion rate and you get some downloads from that. That being said, the time invested to get to that point is significant. And I'm talking from experience. We recently built this UGC machine at Blue Throne. It took us six months to get our first viral video. And that's not one person's time. That's multiple people across multiple disciplines doing the research, doing the execution. So, there is a cost associated to this organic. But like all great mechanisms within the app business, you get better over time and you optimize and you're able to hit those targets faster with less resources as you get better, for sure. David Barnard: So, then, what would your advice be to somebody in that position? Either they're just getting started and they're thinking, "Hey, I'd love to build this app and exit it in 12 months." I mean, I see this on Twitter all the time. Like, "I'm going to build this app and I'm going to sell it for 100k in a year." What would your advice be to a founder like that today to optimize that for a meaningful acquisition? Josh Peleg: So, if you're trying to optimize for a meaningful acquisition, let's say within a 12-month timeframe, it's completely doable, and we see it the whole time. I think what you have to be is an absolutely killer marketer. It's not about your dev skills. And we talked about this over lunch on Friday, right? In a time when anyone can build and the barriers to build are so low because of AI helping us here, the real differentiators are distribution. And that's why we're seeing the people like the App Mafia guys and also a ton of other kind of people who don't make the spotlight as much, but really amazing marketers and distributors, scaling the apps very, very quickly through TikTok, whether it's founder-led content, so it's them telling their story, whether it's them interacting really healthily with influencers in their niche. Let's take an example. Let's say you've got a kind of Christian religion-based app and you connect with the Christian religious influencers in that niche and you build relationships with them and they spin out content for you, that can just shoot you up the charts very quickly as well. And it's actually these guys that we're seeing get those exits within 12 to 18 months. And from the buyer's perspective, I think if I think about Blue Throne's perspective here, we'll always have concerns that an app that's only been around for 12 to 18 months has less historical data to put a value on top of it, because when you're valuing a business, you're looking at past performance. That being said, there are ways to do it because of the beauty of apps, which is you can measure retention and you can measure churn and you can measure repeated customers and you can measure conversion of free to paying users. So you can pretty accurately predict how the app's going to do as long as you have maybe six to nine months of data from that app. David Barnard: What would be the red flags, then, that you would advise folks to try and optimize away from? That if you're thinking, "Okay, I see this app. They sprung up from nothing. They're doing 50k in MRR," but when you're doing due diligence, what are the red flags you're looking for that say, "Oh, this is either, one, a much lower multiple that we're willing to pay, or two, just not an acquisition anybody would want to do"? Josh Peleg: It's a really good question. Let's think about acquisition multiples on a spectrum. For those who aren't aware, a multiple is a number you'll apply to your annual revenue, which will give you the valuation. And you can apply it to your revenue or your EBITDA. But go look that up on YouTube and you'll learn a lot more. Essentially, multiples we can kind of view on a spectrum. And at the lower end of the spectrum, you've got apps that are primarily doing revenue through advertising within the app. It's not very predictable as a buyer. I cannot predict that into the future. It also depends on your DAU or MAU. So it's a little bit hard to put a true value on. It also depends the demographic of your users because your ads are more valuable to tier one-based users like in the U.S. compared to tier three in India, for example. As you move towards the middle of the spectrum, you've got ads that are monetizing through ads and IAPs, which is in-app purchases or one-time purchases. Now, in-app purchases are great, and I'm sure we'll get on to this in a minute, but they're a little bit dangerous when it comes to valuing your app because it's not recurring revenue. It doesn't hit that ARR definition. Now, on the far right of the spectrum, to get the biggest valuation possible, you're looking at apps that are pretty much 100% recurring revenue, so subscription-based apps. And why is that? It's because as a buyer, your revenue is predictable. If I have 12 months of data of your app, I know how many users are going to re-subscribe when their yearly or monthly subscription is over. So I can predict the amount of money that your app is going to pull in into the future, which makes it really easy, whether it's me or anyone else, really, to basically value the app and how much money it's going to generate. David Barnard: Yeah. And then you do that against the expenses, generally, so you're not... And I think that's something a lot of people get mixed up about when they're thinking, "Oh, my app's worth hundreds of thousands of dollars." And then, to your point earlier, if you're an AI app and you're spending, like, 50% of gross revenue on your AI costs, then you're going to get valued on the remaining 50%. But if you're spending 50% on AI costs and you're spending 25% on marketing and you're spending 20% on salaries that would need to continue in the business, as an attractive acquisition, it's looking less and less attractive as those costs go up higher and higher. And then the other thing I'll say, and I was just tweeting about this yesterday, is that what most people in our industry call MRR and ARR are not actually MRR and ARR. So I'll get in my soapbox for one sec and say monthly recurring revenue, annual recurring revenue. In RevenueCat, we have this great chart now, and then I've been lobbying to create some additional charts around this, is that you know once somebody's turned off that auto-renew very early in the cycle. And we have some data at RevenueCat that actually shows the highest month of people turning off auto-renew in an annual subscription is actually the first month. And so, you can get pretty predictive of what revenue's actually going to recur if you know that first month of people turning it off and then fit the curve. And so, when you look at your dashboard and it says 100k in MRR or a million dollars in ARR, it's not ARR, it's AR. And then to get to ARR, you really need to discount by the known churn stats. And whether that's predicting into the future with that first month or whether that's you have a year or two of data where you can look back and see what those cohorts are retaining like, you need to discount that by the known churn or even the estimated churn to get a true ARR and a true MRR. Because, again, I just think in consumer where the median retention of an annual plan is, like, 35%, it's not ARR. It's just not. Josh Peleg: That brings me on to a really interesting point if we draw this back to the kind of valuation topic, which is, so often you'll get a founder come and say, "Hey, I've got X amount of subscribers on the yearly subscription, and it's recurring because it's yearly," but the killer question is, how many people are going to come back and pay at the end of that time period? And if your app has not been around for 12 months, you cannot tell me your resubscriber rate. You just can't. David Barnard: But you can estimate it. Yeah. Josh Peleg: You can estimate it, but you can't tell me for a fact how many users are actually going to come back and pay that money again. David Barnard: Yeah, totally. So, a high churn rate would be one of those red flags in- Josh Peleg: Yeah, high churn rate would be one of those red flags. Let's do four more and let's just kind of list them off so listeners have a five-point checklist, right? So, top one is churn rate because that's where your subscription revenue is coming, and the churn rate dictates how stable that revenue is. It's also a great indicator of how effective your product solves the problem it's set up to solve, which is awesome. Then, obviously, your whole CAC:LTV ratio is super, super important. Is the way you're buying traffic profitable? Does it have viral potential or is it capped? So, basically, knowing where the tip of your ROAS curve is going to be and how far you've been able to push that in terms of budget. That's number two. Number three is basically talent, team composition, who's in the team. I'm seeing so many incredible solo founders who want to build stuff and basically hit that kind of million-dollar exit within a year. Super doable. We've seen it happen time and time again, a lot of deals that we've been a part of. However, there can be some confusion when people say, "Hey, I'm a solo founder." Amazing, but how many consultants are you using? How many outsourcers are you using? Completely fine to use them. Everyone does, and it's a really cost-effective way of scaling up your business. But just great to be honest about it. "Hey, I've got X number of devs in," I don't know, "Brazil, Turkey, or India. And I've got a marketing guy in California," just so we know that even though you are a solo founder and it's just your equity, there are other players involved and the buyer will need to account for that. That's number three. Number four is all this research around the kind of category you're playing in. It's a very different app, whether it's playing in education, fitness, photo and editing, or if it is indeed like a QR code scanner. The competition matters. How well-funded is the competition, how aggressive is the competition on UA, for example. So, that's super, super important. And the fifth point, I will say, has to be whether you've raised money or not. If you've raised money from VCs, then your valuation is going to be inflated because you have to keep your VCs happy. If you haven't raised money from VCs and maybe you're bootstrapped or you've done a friends-and-family round, the power is all yours. And you can sell at a lower valuation, but you're keeping a lot more money to take home and start your next project with or retire your parents or buy a house or whatever it might be. But I wanted to throw this to you, David, because it's something we talk about a lot at Blue Throne, which is, do you think it makes sense for consumer apps to raise VC money in this day and age? David Barnard: I think it can. And I was actually thinking about that on the drive here of what kinds of apps are truly investible in 2025. And looking back at my six years at RevenueCat, I've talked to hundreds, hundreds of founders and app practitioners and all sorts of folks, in my office hours, at conferences, at random meetings I ended up getting booked. And I'll say I feel like I was a little naive six, five, four years ago around just how far different apps can be taken. And I think in 2025, we've kind of seen things play out enough to know the different scale opportunities and the true total addressable market of these apps. And so, I think if you're playing in a niche where there is not a very... and being realistic about it. Is it a niche where there's a high willingness to pay? Is it a niche that's growing or going down? Like, pickleball is a great example. I talked to a friend recently who was thinking about building an app in the pickleball space. It's like, "Oh, it's so hot right now, getting in with pickleball influencers, and that's all really hot." Well, pickleball seems to have already been kind of like rounding the curve- Josh Peleg: He's better off chasing paddle instead. It's the new one. David Barnard: So, maybe even two years ago, it seemed like, "Oh, wow, maybe a pickleball app would be investible because it's growing, your TAM is expanding," and that kind of stuff. But I'd say today we've seen that curve rounded. And I think looking for those kind of trends as well of, like, "Realistically, how big is this market going to be? What are your realistic LTVs in that market?" And I think that the barrier for consumer apps to be investible in 2025 is just much higher. And I think we've seen some slowdown, especially in early investing in these kind of apps because of that. And so, if you think you can build a category winner in a category that has meaningful LTV, meaningful growth, meaningful market, so fitness apps, even... Even mental health is tough these days because we saw Calm and Headspace kind of tap out and now they're going to be more B2B. And even these big category winners that three years ago seemed like they were just going to keep growing, we've seen the growth start to slow and see them kind of reach saturation in some of those markets. So, yeah, it's tough these days. I don't know that on the spot I could come up with any kind of formula of what I think is investible or not. But taking some of those factors I just shared and thinking carefully about the potential for retention and... I mean, there's just so much that would go into me today saying, "Oh, yeah, slam dunk. This is investible." Josh Peleg: It's a good question. I've been thinking about this a lot as well recently because we have so many founders come through our doors who have raised VC money and then regretted and some who haven't raised but then want to. And I feel very strongly that I think at pre-seed and seed, unless you're building something with uniquely defensible tech, forget about it. You just don't need it. Why? Because unlike most businesses that need VC money, they need the VC money to get going, to build, to create the product. But in consumer apps, the barrier to build is so low, you only need maybe $10-15,000 to really get going. And that's also if you're paying someone to build it, right? So, when do you need the extra money, the cash injection to really shoot for the stars? It's after you've done your very smart marketing and you've got your initial batch of users and you have KPIs that tell you your app is an engine that works, that when it brings users in through the front door, it solves their problem and pushes revenue out the other door. Until you've proved that and you're ready to put millions into your marketing machine, you don't need it, forget it. David Barnard: Or, to your point earlier, if you have something you think you can build truly defensible technology, then maybe raising earlier does make sense, if there's a clear signal that "If we build this, it will make sense, and we can't build this without a certain amount of money." Those would be the more traditional kind of big-swing early VC plans- Josh Peleg: True, but how many apps can you think of that needed millions just to get going? David Barnard: Cal AI is a great example. Actually, my respect for that team has grown, while I think for a lot of people in this space, the respect for them has diminished as they've released the course and they've been doing all these shirtless videos and stuff like that. Clearly, they're young and everything. But if you look at what they did, they did start super scrappy. And this is why early on, I really was very dismissive of them, because I opened the app and it was a really crappy app. But they took that crappy app that didn't actually work, that didn't do what they said it was doing. I mean, honestly, and this is, again, why I was dismissive of them early on, is like, it doesn't do what they say it does, and yet they're marketing it as this amazing solution. But to their credit, they have since actually built out that tech. So, to your point, maybe you build a painted door app where you prove out that people are willing to pay for this and then you go build it. And that can work, but I think there aren't a ton of categories that you can do that in where the app that doesn't work will actually sell. I mean, they were selling a lot of hopes and dreams and promises early on- Josh Peleg: Yeah, but they double down on something we said 10 minutes ago, which is, distribution owns the game right now. And these guys, Alex, Blake, Zach, they're killer distributors. I've got a kind of bone to pick here because what they've done is insane. But every time they jump on a podcast or an interview, they talk to someone who's from the kind of success sphere or a kind of growth marketer. I would love to get Alex and Zach onto an app podcast like this so we can push them on things like paywalls, A/B testing, product depth, mechanics, et cetera. In fact, let's call them out right now. I think we should do that. So, Zach and Alex, you've both got my phone number because we've spoken in the past. I challenge you to come here and jump on the podcast with me and David. We're going to push you on your actual app mechanics and performance. Flights are on me. Between Blue Throne and RevenueCat, we can probably cover it. I'd love to have you here. And let's actually put you through your app knowledge and see what's going on there. David Barnard: I'd love it. And Blake, too. Blake is super sharp. Josh Peleg: Blake also, yeah. David Barnard: But anyways, what I was getting at with that is that I think there are cases where you're not going to be able to do those kind of painted door tests where you really have to actually build the product first. I think that's more rare, but I think there are plays where that might still make sense in 2025. I don't think for every possible use case, for every possible... I mean, this is what's so cool about this space, though, is that we're building things on these little supercomputers in people's pockets that can do such incredible things. And I feel like just over the last five years, the broader industry is starting to wake up to just how much opportunity there still is in mobile and then the subscription, monetization, unlocking that long-term revenue and being able to pay that back, where I do think, starting today, category-leading apps that are going to be billion-dollar companies in the future can be built today. Some of them may be built like Cal AI, where you build an app that doesn't work and hype it up really good and you're incredible at distribution and then you figure it out. And again, where I was getting at earlier is, Cal AI is a fantastic app now. And props to those guys, it's genuinely a great app. I watched Blake on a YouTube video with one of the success guys. He actually dropped a lot of knowledge bombs in there in between the discussions of cocaine and all sorts of other stuff about what they're selling. And one of the more, I thought, cogent things he described is that for people who are tracking calories, it's not all about being perfect in the calories. Even if you log every food perfectly and everything else like that, calories can vary, people's metabolisms vary, and all those kind of things. And so, one of the things he said is, by helping people just be more aware of their food intake, by taking pictures, by just the act of tracking, whether it's accurate or not, he claims they're at 90% accuracy with the camera. I still doubt that. Josh Peleg: Yeah, I don't know about that. David Barnard: But he's right in that just the act of tracking your food is going to help a ton of people lose weight, get healthier, be more aware of what they're putting in their body. And so, I think that's fantastic. And hey, and props to them, they're selling it for 30 bucks a year. They're not charging $300 a year, they're not charging 50 bucks a month or something like that. The value that they're delivering compared to what they're charging, I think these days it's actually incredibly favorable. 30 bucks a year for that app, I think, is a great value. And I wouldn't be surprised to see them have better retention than a MyFitnessPal or some of these other big apps that are charging way more money because it's like, "Ah, 30 bucks, 29.99, it's not that much money." To circle this all the way back around, I think there's opportunities to do it that way. But then I also think there's opportunities to build future category-leading, billion-dollar apps that will require much more investment. And I don't think as an industry we should close our mind to that potential just because an app like Cal AI worked out the way it did. That's not going to be the norm. And I don't think it's the only way to do things. And so I do think that there are apps that will require investment to become the category leader. Josh Peleg: I think as we step strongly into this marketing and distribution-first playbook for apps, we're going to see the CEO founder be a marketing guy, and then we're going to see them hire or outsource their dev work because it's not that effective. I just want to make- David Barnard: But again, I think true for some segment of the market, for some segment of use cases, but I think we're going to see technology-forward CTO, ridiculously talented programmer, amazing technologist, first person who's going to build a category-leading company as well. I think we're seeing this rise in that style, and the App Mafia is a great example of it, but I think that's one part of the market. And I think they themselves are maybe a little over-indexing on that being the playbook and the only thing that's going to work moving forward or the way to build. I think that's one way to build. I think that's one way that things are going to be done. So, yes, I think we will see more of the marketing-led, CEO, non-technical-led companies that are built that way. And maybe historically that's only been 20% of the market and now it's going to be 30. But I don't think this is going to take over the whole market. I think it's going to continue to be a spectrum. Josh Peleg: Yeah, definitely a spectrum. And we see a lot of these technical-first founders who were great coders but then can apply the skillset of learning coding to all the different bits and bytes, whether it's optimizing UA or building out the infrastructure, optimizing their team. And what you just said really reminds me of a company we just bought in Brazil, is this incredible technical founder who is one of those jack-of-all-trades that kind of learned through necessity how to do a bit of everything, how to do UA, how to build backend, frontend, et cetera. And it just goes to show that if you can garner that skillset and build something that people want... He lives in Brazil and he walked away with over $4 million because he didn't raise any VC money, he just built from the ground up from his bedroom. And within a year and, I think, six months of launching his app, he walked away with $4 million. And the deal went through in three months because there was no VCs to mess around with. It was straight to his bank account. Crazy. And there are a lot of people like that. We see them all around. David Barnard: So let's circle all the way back around. We chased a bunch of rabbits, but we were talking about red flags for early acquisition. I wanted to throw one more in there. And if you're building that kind of app and you're thinking about an acquisition, a huge red flag is to try and juice numbers leading into an acquisition. So, just tell me about what you've seen and how bad that can be. Josh Peleg: Yeah. We've seen this a couple times where founders are getting prepared to sell, and so what they'll do is they'll try and pump revenue to make their numbers look really good. And what does that actually look like? What does that mean, pump revenue and pump growth? So, to pump revenue would be something like, in your paywall, you optimize the UI and UX so that you're really pushing that lifetime subscription, which is, let's say, $100- David Barnard: And CBD. Yeah. Josh Peleg: ... right? Yeah. And your monthly is 50 and your weekly is 10. So suddenly you're collecting those $100 much, much faster and more in the early days, which, on your P&L, is going to really bump up your revenue and, consequently, bump up your profit or EBITDA as well. However, to the person who's about to acquire that app, they suddenly cannot monetize those users that you've just sold a lifetime subscription to. So you're actually kind of shooting yourself in the foot. We've seen it happen a couple of times. I understand why people do it. It just ends up knocking down the negotiations further along the line, which is not great. You can also pump growth. You can also really put your foot on the gas on marketing. We see that happen as well. That's not as bad because it actually collects a lot of data for the acquirer and the seller as to how effective marketing is when you really try and push the budgets as high as you can go. And in fact, one of the first questions I'll ask when I'm getting to know a founder for the first time is I'll ask, "What's your marketing budget?" And they'll tell me, I don't know, 50k a month. And then my second follow-up question is always, "How high have you been able to push that? And if you're not pushing it, why aren't you pushing it?" So, knowing the answer to that is very important. There's a flip side to this where the founder can also optimize for profit. So, let's say they're running at spending $50,000 on marketing month over month. They think about selling, so they're like, "Hey, I want to sell a profitable app because I'll get a better multiple." They cut marketing from 50 to 10. And once they cut marketing from 50 to 10, they still kind of run off of the cohorts they previously bought. But at some point, the downloads are going to follow that drop as well. So it can be a problem as well. So, I'd say, if I was to categorize, for anyone listening, what's more dangerous, optimizing for profit or revenue, I'd always say it's more dangerous to optimize for profit because you don't want to mess with your download stream. It's better to optimize for revenue. David Barnard: Yeah. And to that point, if you're spending a million dollars a month, and on this podcast, we've talked a lot about paid acquisition and not getting over-dependent on it, and maybe, ideally, you're not spending every penny on marketing, but even if you don't have amazing retention but you do have a decent product, and let's say you're doing 40% annual retention, which would be above... or even if you're doing median or slightly below median at 30% retention on your annual plans, if you're spending a million dollars a month this year, that's 300k a month of free cash flow next year if you can do that million a month this year profitably, or even breakeven. So if you're breaking even on a million dollars a month of marketing today and expanding and growing faster. And so this is to your point. If you're optimizing toward revenue and you have decent retention, an acquirer is going to see that and see, "Okay. So what? They're spending a million dollars a month breakeven," just even as just a financial instrument. If you know that that retention is going to be 30%-ish, if you can predict that, 300,000 a month in free cash flow next year, that's an attractive thing. And to your point also is that you at least see that that's possible to spend at that level and be at least breakeven, if not profitable, on that spend. Josh Peleg: I really agree with all your points and I think we should take two steps back and put everything in a box for people. Different acquirers look for different things. And we can pretty much split them into three different acquirers. You have your strategics, which are people within your niche or within the larger tech sphere that want your product for maybe its features or its user base. Let's give an example. If you're building a dating app, a strategic buyer would be Tinder, Bumble, Match.com, et cetera. David Barnard: A great example of strategic buyer just recently was Strava buying Runna. Josh Peleg: Exactly. That's a great example. David Barnard: Incredible, incredible. Josh Peleg: They're buying it for the users, for the data, for the cross-selling. That's one example. And by the way, founders, if you're listening, you can often get a bigger multiple if you sell to strategics. David Barnard: And the team. Runna was incredible team. I know a lot of those folks [inaudible 00:32:28]- Josh Peleg: Yeah. It can often be a great outcome. The only downside to those outcomes is they'll look for a pretty big earnout because they spot you as a talent and they want to keep you internally. So, that's one. Second type of buyer is more of a private equity-focused buyer who are basically looking for profits or EBITDA. They want to see really, really great margins. These guys, the upside is there's a lot around. The downside is they're going to want you to stay on board because they don't have the team to manage your app. They need you to manage your app. And the other downside is they're going to optimize for EBITDA, so it might get a little bit messy. Not naming any names, but they generally like to cut the team. Then your third piece of the puzzle is these kind of like app acquirers similar to Blue Throne. There's a bunch other in the industry. I'm not going to do them any favors and shout them out. Sorry, guys. But essentially, people like us, we want to buy the app for its future growth potential. And the benefits there is that the founder doesn't need to stay on for a super long period of time. It's often a very, very short handover with a lot of cash up front. So you kind of take the money and walk away. And companies like this will try and take that app to be a category leader and hold it there for as long as possible. The first deal we did was in the music entertainment space. It was a solo founder. We paid him basically seven figures. Seven-figure deal for an app he'd spent two years building and the deal was closed within two months. That was almost four years ago. We bought it at about 200k MAU. And since then, we added to the team. We hired a killer GM from Spotify, actually, to manage this music app. We grew the team from 5 to 15 people. And we grew the MAU from 200k to almost 6 million today. And it's still pretty much top of the category. When I'm talking to a founder and they ask for a case study, I always give that one. But actually, because we're judged on our track record, we have to be very strict about the deals we do because one bad deal can kind of torpedo the whole company. So, actually, our track record is great for now, but with M&A and this kind of playbook, one bad deal can really mess things up for good. David Barnard: Yeah. So, in that third category that you were just mentioning that you lumped Blue Throne into, there is a very wide spectrum. And so, I'd say there is the Blue Throne 1.0 of buying a ton of apps, looking at more a financial instrument. So, tell me about Blue Throne 2.0, though. Josh Peleg: So, Blue Throne 2.0, and it's a great question, essentially we learned our lesson that buying this kind of wide, diverse portfolio of apps doesn't really work because you're buying financial instruments. And at the end of the day, we were apps guys and we knew apps, and our team was made up of guys from mobile gaming, like myself, from ad tech and from consumer tech. So, Blue Throne 2.0 is really about finding apps that have found product-market fit, that have a lot of organic traffic, which is a great signal for us because it means no one is being paid to download your app. They found it out of word of mouth or K-factor or just searching for something on the App Store themselves. And these product-market-fit apps have enabled themselves to rise to mid or top of their category by providing a deep product experience that solves the issue they set out to solve. That's the first thing. And we realized that if we acquired these and actually invested in them and the team, we could keep them as category leaders for as long as possible and really turn them into standalone companies. And so, all the apps we buy have a significant brand image. They have really strong organic traffic. They have great retention, great resubscriber rates, and of course, a killer founding team. Now, sometimes the founding team wants to stay, and that's great, we love that. We've had people stay with us for three years. Sometimes they want to take their money, buy a house, buy a car, pay off their parents' house and go. That's also fine with us. The whole deal structure is about finding what works for both parties. But that strategy we've been employing for about two-and-a-half years now. And it means our portfolio is much smaller. We now have a portfolio of five apps. I saw your face. Yeah, looks a bit surprised there. It's true, it's only five apps, but each app is either a product leader in its category or on its way to be. So it's a completely different strategy, but luckily, it's working well for us now. David Barnard: I've talked to the founders of Blue Throne a few times over the years. And so I knew Blue Throne as the old strategy where there was, like, 100-plus apps in the portfolio. And so when you told me that Friday, and then when you told me again today, it is surprising because it's not what I remember and think of Blue Throne as. But it's obviously a whole different ball game. And, I mean, personally, if I were in the app-acquisition space, this is the approach I would be more taking [inaudible 00:36:35]- Josh Peleg: Which? Blue Throne 2 or Blue Throne 1? David Barnard: Blue Throne 2. Yeah, obviously- Josh Peleg: Can I ask you a question? David Barnard: Yeah. Josh Peleg: If you could buy any app, what would you buy as David? David Barnard: Oh. That is a really good question. Off the top of my head, I would say my friend Ryan Jones' app Flighty, because it's just one of those kind of category leaders with so many opportunities. I don't know that 50 million would do it at this point. He's crushing it. But high retention, high willingness to pay, a lot of ancillary opportunities in the travel space to partner with companies. So, there's obvious future B2B plays. He's done almost no paid acquisition, so it's a very organic growth. Josh Peleg: I think my dream app is probably Opal, the screen time app, for a few reasons. One is- David Barnard: Oh, yeah. Well, they raised VC, though. Josh Peleg: They did raise VC, so I'll be paying a pretty penny for it. I don't know if I can afford it. But I love this app because the design is incredible. It looks like it was built by Apple in Cupertino itself. The problem it's solving is super significant, basically helping people stay off their phones. And they've unlocked this crazy LTV. You know what they charge yearly? 120. 120 bucks per yearly. And the whole logic... I've listened to a bunch of interviews by Kenneth, the founder, is super smart. The whole logic is, they target knowledge workers and they say, "If I can reduce your screen time by 50% a week, you'll be making more money in your probably high-paying job. And that more money you're making is well worth more than the 120 bucks a year you're going to be spending on my app. So you're better off spending the money." And it works. It's a fantastic business that solves a real problem. So, Kenneth, if you're interested, come find me, but I'm also not sure I can afford you. But yeah, shout out. David Barnard: Yeah. Well, I love Opal as well. I've had Kenneth on the podcast. Actually, he just emailed me this morning about our App Growth Annual conference. So this is not to take away from Opal, but let's play it out. Some of the red flags, some of the challenges in the category. Because Opal and other apps have done well, there's now a proliferation of these apps, and so there's a ton of competition in the space. How have you been thinking about a space like screen time management? I assume, I'm going to put words in your mouth here, but I assume it's that even in these spaces, there will be the kind of category winner so that even if there are 100 apps doing similar things, if you can buy the category leader, they're going to continue to thrive irregardless of what the competition is. But based on Blue Throne 2.0's positioning, you wouldn't want to buy one of the 100 other apps to go compete with Opal. And you've probably looked at some of them because they're so clearly breaking away from the crowd as the category leader. Is that how you think about this? Josh Peleg: So, you're a bit unlucky here because I actually did analysis on this the other week, so I'm going to hit you with some data here. Screen time is a really great category, because if you go on Sensor Tower and you do a cross section of downloads over time and you stack them, there's a great viewing way of doing this on Sensor Tower, you can see that not only is the category growing over time, which is great, ever since Apple allowed you to use the API to build these apps, but what you can see is that if you cross section it by downloads, every time a new app enters the market, the whole market grows. And to me, as an investor or a buyer, this tells me there are users that the market leader has not tapped into yet, that if a new entrant comes in and has a different value proposition or branding or appeal, they can actually capture those users. So, that's really interesting. And the same thing happens with the revenue. If you cross section this category by revenue, you'll also see that every time a new company pops in, and there's been one from YC and a couple of others, they're able to capture market share without taking it from Opal, even though Opal is clearly the category leader. So, in this niche in particular, I would feel okay with buying something that isn't a category leader because I think there's space for it to grow. You've also got to remember that screen time is a pretty new category. Weather apps, QR code scanners, they've been around for decades. Screen time has only been around for less than 10 years, probably more like 6 since Apple got the API, which brings me on to another topic of Sherlocking. Some might say, "Well, hey, Apple is providing this service organically on the phones anyway, so why would you pay $120?" And to that, I'd say, "Hey, if you offer a better experience with an improved UI/UX, maybe some social features, you've actually got space to grow in it. And that's been proven already." David Barnard: And I was laughing. The camera would probably be focused on you during that answer, but I was sitting across from you laughing because as a parent, I can tell you that their screen time functionality sucks. I actually was just talking on Twitter with Kenneth, the founder of Opal. He said this publicly on Twitter that they're moving in that direction and wanted to do a user interview with me of all the problems I have managing my family screen time with Apple's stuff. And that's the thing about Sherlocking, is Apple does create great products, generally, but any one of their products is going to have so many holes in it. And then specifically, some of their products just aren't great, and I would lump their screen time product into that. There is a challenge there that as they make it better... And this is an interesting one. I have a weather app. And historically, Apple's weather app has been crap. Well, they actually did invest quite a bit. They bought Dark Sky. They invested a lot in the user experience and created a much better default-experience weather app. Now, did that take away from the rest of the weather app market? I actually don't think it did. I probably should sit down and do a much deeper analysis like you've done. But there is always the potential that they will improve the product over time, and it could cut into the opportunity for that market to continue to grow the way it has. But historically, that just has not been the case. Fitness, they came out with Fitness+, and it's bundled into the Apple One subscription, and yet we see Runna and Ladder and so many fitness apps zero to one since Apple launched Fitness+, doing incredibly well. So, yeah, I don't think Sherlocking and Apple providing it at the system level or even as an add-on like Fitness+ should dissuade you from playing in the category. In fact, maybe that's a sign that it's a good category to play in. And you go create that better user experience and serve the different use cases that Apple's never going to serve. Josh Peleg: Absolutely. Apple, for them, it's a question of focus and ROI. And if they, the behemoth that they are, turn their attention to something that you're looking at, you're probably on the right track. David Barnard: Yeah, totally. All right. Well, I did want to dive into another topic. And we've done so many tangents. We're not even going to cover probably half the topics we were planning on covering today. But I did want to talk about increasing LTV and kind of breaking through some of the ceilings. It's something I've been talking a ton about, hybrid monetization. We've seen early leaders in the subscription space, like Tinder, find ways to better monetize through multi-tier subscriptions, through consumables, through one-time purchases. How do you think about the opportunities ahead? Because I think we're super early. And I love that you come from gaming because I feel like gaming is perpetually 5 or 10 years ahead of the rest of the software makers. So, how do you think about hybrid monetization and ways to increase LTV, not just by increasing subscription price? Josh Peleg: Consumer apps on a subscription basis typically have maybe four price points, which is your weekly or monthly or yearly and your lifetime. And if you imagine a graph with your x- and y-axis and a kind of steps or stairs going up to the middle. You are able to capture user willingness to spend at four different points, the price point of your weekly, monthly, annual, and lifetime. Now, let me put a question to you app founders out there. Let's say you're charging 10 bucks for your monthly and you're charging 100 for your yearly, but you've got a user that's actually willing to spend 75. How do you capture that value? He's not going to pay 100. He might pay 10. But because he was willing to spend 75, you're missing $65 worth of value. Now, gaming cracked this a long time ago because gaming works on this curve that shoots up to the right and to the top of the graph, because gaming uses gacha mechanics and in-app purchases, one-time purchases, for example. So, if a gacha box costs you 99 cents and you're willing to spend $10, you'll make that purchase 10 times and the app has been able to capture all of the money you were willing to spend. So, how can you capture this from consumer subscription apps? Well, the solution we came to on Friday, which is of no surprise to anyone, I'm sure, is introducing in-app purchases, one-time purchases into your app. And let's give an example. There's an amazing app called Soundmap, for example. Soundmap, I spoke to the founder a while back now, a great guy called Zibo. Soundmap is Pokémon GO for music. So you'll walk around your city using your phone, and you'll find tracks in your city and you'll collect that music track, whether it's a Drake song, and then you'll be able to trade that with someone else. Maybe they've got a Metallica song and you can trade that. So there's peer-to-peer sharing there as well. Now, they have a subscription, which is capturing majority of the value of the users. But they also have consumables and power-ups that, for example, let you discover two times more songs in your area. So they're able to capture all the value of the user that they're willing to spend. And I think the issue here for a lot of consumer apps is that they don't all lend themselves to this kind of monetization. But the real unlock we've seen from Blue Throne's level, talking to hundreds of app founders a month, is the ones that can crack this generally can create deeper LTVs, which gives you way more breathing room on your CPIs and your marketing budget. David Barnard: Yeah. I think this is such an underexplored space so far in the non-gaming app world. And consumable IAP in some ways is probably the holy grail. And this is what we see with Tinder. And Tinder is a perfect example. One of the things we talked about over lunch was this famous graph from Ravi Mehta, famous to me. I just think... Josh Peleg: Not everyone is as deep into this as you are. David Barnard: But it's looking at number of users across the horizontal axis, and then in the vertical axis, that willingness to pay and amount spend. And what's so beautiful about Tinder's model is that they have subscription tier, a lower subscription tier that can capture way more users at that lower price. And they have a mid-tier subscription where it's a higher price, but fewer users. And then they have the highest paid subscription tier, which is going to be the highest LTV subscription, but the lowest number of users. But then, layered on top of those boxes is those consumables where you can just perfectly match that demand curve all the way up and down. And so, that is optimal. But to your point, not every app can find that mechanic. I would say look for it. It's like, figure out if there's a way to do that. But if you don't, there's a ton of other hybrid monetization opportunities out there. And one that I think is still underexplored in subscription apps is ads. And even rewarded ads is something I've hardly seen in subscription apps, but it's one of those things where maybe if you're a scanner app and somebody's got zero willingness to pay, but they just need that one scan, maybe you do a rewarded ad. Or you do an in-app purchase, 3 bucks just for one scan, and then they can move on with their life. Now, for most apps, and scanners are probably a good example of this, you probably are going to be a higher LTV charging them on a weekly subscription and certain amount of people forget or whatever. But if you can make those kinds of things work, these are the unlocks we're going to see. And then I'll be interviewing Michael Ribero from Condé Nast at App Growth Annual next month. And this is something they're doing, is bundling subscriptions across their products. After somebody subscribes, offering physical goods. There's so many ways to build up those LTVs, not just with consumables, not just with ads, not just with rewarded ads, not just with... There's just so many ways to make that work. And then, to our earlier conversation about Strava and Runna, it seems like what they're doing, when Strava initially acquired Runna, I was like, "Oh, it makes so much sense. They bought a really amazing team. They're going to incorporate all these amazing Runna features into Strava. Oh, yeah, brilliant." And then three, six months later, you start seeing them do subscriptions that get access to both products. And it's like, "Wait a minute. They're looking at this as a portfolio play where they have Runna standing on its own and bundle in Strava, and maybe..." I actually hadn't looked specifically whether they're doing that at a higher price point or just using it to acquire more subscribers because you're giving more value by giving them both. But I think there's just so many creative ways that this industry is going to grow over time by layering on different forms of monetization. Josh Peleg: Yeah. And let's try and distill that down into one action item for the app founders listening, because I always try and do that, because otherwise, there's just so much data coming at them. The one action item is what's the easiest, lowest-hanging fruit in order to use either rewarded ads or one-time purchases in your app. The answer is just to build an economy, to introduce a soft currency, which is gaming slang for a way of building an economy that's not based around dollars. So it could be gems or flowers or whatever, whatever else it might be. Once you have the economy, you can then say, "Hey, here's a rewarded ad, which if you watch, you'll earn 10 coins," or, "Here's an option to buy 5 coins, 10 coins, 15 coins at different price points." And if you're not sure how to do this because it's unfamiliar to you, my best piece of advice would be, A, go and deconstruct the best mobile games, RAID: Shadow Legends, the game I used to work with, or Candy Crush, or Match Royale, or any of the Supercell games. Figure out how they're doing it. And if you're still in the dark, there are plenty of great consultants who can help you build a gaming economy into your app. David Barnard: Or look at Tinder. And we had a podcast with a former Tinder employer where he went in depth about how they thought about layering on those consumables. So, that's another good example. And there's a growing number of apps that would be great examples to look at in this space. And another thing I would challenge folks on is, there has been a big move to hard paywalls, and that can be a very effective way to monetize and to get that return on ad spend. But if you're trying to grow a category-leading company and the TAM is huge, most apps that do that are probably going to need to have some kind of free tier. And Duolingo is a great example of this. They would never have become the company they became... And, I mean, you can even look at the difference between Duolingo and Babbel. Babbel has been a hard paywall. And Duolingo surpassed them, even though Babbel was older, because they allowed people to come in. And then what do you see Duolingo doing now? They've layered on consumables, working harder at monetizing those users. They have ads now. A lot of their ads currently are for the subscription, but you could see them layering on nice branded ads. So, Duolingo is actually another good example for founders to look at of how they've managed to do that with streak freezes and things like that. Now, some of Duolingo's mechanics are probably overplayed and probably not going to work for your app. I've had podcasts where we talk about that as well. It's exciting to me because I think there's just so many opportunities, and I think we're going to see so much creativity. And then I'm going to have fun on the podcast dissecting what all these different companies do over time to make things work. Ladder is a fun example. They recently started doing physical goods. And I think for them, right now, it's just kind of like a little side thing and it's not like a revenue driver. But I could see that kind of thing for a fitness app selling, doing an affiliate deal with Vuori or one of these big fitness brands where they're selling those clothes inside the app. People who are into fitness are going to be buying those things anyway. Can you create an experience in the app where it makes it better, and then you do a rev share with the brand, or create your own brand of clothing that's as good or better than these other brands and doing that inside your app? I think there's just so many... I was talking to the founder recently about "At what point are you going to sell a home gym bundle, where you just go into Ladder and you're like, 'Okay, I want to join this team and the team's great, but ah, it's hard to find a bench at the gym,' and whatever. Can you sell them a $3,000 home gym in a box?" Right? Josh Peleg: That's a crazy LTV. David Barnard: Yeah. And that's the thing. It's like, Ladder already has an incredible LTV at $130 a year. But I think there's so many opportunities when you're a category leader, which I think Ladder already is and is going to be even more so recognized as that category leader in the coming months and years. They have a high willingness to pay in a category that people are willing to spend thousands, even tens of thousands of dollars now as people are looking at longevity and optimizing their health. It's a whole... And this is another... back to our point earlier, are you latching on to a trend that's growing or that's tapping out? And that's one where they're latching on to a trend that already been growing tremendously and I think has room to continue growing a ton. And so then there's just so many opportunities for them and other apps like that to diversify monetization across all different kinds of things, not just, like, "Can I layer on this one-time purchase?" For Ladder, I think that might be a mistake. That might not be a great answer for them to try and build mechanics around that and maybe alienate some of their hardcore users, whereas they have so many other opportunities. And so, I think it's going to be really fun to see how the industry progresses in the coming months and years. Josh Peleg: For sure. And a couple things to throw on top of that. The first one is a piece of advice for founders, which is how to avoid quite a significant risk. So, if you do implement a hard paywall and Apple finds out about this, there's the risk that they'll move your app from the free category to the paid, which will really mess with your ASO, if it's a super hard paywall- David Barnard: [inaudible 00:54:44]. Josh Peleg: Yeah, yeah. If they figure it out. So just a word of warning there on that one. Other thing to add is, so when I was working at Plarium, the guys who made RAID: Shadow Legends, which, for those who don't know, is a huge RPG, kind of hero-collection game that was doing about a billion a year in revenue at its peak. And one of my projects back there was to build the physical merchandise line for this game. And so we looked into the different types of customers and what they're willing to spend on and what their likes were. And the way we were analyzing it was not as an additional revenue stream, but "How can I increase the LTV of these users using physical products?" And it might be a mug for $6. It might be a t-shirt for $20. Or it might be a super-premium hoodie for $50. And I know that with my whales that are 2% of the user base, give or take, that are spending thousands of dollars on this game, I can then do this easy add-on of a premium product just to show off their fandom for the game and use that to actually influence my marketing spend because I'm actually increasing my LTVs there. David Barnard: That's really cool. I like that. There's just so much opportunity in this space to figure out ways to lever up and grow in so many different ways. Josh Peleg: For sure. And I wanted to pull the conversation back to something else we were talking about on Friday, which is company strategy. We are seeing so many companies and founders that are building one app, and they'll kind of have some luck with this, maybe after a few failures. And this question we were riffing on on Friday was, when does it make sense to go from a single-app company to a multi-app company? And if you do decide to go to a multi-app company, should you buy or should you build anything to chuck onto that? David Barnard: Well, I mean, yeah. We talked about this a lot on Friday. Hard to summarize in a bite-sized podcast. So I'll have to have you back on in the not-too-distant future to cover the 20 other things we could talk about. But I think from my perspective, and then I definitely want to get you to tag on here, is that I do think a lot of founders don't fully understand why they were successful and maybe overestimate their ability to pull off a second app and run the playbook a second time. I mean, again, we're talking about the Cal AI guys, right? Their plan is to build a whole slew of apps. Now, if you have lots of shots at bat, which they're in a position now where they can take a lot more shots at bat, I think they're the kind of team and people who will have successes, but they're also going to have failures, probably very public failures along the way because of how publicly they're doing all of this. But if you expect to win every time and you need a win to make it worth it, you might be better off doubling down on your existing app and continuing to grow that versus thinking you can run that same playbook again and make it work again. I think the hindsight bias of, like, "Oh, I ran this playbook and it worked. I can run it again 10 more times," probably not. Maybe the unicorn folks out there will. But yeah, what are your thoughts on... And another layer of this is, if you've had some success, you go buy another app and run your playbook on the app that's already showing some product-market fit. And how do you all think about it at Blue Throne? Josh Peleg: So, let's break it down to two questions. The first one is, should you go single app or multi-app? And the second question is, if you go multi-app, should you buy or should you build? So, starting from the first question, I would always tend to agree with you, which is, stick with the thing that works because at the end of the day, the top five apps are making 400x more revenue than the bottom 25% of apps. And if you've hit that product-market fit, it's a bit like a flash in the pan, so you want to kind of hold on to it. Now, building again from that and trying to build a second app comes with very similar risks to the first app and there's no guarantee you'll do it again. So which is why I would encourage a lot of founders out there to actually start exploring buying apps. And yes, this does add competition to my industry, but that's fine. There's enough to go around. And here, it's much easier to measure the ROI of your dollars spent. And one of the frameworks we use at Blue Throne is really the ROI of a dollar. So, if I have a current app and I know that if I invest $1 into this app today, I'm going to get back $50 by month 3 and then $200 by month 12, whatever it might be, you have this data. When you're looking at buying another app that you want to apply your playbook to, you can say, "Hey, this app is going to cost me a million. And the ROI I expect is going to be X because I know their revenue is Y and their resubscriber rates is Z," et cetera, et cetera. You're then in a position to directly compare the ROI of that dollar to whether you spent a million more dollars on marketing your current app, because you should know that data. So, as founders, you're probably in a much more powerful position than you realize to actually go and analyze other apps in the market, especially if you're looking at apps within your niche, because you can directly compare what's their retention, what's their churn, what's their price points, LTVs, et cetera. And you can do a like-for-like comparison. And there's so much supply in the market because AI is enabling developers to build and execute and publish faster. You'll probably be able to find stuff that's kind of interesting to you. David Barnard: Yeah, it's fascinating. I hadn't thought about it from that perspective. And this is one area I think a lot of folks, especially who are early in the App Store, like my peers who were building apps in 2010, 2015, and today they're doing millions of dollars a year in revenue, whether it's ASO or something else, having some kind of organic channel that's succeeding oftentimes is what helped propel those apps into the position that they're in today. So you want to really deeply understand that, of the success of your current app, and then looking at potentially buying another app, what you may be buying is somebody who also cracked that, and then you can layer on the paid... I mean, there's so many apps that do get to 10, 20, 30k a month in revenue. You could probably buy them for not that much money. But they haven't even done a paywall test. They haven't done any paid marketing. And so, yeah, if you're a founder and you're really good at paid marketing and viral TikTok or you know how to work with influencers and stuff like that, I think that it's a really cool opportunity to find some of those apps who have that traction and then double down on them. Josh Peleg: Absolutely. And there's supply, there's opportunity out there to do it. More people should. David Barnard: We need to wrap up. But I know you prepared a fun little quiz for me with some data you pulled over the weekend. So let's wrap it up with that because I think it'd be a lot of fun. Josh Peleg: Sure. So, at Blue Throne, we're talking to over 100 founders a month. It's crazy at this point. We've got quite a big team for it. So, I went back into the CRM and I looked at the last 100 founder meetings we've had over the last two months, and I calculated some stats. So I'm going to throw you a question and you tell me what you think. David Barnard: Okay. Josh Peleg: All right? Of the last 100 founder meetings, how many do you think were building an AI note-taking app? David Barnard: Yeah, I just saw somebody tweeting about this. I think it was, "Don't go build AI note-taking app." So I'm going to guess it's high, maybe 30%. Josh Peleg: Oof, it's not that high. It's 9. So it's close to 10%, which, considering the number of categories out there, it's still pretty competitive. David Barnard: That's crazy, though. Josh Peleg: Next question maybe reveals a bit of a harrowing truth about our industry, but how many do you think were female founders? David Barnard: Not many. I do worry apps is turning into the next drop shipping and there's going to be a lot of... whatever it is. It's like, drop shipping bro is the caricature for a reason. I'm going to say less than 10%. Josh Peleg: Yeah. It's 2. David Barnard: 2%? Josh Peleg: It's super, super... And maybe that's a factor of a success bias thing as well, but it was only 2, which I think we need to change, to be honest. David Barnard: Yeah. Josh Peleg: All right. Of the last 100 founder meetings, how many do you think successfully raised VC funding for their app? David Barnard: Well, I know you're going after bigger, more successful apps now. You're not just kind of spray-and-pray with it much. So, probably had higher-quality 100 founder meetings, but I'm going to go low on this one and say less than 40%. Josh Peleg: Yeah, it was pretty low. It was closer to 20%. But we are seeing more and more pop up these days. David Barnard: It's a time in the industry where a lot of the apps were able to raise in 2021 when money was free. And so, now is about the time they've already cut the team, they've run out of cash, they're kind of looking for the kind of exit that Blue Throne would provide versus a strategic buyer or an IPO or something like that. So, makes sense. Josh Peleg: And they're now raising their heads, right? They're now kind of out into the market. So, we'll see them. David Barnard: Yeah. Josh Peleg: All right. Last two for you. Of the last 100 founder meetings, how many were just solo founders with no full-time team around them? David Barnard: Oh, I'm going to guess a ton on this one. I'm going to go high, over 50%. Josh Peleg: It wasn't that high. But it was high compared to the other ones. It was 34%, which is still quite a lot. David Barnard: Okay. Josh Peleg: A third of founders that we're speaking to are solo founders, which is pretty impressive, I think. David Barnard: Well, especially impressive given the criteria of who you talk to. Josh Peleg: Yeah. No, it's definitely the time to build solo. And the last one, I think, because we're in the U.S., I'd thought I chuck a U.S. one, but how many were U.S.-based founders of the last 100? David Barnard: I want to go lower on this one. Less than 30%. Josh Peleg: No. Actually, it was a little bit high. It was 45%. David Barnard: I did terrible. Josh Peleg: Yeah. I made it hard because it was out of 100. So if I did it out of 10, it would've been easier. But I think the U.S. just has all the tools you need to build these really great products- David Barnard: That's actually surprising. Josh Peleg: ... And there's a key reason- David Barnard: Yeah, yeah, tell me. Josh Peleg: ... There's a key reason here, which, if someone listening is doing TikTok marketing, they're going to know exactly what I'm about to say, which is to smash it on TikTok, you have to have your TikTok account based in the U.S. So, naturally, U.S. founders almost have an advantage, really. So these guys are actually doing better compared to people around the world who have to figure out kind of VPN and buy a SIM card, and gets very complicated. David Barnard: I'll say that's the most surprising stat of this whole conversation to me, just because I talked to so many founders all across the world, and so many great founders coming out of Europe, Eastern Europe, Asia, India. I've been surprised at how global the app industry is, even though the U.S. is the primary app market where users do spend most of their money. I mean, this may be kind of a bias in your travels and stuff, but RevenueCat, we've been looking at the data, and Japan and South Korea are two of the largest markets in the world and combined are closing in on some of these larger markets as well. So, you have U.S., then China, then Japan, and South Korea. And I think those markets, language barrier, culture barrier, everything else are a little underrepresented in the broader kind of subscription app ecosystem. U.S. events, you're not going to run into a lot of them because language barrier. RevenueCat, we recently did a thing in Japan and hired somebody in South Korea. Thriving ecosystems in those countries, but they are fairly isolated. So, yeah, surprising to me, but maybe your stats are a little biased. If we took the global kind of a- Josh Peleg: It's definitely not like a global representation of the population. There's some sort of success bias here as well. David Barnard: But that was fun. So thanks for bringing the data. And I think tossing it back and forth was insightful and kind of interesting. So, thank you. But as we wrap up, we always give guests an opportunity to share. Anything you want to share, if you're hiring, looking for apps or anything else you kind of wanted to talk about as we wrap up? Josh Peleg: Sure. So, Blue Throne, we're full steam ahead on looking for our next basically app to acquire and maintain its market-leader position. Our budgets range from 2 all the way up to 50 million to basically acquire the next big app. And if you're building and have scaled already and want to basically look for your exit and get cash in the bank having built for many, many years, then feel free to reach out to me on LinkedIn, Josh Peleg. Maybe we'll share my email on the show notes as well. But yeah, dude, thanks for having me. David Barnard: What's the minimum you would say, minimum annual revenue you would consider? Josh Peleg: Probably about 500k is the minimum annual revenue we'd go for, just because there are costs involved in getting all those processes started, and the acquisition has to be worth it. But the core driver is really the performance of the app, the KPIs internally, and the talent of the founder behind it. Yeah. David Barnard: Well, it's been a blast talking to you. We'll have to hang out at App Growth Annual in a few weeks. Josh Peleg: Dude, I can't wait. I'm going to be coming back to New York just for your event. David Barnard: Yeah. And I'll have to have you back on the podcast sometime. So, thank you so much. Josh Peleg: Thank you so much, man. David Barnard: Thanks so much for listening. If you have a minute, please leave a review in your favorite podcast player. You can also stop by chat.subclub.com to join our private community.