Simon Dawlat started AppGratis with the $10,000 in savings he had in his bank account. Three years later, the company says it has grown to 40 employees and $14.5 million in revenue last year. Not bad for a business built on giving apps away for free. Today the company announced it's raising a $13.5 million series A fund to help double its staff and expand to new markets.
The model for AppGratis is paid distribution. Big brands like Nike pay AppGratis for every user who installs the Nike+ app. For an indie developer like Etermax, developer of the iOS game Wordcrack, AppGratis works on a revenue share. Instead of charging per install, Etermax and AppGratis split the money coming in from digital downloads and advertising.
AppGratis has been profitable for a while and is currently #5 in the free section of the app store. So why the big funding round? "Three reasons: international expansion, product improvements, and hires," says Dawlat. "We want to improve our recommendation engine and scale up to eighty employees. Top talent is very expensive, as is global infrastructure." The money comes from Iris Capital, the French telco Orange, and the advertising giant Publicis.
The key to the business, says Dawlat, is user trust. "We have heated debate in the office sometimes about whether or not to push a certain app." Avoiding spammy or underperforming apps has gotten the company to 7 million downloads and 2 million people a day who open AppGratis to check out the free software being offered. "Our goal for this year is to go beyond just recommending great apps, and start pushing specific apps to certain users based on their profiles."
"We have heated debate in the office sometimes about whether or not to push a certain app."
As our own Ellis Hamburger discussed in some detail, mobile developers are often snared by the Catch-22 of wanting to have a free app so they can grow a large user base, but needing money to support a growing business. AppGratis seems like an interesting third option:, allowing apps to remain paid in the store, but also scale up their user base by offering a free copy to the millions of folks who open AppGratis every day.
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