“Big news in the world of mobile analytics providers”is what TechCrunch headlined back in May last year, when App Annie, app analytics and app data industry platform, acquired Dutch company Distimo. How does Distimo co-founder Remco van den Elzen look back on the road travelled from starting up Distimo to merging with global leader, App Annie?
“We started Distimo about six years ago, when mobile apps became available but many app developers didn't know much about the market. We collected data and sold it to any company active in the industry that wanted to gain insight into their market. App Annie does the same, with technology that has now evolved to enable much more in-depth data analysis. Initially, we provided estimations on downloads and revenues, now we also go into engagement. Developers do not just want to know if their app is being downloaded, but how it is being used.” Remco is a born entrepreneur: during his university years he had his own company (founded by Distimo co-founder, Vincent Hoogsteder) and worked together with Kennispark Twente to promote entrepreneurship amongst students. For his graduation project Remco worked at mobile app company eBuddy, together with his Distimo co-founders. “We realized how hard it was to track our competitors and to track the market in general. We figured many other companies must have the same problem: we founded Distimo to solve it.”
AHA moment: changing the product
Although mostly bootstrapped, Distimo did receive “a small but helpful (TOP) loan” from Kennispark Twente. The first product the young company developed was a web-based tool allowing developers to track their own data. “The initial idea was to make money by selling that tool for which we collected data during the development process. Data that you now see when you open the app store, like top ten lists, app prices, and how they are trending over time. When we did a presentation at a conference in Barcelona, Spain, for which we went through our collection of data, made analyses, sheets, and presented findings on successful mobile apps, Nokia asked us if we sold that data. We had never thought of this because we hadn’t realized this freely available data could be valuable. That’s when the idea was born to track and analyze the data ourselves, and sell it back to developers and any other interested companies. We changed the business model.”
Underestimating the market
Distimo benefitted from the network effect. “Are you familiar with the network effect? Facebook, for example, is only of value to you when your friends join too. We relied on a similar effect which I think helped the company be successful and made it hard for competitors to compete. We made our tool freely available to developers to track their data – and collected that data ourselves. More developers meant more data and so improved our estimations of the entire market as well as individual apps. That’s how it became harder for other companies to compete with us: they didn’t have this data at their disposal.” Although Distimo started selling the data analyses after about six months, they did not scale up until three or four years into the company. “Initially we mainly sold to big companies like Microsoft, Nokia and Blackberry, because the paid work we did was highly custom and therefore expensive. But it was a mistake to think only these big platforms could afford us. We hadn’t considered selling to developers because we thought they didn’t have the money to spend on data.” Remco chuckles: “We figured out they actually want to spend hundreds of thousands of dollars on market data. With this realization our market opportunity became so much bigger that we automated our entire product and scaled our sales team and operations.”
The competition: App Annie
Remco moved to the West Coast of America where many of Distimo’s clients were based. “When selling to American companies you want to feel as American as possible. They prefer to work with local companies, it’s an expensive product so you need face to face contact with your customer. By being there you can keep better track of competitors, investors and developments and learn more about the market in general.” So how did the founders of Distimo respond to another player on the scene? “Having no competitors may seem great, but they in fact make you accelerate. You grow more quickly, hire more people sooner – you become more aggressive. It’s a good lesson: eventually a competitor will come in, so don’t relax for too long, take it while you can.” App Annie and Distimo were building similar products for the app ecosystem. “Both of us agreed that it made more sense to work together instead of against each other. Especially because we had high ambitions for the market, which is growing like crazy. We were sure that App Annie, like us, wanted to continue to innovate with the market and grow insights and penetration. You need to be a strong company with plenty of capital to make those ambitions a reality. For us it made sense to do it with them instead of on our own.”
“It’s interesting how an acquisition process goes: you can never know the intentions of the other party, it’s about growing confidence on both sides. App Annie worked hard to gain our trust, by involving their investors, for example. It was a long process, in which we needed to collect a lot of data, have lots of negotiation. This process is especially hard when you own the business yourself; you cannot involve your employees, have to work many, many hours, travel a lot, keep the business running.” App Annie was a better-known brand, had large headquarters in San Francisco as well as offices around the globe, and was valued higher than Distimo: so it was the natural conclusion to merge into App Annie. “At Distimo we all agreed it was a genius move! For us personally as well as for the company, the combined entity is so strong right now. It was a complimentary merge: our focus was with engineering while App Annie is customer focused. Our developers in Utrecht played a big part in launching the Usage Intelligence product which is now an important product for App Annie.
Engineers: talent of the Netherlands
App Annie’s engineers work together worldwide. “I think the Netherlands is a great country to start from. Our Dutch engineers are world class: they understand what you are trying to achieve. That's why the Dutch engineering team at App Annie is very important in their R&D.” Is it the mindset that makes Dutch engineers so skillful, or is it our education? “I think both of those reasons, we are down to earth and work hard without overdoing it. It helps. But it is also because the Dutch speak English very well. All the code and documentation is in English, so speaking the language makes it so much easier to learn code. If you want to sell to the entirety of Europe, the Netherlands is a great launch pad: you can have one office with multilingual people, hire great engineers and your sales people can easily travel to any of the European countries.”
From starting up to merging: lessons learned?
Like Remco explained one of Distimo’s errors of judgement was realizing too late how many parties were willing to pay for their product, “we could have scaled after a year and a half.” It was mostly due to the lack of people asking the founders the right questions. Remco’s lesson: “Get advice from other people. It makes sense, but we were stubborn at the time, and proceeded without a board or investors. If we had had the board of advisers sooner (they came in after four years), they could have challenged us and make us think bigger at an earlier stage. It would have been tremendously helpful to have found someone with a company that went public, to make that seem more achievable to us. Maybe then we would have done it on our own. I would advise any young company to have a board of advisers, made up out of people who solve big world problems in their respective companies.” What did Distimo do well? “We always had big ambitions for our company. We wanted to sell to the US first and then go gobal. This is often what I miss in Dutch startups. They have great technology, fantastic founders, but are not wired to think they can compete in a worldwide market. But they can.”