BLOG

How much does it cost to build an app like _____?

In technology — and apps are no exception — new ideas often are iterations on existing ideas.  In fact, I’d say (conservatively!) that around 80% of the calls we get start with a question following this basic formula: “I’d like to build an app like X but targeting Y group with Z features.”

Totally legitimate question, and quite often these ideas are good, viable iterations on the original theme.  The confusion is often with the cost to develop such an app.  During these conversations, we find it helpful to pull up the funding history for the original company and start the conversation there.

There are a few things to keep in mind when looking at development cost based on an existing platform.

First, many if not most of these companies were founded by programmers.  As such, the amount of money they raised can be considerably less than would be required for a company that doesn’t have any programming talent at inception.  If I were to start a new social network, I can write off a considerable chunk of the cost by simply coding it myself at a cost of $0.  My spending would then be primarily on marketing, design, legal, etc.  But for anyone else, that code cost, which is the largest portion of your startup costs, must be raised.

Second, a well-established app or website has likely gone through several rounds of funding, and several releases, over several years.  Instagram may have started small, but after several years, several hundred million users, and several revisions, it is now something quite different from what it started at.  To reach the point its at cost many millions of dollars.  If you think you are going to compete with Instagram now with an app you paid $5000 to develop, you are quite frankly wasting your $5000.

Luckily the funding history of many tech companies is publicly available, so you should be able to research your existing competition and get an idea of how realistic your goal is.  CrunchBase is a great resource, and the one I will be using here to find numbers for reference.  Let’s look at a few of them now, but keep in mind (I can’t stress this enough!) that most if not all of these companies were started by tech entrepreneurs with the ability to write code.  Your initial funding needs very well could be considerably higher than what you see here.

I want to build an app like Instagram

Funding history

  • Seed round: 500k
  • Series A: $7 million
  • Series B: $50 million

Total investment: $57.5 million

The first version of Instagram allowed you to take photos, apply filters, and upload them to a server, and share them to your Facebook and Twitter feeds.  Basic features like Likes and Follows.

The later investments were likely used to improve the performance and scalability of the backend, increase the quality and speed of the photo filters, and do some marketing.

I want to build an app like Yelp

Funding history

  • Series A: $1 million
  • Series B: $5 million
  • Series C: $10 million
  • Series D: $15 million
  • Series E: $25 million

Total investment: $56 million

Yelp in and of itself isn’t an entirely complex site.  The majority of this funding likely went to marketing, sales and legal, with a decent chunk of the money going to improve scalability of the service, as well as develop mobile apps.

I want to build an app like Facebook

Funding history

  • Angel: $500k million
  • Series A: $12.7 million
  • Series B: $27.5 million
  • Series C: $240 million
  • Series C:$60 million
  • Series C:$15 million
  • Series C:$60 million
  • Debt financing: $100 million
  • Series D: $200 million
  • Private equity: $210 million
  • Private equity: $1.5 billion

Total investment: almost $2.5 billion

Yes, people really do ask us this.  I’m not even going to speculate about all the ways you can spend $2.5 billion, but obviously sales, marketing, legal, mobile apps, new platforms, and acquisitions are all included here.

Those are a few of the big ones, and I could go on and on.  I strongly urge everyone to peruse CrunchBase to get a sense of how much money goes into developing platforms like these as part of your research phase.

One of the biggest things I hope readers take away from this is that if a developer or agency tells you they can build you a service like Yelp for less than 1% of what Yelp itself needed to get off the ground, they are lying to you.  Run like the wind.  If you could build a complex social network for $2000, why did all these companies spend a half million or more at start?  This is the single most important question you have to ask.  Not how cheaply can I get this done, but am I spending an amount that makes sense?

Leave a Comment

You can use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>