Dr Aaltonen: How I built and sold an app to Facebook
18 November 2016
- Aleksi Aaltonen reveals his journey from start-up to Facebook
- His app Moves took on the might of Nike and Fitbit
- The Moves team secured the backing of major investors
- Now he is looking to pass on his knowledge to undergraduates
After finishing his Phd in 2012 rather than continue in academia Aleksi Aaltonen thought it would be fun to build an app.
Two years later Moves – an activity tracking app – had been downloaded nearly four million times and was sold to Facebook.
Aaltonen is now back in academia bringing his experience to the classroom on the BSc Digital Innovation & Entrepreneurship and believes it was his teenage years hidden in the bedroom in Helsinki on his Amiga 500, ignoring his parents advice to “get off it and get outside” that started his interest in computers.
“I was not just playing games,” says Dr Aaltonen, Assistant Professor of Information Systems. “There was a bulletin board system, and you could hook up a modem call another computer and exchange messages or download games - in some ways the same as the internet.”
After leaving school Aaltonen caught the burgeoning internet wave working at a multimedia company building websites and the first digital adverts. With the internet so new he learned ‘by doing’ and he met colleagues who would become his future partners in Moves.
“I finished my PhD at LSE and a couple of my old colleagues had built a popular games, an online virtual world, and they had the idea of doing an app,” says Dr Aaltonen. “We started doing a sports app, but it slowly changed and Fitbit and Nike Fuelband was also developing so then we decided to do an app that just tracked everyday activities like walking, so you could see how active you are.”
The founders quickly put together a prototype that they could take to investors, with Dr Aaltonen working on the product concept, though he says “in a start-up you get to do a bit of everything, that’s why it is so interesting”.
Through connections they approached investors Lifeline Ventures in Helsinki and pitched it to them.
“Pitching is an act of storytelling,” says Dr Aaltonen. “Nobody knows if it is going to work because we had not yet built it. They look at the team, and see if they have the knowledge to do this and then you have to have a story that makes sense and fits the kind of trends going on - you have to piggyback on them.
“We knew there were other competitors, Nike Fuelband, which hadn’t launched yet and Fitbit was at its very early stage, so we needed to be quick. Even if you have a great idea the window of opportunity is very narrow.
“If you are too early you are dead in the water because people don’t understand why they need this product, or if you are too late some big company has already done it and you can’t compete as a start-up if the market is already established. You have to catch the right moment, not too early and not too late, there is a lot of gut feeling involved.
“Our story was there were a lot of apps and gadgets for the fitness freaks, but we wanted to make something for the rest of us, who know they need a bit more exercise but can do it by just moving a bit more. At the time people were talking about how you needed to do 10,000 steps in a day, so it fitted into that trend.”
Lifeline Ventures, a company behind Supercell - the makers of the Clash of Clans game - liked the story. They invested a few hundred thousand Euros, which was doubled by the Finnish Government through an enterprise allowance scheme, and one or two angel investors invested as well.
“Investors like there to be other investors involved,” says Dr Aaltonen. “You don’t want to be the only one betting on potentially the wrong horse.”
The team spent the money on employing staff, bringing in a few more developers. They didn’t have long to get it up and running, the money would soon run out.
“When you are a start-up, you are on a short lease of life known as runway,” says Dr Aaltonen. “You get nine or 12 months unless you can turn it into cashflow. We didn’t even plan that.”
The first challenge was the technology. They found the GPS rapidly drained a phone’s battery and so they had to find a way around that while making it sure it switched on when people moved so it was accurate. Once that was mastered and the design perfected they were ready to go to market.
“That is a huge problem,” said Dr Aaltonen. “There were nearly a million apps in the App Store, how is anybody going to know about ours? We were up against Nike and Fitbit as well. I remember walking past the IMAX at Waterloo and seeing a huge advert for Nike’s Fuelband. That alone probably cost more than all of our initial funding.”
Through some contacts though, Moves managed to pitch their app to TechCrunch, a huge US website, who liked it and timed the article to come out on the day the app was launched. It was a huge coup and saw thousands of downloads a day. Then the holy grail. Apple’s App Store made it their feature app.
“They just liked the app, we were lucky,” said Dr Aaltonen. “That opened the floodgates.”
Suddenly they were getting tens of thousands of downloads a day and now they had a different potentially fatal problem.
“We had to quickly ring our server provider who we were renting the servers off to put some more hardware in the rack,” said Dr Aaltonen. “Luckily that worked out, otherwise we could have had 50,000 people getting error messages and that would have killed us. They would have moaned on the blogs and never come back.”
The Moves team were working frantically to keep up with demand, ironing out glitches and improving features. They quickly burned their money and needed another round of cash. Lifeline Ventures helped with some introductions and the company was able to bring a funder on board from London and keep Moves going.
After launching in 2013 in 18 months Moves had been downloaded four millions times. They were again running out of money though, luckily a tech giant was circling in on their success - Facebook.
“We were getting to the stage that we had to take it to the next level if we were going to monetise it,” said Dr Aaltonen. “We had about four million downloads and by any traditional standard that is huge but in apps it is just a start, you need 10s of millions before you can start bringing in advertisers, for instance.
“People are happy to pay £2 for a latte but they won’t pay for an app that costs €1 million to develop. Investors know the game. First you have a product and a big user base, then you find a way to monetise or you grow like crazy.
“You don’t create a business only wanting to sell it, otherwise you don’t create value that anybody wants to buy. But in early 2014 there was interest from Facebook and we decided to go with them rather than try to monetise it.”
A confidentiality agreement forbids Dr Aaltonen from revealing how much Facebook paid – “there are tons of lawyers and hundreds of pages of contracts involved in this kind of acquisition processes," he laughs.
At this point, Dr Aaltonen decided to head back to academia.
“I can code, but not enough to produce professional apps,” said Dr Aaltonen. “We had others who could do that. My job title was Chief Social Scientist where my sociology PhD allowed me to work on the design. At Facebook I would probably have been stuck in an office job going to endless boring meetings, part of a corporate machine. I didn’t want that. People want to join a cool company like Facebook, but I always say to students do what you want to do, don’t follow a brand.
“In a start-up you get to do everything, make life and death decisions on behalf of the company. You become a self-starter, though, looking back it would have been good to have known what I was getting myself into – perhaps we could have gone even further!”