Business Monday

South Florida’s app economy emerging on many fronts

A Miami-based developer of online training programs called LearnerNation is improving its mobility while raising money to expand. The young company is easing access to its website with a smartphone, having decided against the alternative of creating a mobile app for a particular brand of handset, such as Apple’s iPhone or Google’s Android. “That could be extremely costly for a startup, and also you become more app-centric at that point,” said Michael Laas, co-founder and chief operating officer of LearnerNation. “Another way you can go is, we’re actually going to be designing our site to be browser-friendly for smartphones, so it doesn’t matter if you’re logging in from an iPhone or an Android phone.”

Welcome the rapidly changing app economy. While mobile apps are popular among consumers who own smartphones, many companies are achieving mobile connectivity through so-called cloud computing, or the use of software that resides on the Internet, not on a smartphone, tablet or laptop. These are the “two divergent paths when it comes to being used on mobile devices,” Laas said. "Are you based for the Web, or are you based for an app, for a smartphone?"

Both paths are providing unparalleled handheld access to information over the Internet, and the march toward nonstop connectivity has created unprecedented opportunities. The development of mobile apps, in particular, has become a dynamic force in the software sector of the economy. Building and distributing software for mobile phones has never been cheaper, so this slice of the software industry has attracted not only a swarm of inventive entrepreneurs but also a slew of advisors, financiers and technicians to help them. Big brand-name corporations are investing in mobile connectivity, too, along with social media exposure, transactional capabilities and other elements of their online presence.

By one measure, South Florida’s app economy appears to be growing faster than the overall economy. The number of payroll jobs in information services, a broad sector of the economy encompassing software development and publishing, has risen by 1,200 in Miami-Dade and Broward counties since 2010, according to the U.S. Bureau of Labor Statistics. The 12-month average for the two counties increased to 35,800 last year from 35,000 in 2011, a 2.3 percent rise, about double the growth rate of total non-farm employment in the two counties. National employment in information services totaled 2,688,000 in June, virtually unchanged from a year ago, the U.S. Department of Labor reported Friday.

Payroll employment figures, however, undercount the impact of independent contractors who have created their own jobs in the app economy. Entrepreneurial activity may be greater in the software industry than in any other. One prominent piece of evidence in recent years has been the proliferation of local facilities known as incubators and accelerators with programs to help entrepreneurs turn software-based ideas into viable ventures. Other companies build software-based systems for entrepreneurial ventures and take equity positions in them. A fast-growing startup company called Rokk3r Labs in Miami Beach, for example, is building software that will improve mobile access to the website of LearnerNation.

Launched in January 2012, LearnerNation has sold online programs for employee training to commercial customers that include Riot Games, a leading publisher of computer games, and Hulu, an online video service provider.

Laas said LearnerNation is trying to raise $750,000 of fresh capital and would use some of the funding to hire a Miami-based chief technical officer. The company is seeking “a mid-level programmer that can come in and know our programming language,” he said. “I would say we are willing to pay anywhere from $60,000 to $80,000 a year.”

Despite good pay for full-time work, talented software designers and developers often prefer to work on their own, and many have gravitated toward app development for mobile phones. David Elgena, for example, is an entrepreneurial software designer in Miami whose professional claim to fame is a popular application for the iPhone. The 28-year-old initially doubted the viability of the iPhone when Apple introduced the handheld phone-inside-a-computer in 2007, launching a new era in mobile app development. “I just thought nobody wants this much stuff on their phone, but I was wrong.” Now Elgena has the right take on the mobile connectivity trend and the sales revenue to prove it.

In the first two weeks after Weather Dial, his iPhone app for real-time weather reports, appeared in the App Store, Apple’s online shopping site, more than 20,000 buyers paid 99 cents each to download it. He has updated Weather Dial and raised the price to $1.99 since its initial release last year. “It was kind of like disbelief,” Elgena said, describing his initial reaction to the surge in sales of his app. He once worked full-time for Senzari, a software firm that provides Internet radio service with offices in Miami, San Francisco and Berlin, Germany. But his solo success encouraged him to resist working full-time for others and pursue his own professional path.

“In the beginning, it was hard to establish the self discipline,” he said. “But now I think I’ve got the hang of it. Just waking every morning creating new products, which is what I love to do.”

Welcome to the independent wing of the app economy. Elgena, a recent graduate of Miami International University of Art and Design, is a sole proprietor out of choice, not necessity. He has had his share of full-time job opportunities. “I interviewed at Yahoo! at one point to join their mobile team. That didn’t work out,” said Elgena, who operates at Pipeline, a shared work space in Miami’s Brickell financial district. “But there have been a lot of inquiries.”

Successfully developing a mobile app is inexpensive because distribution costs are low. Downloadable mobile apps are just clicks away online at such shopping sites as the App Store that Apple. operates. “The App Store has aided my success,” Elgena said. “It certainly has made it easier for me as an individual to distribute to a wide market.”

The worldwide number for mobile app downloads will reach 108 billion by 2017, compared to 60.1 billion last year and 29.5 billion in 2011, according to a new study by Sweden-based telecom consulting firm Berg Insight. The firm also forecast that Apple’s App Store will remain the No. 1 online source for mobile app downloads, followed by the No. 2 shopping site, Google Play, and Windows Phone Store in third place.

Even small improvements to existing computer applications can produce big rewards. Elgena, for example, redesigned the look of the typical weather app, the user experience, rather than reinventing it. He paid almost $5,000 to a third-party software developer in Ukraine that did certain types of coding to make Weather Dial work. “As far as the very heavy, back-end coding, I haven’t learned it, because I realized my time is more valuable on the front-end design, creating the user experience,” Elgena said.

His work on Weather Dial was more personal than commercial: “My goal was to create something that I would be proud to carry around on my phone,” Elgena said, “and I was just hoping other people would feel the same way.”

Plenty did. Elgena said revenue from Weather Dial, after subtracting the 30 percent share that Apple withholds, has totaled about $40,000.

Success in the mobile app world is often fleeting, though. Weather Dial quickly spawned several competitive imitators. Elgena said without elaboration that he is designing different types of iPhone software.

The app economy attracts multiple types of entrepreneurs, not just computer programmers who can write code. In fact, more than a few software-based businesses have chief executive officers and other top managers in South Florida and technical staff outside the state.

Consider the career path of Kristen McLean, an entrepreneur who has employed the technical talents of others to develop a business built on software. She is co-founder and CEO of Bookigee, a three-year-old company developing software services to help authors sell books. Before the startup of Bookigee, which she calls “a software-as-a-service company,” she ran a trade association for bookstore owners. She is one of six Bookigee employees, including a two-person technical team in San Francisco.

She and a partner personally invested $40,000 to start Bookigee in 2010, and In 2011, the company raised $450,000 of capital from wealthy individual investors, known in investment circles as “angels,” in exchange for 20 percent of the company. Another pivotal development in 2011 was McLean’s decision to enter an accelerator program in downtown Miami called Incubate Miami, opened in 2009 by Enterprise Development Corp., a non-profit organization dedicated to supporting South Florida entrepreneurs.

“That was the key for us,” McLean said. Her training there led her to refocus Bookigee on serving the needs of authors rather than trying to compete in the mass consumer market for books. Whether authors self-publish or work with book publishing companies, “they’re all having to take on a much larger percentage of their own marketing,” she said, “so we’re building tools to help them,” a mapping tool, for example, designed to identify U.S. metropolitan areas where certain types of books sell best.

Bookigee also is trying to take advantage of the mobility movement in book publishing industry. McLean said in a recent email that Bookigee is working with a Chicago-based app developer and “building an analytics program for his e-bookstore and reading application, and we will be bundling both products for sale into the publisher level of the market.”

McLean said funds for further research and development would come from another private sale of stock in Bookigee: “We are working on a $1 million round.”

Privately owned software companies raised $2.3 billion of venture capital in the first quarter, more than any other industry and 8 percent more than in last year’s fourth quarter, according to a U.S. survey by professional services firm PricewaterhouseCoopers. PwC also said in an April 19 report that the software industry attracted 63 percent of first-round venture capital funding during the first quarter.

Investor interest in software-oriented ventures has fueled the startup of companies that try to guide entrepreneurs from business concept to commercial success. One such company, New Frontier Nomads in Miami, combines the technical guidance of an incubator facility with the financial support of a venture capital fund.

“Some people have referred to us as an ‘accelerator,’ but I don’t necessarily see us that way,” said Andrej Kostresevic, the founder of New Frontier Nomads. He intends to lead his 14-employee company to the new frontiers in information technology, and “currently, that frontier is mobile. We now have a computer in our pocket that’s always connected to the Internet. The next new frontier might be wearable computers. It might be smart TVs.”

Started almost two years ago, New Frontier Nomads usually takes 5 percent to 15 percent of a company’s stock in exchange for its technical development services. “We become the tech startup team,” said Kostresevic, a veteran software developer. “We have a process that takes you from an idea to a finished and successful product. We focus on idea validation and product development.” He said New Frontier last year launched 10 software-based products for development-stage companies.

Rokk3r Labs is another facilitator of software business development that has been in operation since March 2012. Its bustling home office in Miami Beach has about 45 employees who build mobile phone applications and other types of software products for more than two dozen portfolio companies, including LearnerNation, an online locator of entrepreneurial activity and opportunity called MapYourStartup and an online employee recruitment site called Crowdbounty, which pays viewers for personnel recommendations that lead to hires. Rokk3r Labs also has worked on tech-heavy ventures with investors that are well established corporations, including McDonald’s and State Farm. “We try to focus on social, mobile and digital products that will change how people interact," said Nabyl Charania, 37, a managing director of Rokk3r Labs. "It’s not an easy thing. For every Facebook, there’s 1,000 startups that fail in two months."

Rokk3r owns 3 percent to 45 percent of most companies in its portfolio and 100 percent of some. “A lot of the companies in our portfolio come from accelerators and incubators. We’re the logical next graduation step,” Charania said. His company serves high-tech entrepreneurs in more than the purely advisory capacity of accelerators and incubators by actually building software and business models for them in exchange for a combination of cash and equity in their companies.

“Our model is cash and equity, so entrepreneurs pay enough cash to fuel the development, then we invest whatever they can’t pay in cash as part owners of their company,” Charania said. “We price it at $20,000 a week, and that gives you about four or five full-time resources,” including management consultants, software designers and program developers.

Most Rokk3r projects cost $100,000 to $300,000 to complete. “We do it very, very fast. We develop them in four months or less,” said German Montoya, 41, a managing director of the Miami Beach company. “A four-month project is a huge project for us. When you finish that product, you are ready to run your business.”

In addition to newly minted companies, the app economy also encompasses such well established, software-based companies as Citrix Systems in Fort Lauderdale and Ultimate Software Group in Weston, both publicly traded. Others based outside the state have facilities in South Florida, including Research in Motion, the Canadian maker of Blackberry wireless handsets.

Research in Motion, Foxconn Technology Group, the Motorola Mobility unit of Google and other app-intensive businesses “all have R&D facilities here in South Florida, which means engineers with not only the capability to write the apps but to build the hardware,” said Steve Luis, director of technology at Florida International University’s computer science school. “South Florida obviously participates in a broader app economy through the U.S. and globally. So, we have a great deal of talent and a broad spectrum of talent.”

FIU is adding to the talent pool by graduating about 250 students each year with degrees in computer science. “We’re definitely seeing an uptick in the interest in the industry to hire our students,” Luis said. “Starting computer scientists could make anything starting in the upper $70,000s. It’s one of the highest paid professions coming out of college.”

A do-it-yourself trend could help reshape the development of software for mobile phones and other handheld devices. For example, customers of a Deerfield Beach company called AppsBar build their own mobile apps. Founded in 2011, AppsBar helps customers make apps compatible with Apple’s iOS operating system and Google’s Android operating system and says it has more than 400,000 users.

Miguel Alonso, college-wide chairperson of engineering at Miami Dade College, said a free software tool called MIT App Inventor allows almost anyone to create a mobile app for an Android phone. The Massachusetts Institute of Technology maintains the tool online and search engine operator Google created it. “They allow you to build apps just by kind of piecing it together graphically,” Alonso said.

The surge in app publishing has encouraged MDC to make mobility a major in its computer science curricula. Miami-Dade College last year began offering a two-year degree program with an emphasis on mobile app development, Alonso said. “Essentially we developed that program based on the trend in the industry,” Alonso said. “Even the lay person sees the growth in this industry, so it’s kind of a no-brainer for us to focus on the mobile space as one of our initiatives.”