The phrase “app economy” gained popularity about a decade ago, when smartphones completed their evolution from cool gadget to essential device of modern living.

Since then, of course, apps, and mobile apps in particular, haven’t gone anywhere. They’ve only become more entrenched as the go-to channels for everything from banking to shopping to gaming.

Startup investment, however, has not followed a similar pattern. Per Crunchbase data, seed through growth-stage funding for U.S. companies tied to the app economy peaked as a percentage of total investment back in 2016. That year, app-focused companies pulled in nearly 14% of all funding.

In 2023, by contrast, only around $3 billion, or 2.5% of U.S. funding, has gone to companies in Crunchbase’s App Industry Group. That’s by far the lowest share in a decade, as illustrated by the chart below:

Investment totals have fallen too

Over the past two years, we’ve also seen a particularly sharp drop in total funding going to app developers, as illustrated in the chart below:

To some extent, the declines are part of the overarching trend in venture funding, with investment to most categories down considerably since the 2021 peak. But there are some app-economy-specific factors at play as well.

For one thing, many of the most seminal app companies launched over a decade ago. As a result, these companies were getting large equity financings in the mid-2010s. Uber, for instance, picked up $3.7 billion in 2016 alone. Snap snapped up $1.8 billion that year, while Airbnb landed $1 billion.

This year, by contrast, looks more like a “now moment” for scaling a generative AI platform rather than attempting to corner a big market with a consumer-facing app. Only four companies in the app category closed rounds of $100 million or more in 2023, with none exceeding $200 million.

Health apps and other niches for recent funding

Health and health care staffing appears to be the closest thing to a hot area within the app startup space lately, but lukewarm might be a more apt description.

The largest U.S. app round of the year went to ShiftMed, an on-demand app for health care workers, with a particular focus on nurses. The McLean, Virginia-based company picked up $200 million in a February financing.

Meanwhile Nursa, another health care staffing platform and app, also picked up $80 million in an August Series B. And K Health, an AI-enabled virtual care app and service, picked up another $59 million in July.

Beyond health care, other noteworthy financings this year include $110 million for transit app developer Via, and $50 million for Hallow, a prayer app.

Might we see an Epic effect?

As we put together this dataset, many app developers and their backers were likely celebrating this week’s verdict in gaming giant Epic’s antitrust lawsuit against Google. A jury found that Google violated antitrust laws by charging fees and limiting competition for its Play Store mobile app platform.

Potentially, the decision could lay the framework for a sharp shift from the current status quo. The way it is now, the two dominant app stores — Play Store and Apple’s App Store — serve as platforms for accessing the overwhelming majority of apps. In addition, Google and Apple take a sizable cut of revenue for subscriptions and in-app purchases.

To date, those rules haven’t exactly chased away app developers. Play Store, for instance, had an estimated 2.6 million available apps as of June, per Statistica.

However, the number of available apps today is down from a peak of 3.6 million in 2018. And clearly developers would be more motivated to churn out new commercial apps if attached fees were lower.

Putting the app in valuation appreciation

In addition to lower fees from Google and Apple, the thing that would greatly help the app economy venture funding scene would be a robust recovery in startup valuations. After a generous check-writing spree in 2021 — when U.S. app-focused companies pulled in nearly $19 billion — the easy money days have ended.

Given how addicted all of us are to our apps, however, it’s not hard to imagine funding for the sector picking up again should the investment cycle turn more bullish.

Related Crunchbase Pro query:

• Funding To US App Economy Companies

Illustration: Dom Guzman