AppSumo is an online platform that offers discounts and deals on digital tools and services for entrepreneurs and small businesses. It was founded in 2010 by Noah Kagan and is based in Austin, Texas.
Who are the original founders of AppSumo?
AppSumo was founded by Noah Kagan and his business partner Josh Howarth. Noah Kagan is an entrepreneur who previously worked at Facebook and Mint.com. He came up with the idea for AppSumo as a way to help entrepreneurs and small businesses gain access to tools that are typically expensive.
In 2010, Kagan brought on Josh Howarth, an experienced entrepreneur, as a co-founder to help build and grow AppSumo. Howarth’s background in marketing and business development complemented Kagan’s experience in product development.
Together, Kagan and Howarth launched AppSumo in November 2010 with the goal of making tools and services more affordable for small businesses and startups. The company was bootstrapped and did not take any outside funding initially.
How did Sumo Group acquire AppSumo?
In 2014, after running AppSumo successfully for four years, Noah Kagan and Josh Howarth decided to sell the company. They were approached by Sumo Group, a UK-based company that owns a suite of digital tools and services.
Sumo Group acquired AppSumo in an all-cash deal in October 2014. The terms of the deal were not disclosed publicly, but it was reported to be a multimillion dollar acquisition.
For Sumo Group, acquiring AppSumo gave them an entry into the US market and a strong presence selling to small businesses and entrepreneurs. AppSumo also had an engaged user base and email list that Sumo Group gained access to.
For Kagan and Howarth, the acquisition provided an exit after several years of bootstrapping and growth. Kagan did note after the acquisition that they likely could have grown AppSumo’s revenue further had they not sold.
Who owns AppSumo today?
Today, AppSumo continues to be owned and operated by Sumo Group. The headquarters remain in Austin, Texas and AppSumo largely runs as its own entity within the broader Sumo Group organization.
Sumo Group is a private company founded in 2005 by Joe Gribben and Greg Dziemidowicz. They own and operate several digital services in addition to AppSumo, including:
- Remember the Milk – Task management app
- Builds – Website development platform
- SellerMarket – Ecommerce platform
- OptinMonster – Lead generation tool
As the parent company, Sumo Group provides funding, strategic direction, and corporate support to AppSumo. However, AppSumo continues to have its own dedicated team and maintains the brand identity it had before being acquired.
Who are the key executives at AppSumo?
Here are some of the key executives and leaders at AppSumo under Sumo Group’s ownership:
- Noah Kagan – Chief Sumo. Kagan is one of the original founders and continues to be involved as the head of AppSumo.
- Dalton Valine – Head of Operations. Valine manages the operational side of AppSumo.
- Kishan Laddha – Chief Revenue Officer. Oversees the marketing and growth initiatives.
- Chris Nuckolls – Head of Sales. Leads the sales team.
- Phong Nguyen – Head of Engineering. Oversees AppSumo’s software engineering and product development.
While AppSumo operates within the Sumo Group ecosystem, the executive team is specifically dedicated to AppSumo’s initiatives and brand vision.
How does AppSumo operate within Sumo Group?
As a wholly owned subsidiary, AppSumo operates fairly independently but can leverage the resources of its parent company Sumo Group. Some of the key ways AppSumo operates within Sumo Group include:
- Funding – AppSumo can tap into Sumo Group’s funding for technology development, marketing, and other investments.
- Talent sharing – AppSumo can leverage Sumo Group’s talent pool for hiring and training.
- Shared services – AppSumo can benefit from Sumo Group’s legal, HR, and other corporate services.
- Brand recognition- Being under the Sumo Group umbrella provides increased brand visibility and credibility.
- Synergies – AppSumo collaborates with Sumo Group’s other properties to create bundled offerings.
However, AppSumo also maintains its own office, leadership team, and unique brand identity. This allows AppSumo to stay agile and focused on its core business serving entrepreneurs and small businesses.
What is the business model for AppSumo?
AppSumo operates under a software-as-a-service (SaaS) business model. The core elements of AppSumo’s business model include:
- Offering discounted software and services – AppSumo partners with SaaS providers to offer their products at heavily discounted rates for a limited time. This creates urgency for customers to buy.
- Upsells – AppSumo tries to upsell customers to annual subscriptions to the apps after the initial deal expires.
- Affiliate revenue – AppSumo earns affiliate commissions if customers purchase through AppSumo’s partner links.
- Product bundling – AppSumo bundles deals together to encourage higher spend.
- Advertising – The website and emails generate advertising revenue.
- Business intel – AppSumo charges for business trend reports and intel.
This model allows AppSumo to earn revenue in multiple ways. The business is very lightweight operationally because AppSumo does not create any software itself – it simply connects customers to discounted SaaS tools.
How much funding has AppSumo raised?
As mentioned previously, AppSumo was initially bootstrapped by founders Noah Kagan and Josh Howarth without any outside funding. They built the company themselves and retained full ownership.
It was only after AppSumo was acquired by Sumo Group in 2014 that outside funding came into the picture. As a subsidiary of the privately-held Sumo Group, AppSumo has access to financial support from its parent company.
There is no public data available on exactly how much funding Sumo Group has provided AppSumo. Given Sumo Group’s financial resources from its other digital brands, it likely has been able to provide sufficient capital for AppSumo’s technology, marketing, and other needs.
By acquiring an already profitable company like AppSumo rather than a cash-burning startup, Sumo Group has not necessarily had to raise enormous outside rounds. Its existing cash flows likely support ongoing investments into AppSumo.
Key Takeaways on AppSumo’s Funding
- Bootstrapped initially without outside funding
- Acquired by Sumo Group in all-cash deal in 2014
- Has access to financial resources from parent company
- Sumo Group’s internal cash flows reduce need for large outside funding
What is AppSumo’s annual revenue?
As a private company under Sumo Group, AppSumo does not disclose its specific financial results or annual revenue. However, there are some estimates and reports on AppSumo’s revenue growth:
- Estimated at over $50 million in annual revenue as of 2020
- Reported over 3x revenue growth from 2016 to 2020
- Has over 1.5 million registered users as of 2020
- Average order value estimated at $50
- Has featured over $5 billion in partner deals since founding
Based on these estimates, industry analysts project that AppSumo likely generates well over $50 million in annual recurring revenue and continues experiencing healthy growth under Sumo Group’s ownership.
AppSumo’s revenue comes from several sources like one-time deals, recurring subscriptions, advertising, and upsells. The company has been able to scale successfully while maintaining strong profit margins.
Key Revenue Metrics
| Metric | Estimate |
|---|---|
| Annual Recurring Revenue | $50 million+ |
| Registered Users | 1.5 million |
| Average Order Value | $50 |
| Revenue Growth (2016-2020) | 3x |
How does AppSumo make money?
AppSumo relies on several key monetization models to drive revenue and profitability:
One-Time Deals
The core of AppSumo’s business is providing consumers access to deeply discounted deals on partner products and services. Customers pay AppSumo directly for these limited-time deals.
Recurring Revenue
After deals expire, AppSumo converts some users into full-paying subscribers of the partner apps. This recurring revenue is valuable.
Upsells
AppSumo encourages customers to purchase multiple deals at once. Bulk discounts incentivize larger order values.
Affiliate Revenue
AppSumo earns affiliate commissions when partners make direct sales through AppSumo’s platform.
Advertising
The AppSumo website and email newsletters generate revenue from display advertising.
Business Intel
AppSumo sells market intel reports and analysis of business trends to subscribers.
This diversified monetization strategy is a major reason why AppSumo has been a profitable business from early on, even while providing heavy discounts. The company has mastered digital monetization tactics.
Does AppSumo turn a profit?
Yes, AppSumo is a profitable company. Since it was bootstrapped at the beginning, AppSumo was built to be a lean, cost-effective business. Under Sumo Group’s ownership, profitability has remained a priority.
Some key factors that contribute to AppSumo’s profitability:
- Requires minimal overhead since it does not develop products in-house
- Generates revenue from multiple sources
- Masters digital marketing and monetization tactics
- Benefits from economies of scale
- Focuses on high-margin products and upsells
Public filings indicate that Sumo Group itself has strong net profit margins north of 30%. While AppSumo’s individual margins are not known, its model lends itself well to maintaining profitability.
AppSumo also benefits from Sumo Group’s financial stewardship and experience operating profitable digital businesses at scale. Access to growth capital also enables AppSumo to continue scaling while staying in the black.
What is AppSumo’s valuation?
As a private company under the ownership of Sumo Group, AppSumo does not have a public valuation or market capitalization. The 2014 acquisition price was not disclosed.
However, industry analysts estimate AppSumo’s valuation is likely between $200-400 million based on its annual revenue, growth metrics, and profitability profile.
A valuation in this range would represent 3-4x times AppSumo’s estimated revenue. For a bootstrapped and profitable SaaS business with an experienced parent company, this is a reasonable valuation range.
AppSumo also benefits from access to Sumo Group’s resources and cross-selling synergies, which likely enhance its valuation. But overall the business fundamentals remain strong.
Factors Supporting AppSumo’s Valuation
- Strong revenue growth and large addressable market
- Diversified monetization and repeat business
- Profitable company with positive cash flows
- Experienced parent company and ability to upsell
Does AppSumo have any direct competitors?
AppSumo pioneered the concept of the “deal site” model for software and tools tailored to entrepreneurs and small businesses. But over the years, some other direct competitors have emerged, including:
StackSocial
StackSocial offers discounted software and apps across multiple categories. It features daily deals and also has an online marketplace for discounted tools.
SaaSDeals
SaaSDeals provides short-term discounted deals on SaaS apps and software specifically. The deals can include free trials and other incentives.
LaunchDeals
LaunchDeals is another discount SaaS marketplace that showcases limited-time offers on digital tools for startups and small companies.
DealMirror
DealMirror aggregates time-sensitive discount deals on software and apps from various providers. Users can browse and search for deals.
However, AppSumo remains the dominant player in this niche and is far larger than any of these competitors in terms of revenue, website traffic, email subscribers, and brand recognition.
Conclusion
AppSumo has had an impressive growth trajectory since it was founded in 2010. After bootstraping initially, the company was acquired by Sumo Group and given the resources to continue scaling rapidly.
Under Sumo Group’s ownership, AppSumo generates over $50 million in estimated annual recurring revenue while remaining solidly profitable. It has pioneered a unique model for providing discounted tools and software to startups and entrepreneurs.
Going forward, AppSumo is well-positioned to expand its customer base globally and drive more value for its parent company Sumo Group through synergies with complementary brands.