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The phrase 鈥渁pp economy鈥� 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鈥檛 gone anywhere. They鈥檝e 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 . That鈥檚 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鈥檝e 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. , for instance, picked up $3.7 billion in 2016 alone. snapped up $1.8 billion that year, while .

This year, by contrast, looks more like a 鈥渘ow moment鈥� 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 , 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 .

Meanwhile , another health care staffing platform and app, also picked up $80 million in an August . And , an AI-enabled virtual care app and service, picked up another .

Beyond health care, other noteworthy financings this year include for transit app developer , and for , 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鈥檚 verdict in gaming giant 鈥檚 antitrust lawsuit against . A jury 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 鈥� Play Store and 鈥檚 App Store 鈥� 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鈥檛 exactly chased away app developers. Play Store, for instance, had an estimated 2.6 million available apps as of June, .

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 鈥� when U.S. app-focused companies pulled in nearly $19 billion 鈥斅爐he easy money days have ended.

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

Related Crunchbase Pro query:

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