Sub Club Podcast Episode Summary

Episode: Buying vs. Building: Scaling Beyond a Single App — Josh Peleg, BlueThrone
Date: October 15, 2025
Host: David Barnard
Guest: Josh Peleg, Head of M&A and Business Development, BlueThrone

Main Theme & Purpose

This episode dives into the evolving strategies of app acquisition, the nuances between buying and building apps, and how to optimize for high-value exits in today’s market. David Barnard and guest Josh Peleg explore acquisition red flags, monetization strategies, the impact of VC funding, and the critical skills for modern app entrepreneurs. The discussion is rich with real-world examples, practical checklists, and inside perspectives from BlueThrone’s journey from a spray-and-pray buyer to a focused category leader investor.

Key Discussion Points & Insights

1. Evolution of BlueThrone’s Acquisition Strategy

• BlueThrone 1.0: Started with a "spray and pray" approach, acquiring almost 100 small apps focused on steady EBITDA and surface-level revenue.

  • Red Flag: Many apps’ revenues were artificially inflated at sale (“pump and dump”), leading to sharp post-acquisition declines. (02:27)
  • Focused more on financials than core metrics like retention and churn.

• Market Context: At the time, organic growth mostly came from ASO (App Store Optimization)—not the virality we see with TikTok today. (05:03)

• BlueThrone 2.0: Shifted toward acquiring fewer apps with:

  • Strong organic growth (not manufactured or paid)
  • Demonstrated product-market fit and category leadership (34:33)
  • Deep product experience with high retention and brand strength
  • Smaller but higher-quality portfolio (now just 5 apps, each a potential category leader). “Each app is either a product leader in its category or on its way to be. It’s a completely different strategy, but luckily it’s working well for us.” (36:07, Josh)

2. What Buyers Value in an App Acquisition (Red Flags & Checklist)

• Attractive Apps:

  • High recurring revenue from subscriptions (predictable, easy to value) (10:13)
  • Strong retention and resubscriber rates
  • Organic customer acquisition
  • Minimal “pump and dump” behavior

• Red Flags to Avoid (5-point checklist) (14:01):

  1. High churn rate: Unstable subscription revenues, signals poor product-market fit.
  2. Unprofitable CAC:LTV ratios: Non-viral, capped growth is unattractive.
  3. Team transparency: Solo founders should clarify their roles and any external support (outsourcers, consultants).
  4. Weak category/market analysis: Highly competitive or shrinking markets are risky.
  5. VC involvement: Raises acquisition price and complexity, often reducing founder take-home.

     “If you’ve raised money from VCs, then your valuation is going to be inflated because you have to keep your VCs happy. If you haven’t… the power is all yours.” (15:31, Josh)

• Red Flag Quote:

  “If your app has not been around for 12 months, you cannot tell me your resubscriber rate. You just can’t.” (13:27, Josh)

3. The Realities and Tradeoffs of Raising Venture Capital

• Most consumer app categories don’t require VC money—you can achieve a lot with $10–15k if you’re scrappy and smart about marketing. (19:08)
• VC should be reserved for cases with clearly defensible tech or proven massive addressable markets.
• Raising VC often complicates exits and pressures higher valuation multiples.

  “Unless you’re building something with uniquely defensible tech, forget about it. You just don’t need it.” (19:08, Josh)

• Some categories (like fitness or niche apps) have declining TAM, so market timing and growth trajectory are crucial. (17:37)

4. Distribution & Marketing as the Core Founder Skill (Not Just Building)

• With AI lowering dev barriers, distribution is now the main lever for scaling and successful exits. (07:32)
  • Success is driven by marketing, influencer relationships, and innovative viral approaches (often on TikTok).
• Proliferation of founder-led content and influencer partnerships is key to quick exits/ growth.
• Solo founders or small teams can achieve million-dollar exits in 12–18 months if they nail distribution and growth loops. (07:32, 27:02)
• Realistic timeframes: 6–9 months of strong data may be enough for buyers to value an app. (08:45)

5. How Founders Can Optimize for High-Value Exits

• Don’t pump revenue right before sale: Artificially inflating numbers via aggressive paywall optimization or lifetime deals will backfire. (28:17)

  “You’re actually shooting yourself in the foot... it just ends up knocking down the negotiations further along the line.” (28:17, Josh)

• Optimize for sustainable growth and realistic numbers, not juiced metrics.
• Paid growth isn’t a negative if it’s scalable and predictable.
• Founders should prioritize healthy, long-term metrics—retention, ARPU, organic/viral channels—over temporary spikes.

6. Strategic vs. Financial vs. PE Buyers

• Strategics (e.g., Strava buying Runna) pay the highest multiples, want user bases or features, but often require founder earn-outs. (31:43)
• PE wants stable EBIT/ profit; may want founders to operate post-sale and tend to cut team costs.
• Pure app “aggregators” like BlueThrone (2.0 model) focus on high-quality, standalone, category-leading apps with up-front cash and relatively smooth transitions. (32:27)

7. Hybrid Monetization—Learning from Gaming and Beyond

• Most subscription apps underexplore “hybrid” models (combining subs, one-time purchases, ads, consumables). (43:52)
  • Gaming cracked this early, capturing a broader spectrum of user willingness to pay.
  • Example: Soundmap uses subs plus in-app consumables for deeper LTV (45:30).
  • Example: Tinder model leverages multiple sub tiers plus consumables, mapping the entire demand curve (46:28).
  • Ads—even rewarded ads—are still mostly untapped in subs apps.

  “If a gacha box costs you 99 cents and you’re willing to spend $10, you’ll make that purchase 10 times and the app has been able to capture all of the money you were willing to spend.” (43:52, Josh)

• Action Item for Founders: Introduce easy, soft-currency reward economies—even simple ones unlock new monetization. (49:33)
• Physical goods (e.g., fitness apparel), B2B bundles, and creative offers are further ways to expand LTV beyond price hikes. (53:12, 54:26)

8. Buying vs. Building When Scaling Beyond a Single App

• Most founders should double down on core winners vs. diversifying too early. Second apps carry same risks as the first with no guarantee of repeat success. (57:58)
• Buying another app with proven traction can be lower-risk—especially if you can apply your own proven playbook (marketing, monetization, ops) (57:58, 59:44).
  • Evaluate ROI of every new dollar: “You’re probably in a much more powerful position than you realize to actually go and analyze other apps in the market, especially if you’re looking at apps within your niche...” (57:58, Josh)
• There’s a “liquid” market of apps with initial traction but under-leveraged monetization, ripe for acquisition. (59:44)

Notable Quotes & Memorable Moments

• On the misleading nature of “organic” TikTok growth:

  "Us in the industry labeling this TikTok strategy as organic is very misleading...There is a cost associated to this organics." (06:20, Josh)

• On VCs and founder exits:

  “If you haven’t raised money from VCs and maybe you’re bootstrapped or you’ve done a friends and family round, the power is all yours. You can sell at a lower valuation, but you’re keeping a lot more money to take home and start your next project with.” (15:31, Josh)

• On distribution vs. product:

  “Distribution owns the game right now. These guys, you know, Alex, Blake, Zach [of Kal AI], they’re killer distributors.” (21:42, Josh)

• On hard paywalls and risk:

  “If you do implement a hard paywall and Apple finds out about this, there’s the risk that they’ll move your app from the free category to the paid, which will really mess with your ASO.” (54:26, Josh)

Fun Data & Stats Exchange (61:11–65:57)

• Of BlueThrone’s last 100 founder meetings:
  • 9% were AI note-taking apps
  • Only 2% women founders
  • 20% had raised VC
  • 34% were solo founders
  • 45% were U.S.-based (surprisingly high; TikTok US advantage cited)

Key Timestamps by Topic

• [02:27] – BlueThrone 1.0 acquisition method: spray and pray, focus on financials
• [14:01] – 5-point red flag checklist for app acquisition
• [19:08] – VC funding: necessity vs. optionality for consumer apps
• [27:02] – Market evolution: rise of the marketing-led CEO/founder, versus technical founders
• [28:17] – Dangers of pumping revenue or cutting spend before selling an app
• [34:33] – Transition to BlueThrone 2.0 and its criteria for acquisition targets
• [43:52] – Unlocking LTV via hybrid monetization (“gaming is years ahead”)
• [54:26] – Risks of hard paywalls and inspiration from gaming economies
• [57:58] – Should you build or buy when going multi-app?

Final Takeaways for Founders

• For sellers: Optimize sustained, recurring revenue and transparency. Don’t juice numbers before selling.
• For buyers: Look deeper than revenue—product-market fit, strong brand, team quality, and organic growth are critical.
• For builders: Distribution is the kingmaker. Master viral channels and influencer marketing, and leverage hybrid monetization.
• On scaling: Most founders should optimize what’s working, but savvy acquisitions (rather than building from scratch) offer a low-risk path to portfolio growth—if you’re able to rigorously compare potential returns.
• On market trends: The playbook is evolving—expect more creative blends of subscription, IAP, advertising, and even physical goods. Today’s winners will be those able to adapt quickly and capture LTV through multiple channels.

BlueThrone is actively seeking standout apps (500k+ annual revenue) with strong performance and founder talent. Contact Josh for more info.
(66:13)

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