Our guest today is Evelin Herrera, founder of EHVM Capital, where she manages over 360 mobile app and game assets available for sale. She is also the founder of Mobile Club, a community for mobile app founders, investors, and operators. Today, Evelin joins us to share how AI is shaping mobile growth, mobile M&A, and investment strategies, offering a strategic perspective on where AI is headed and how it is impacting apps today.

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FULL TRANSCRIPT BELOW
Shamanth: I’m excited to welcome Evelin Herrera to Intelligent Artifice.

Shamanth: Evelin, welcome to the show.

Evelin: Thank you, Shamanth. Super excited to meet you.

Shamanth: I’m excited to have you, Evelin. It’s been quite some time in the making. I know we connected online a while ago and I’m glad we finally managed to make time to make this happen. And I’m really excited to have you because you’ve seen literally hundreds of apps.

Shamanth: You’ve seen the insights, the metrics, you’ve seen what makes them tick, you’ve seen what doesn’t. And I think you have this ability to connect the dots in ways that very few people can and for all of those reasons, I’m excited to have you on the show today. So first of all, welcome again.

Evelin: Thank you so much.

Shamanth: Obviously you’ve seen a surge of AI products because AI is very much the buzz lately. when we spoke in preparation for this call, you said a lot of AI apps can feel like info products with a paywall. Talk to me about that.

Shamanth: Can you explain what that means and what you meant by that? Let’s start with that.

Evelin: So actually this idea, I heard it first from Ryan, the founder of Reflectly. Now he’s on his app and he’s having a new company, but I heard him from him first and it’s because many AI apps, they don’t really have a good functionality.

Evelin: They don’t really have a technology mode or a strong feature. Many of them are a one time use case. An example is these apps that are like scan your face and we’re gonna tell you like your face score and which creams you should use, which skincare. And once you scan, that’s it.

Shamanth: Yeah.

Evelin: Even if you start implementing those creams, you’re not gonna see the effect after like probably two months.

Evelin: And in two months you’re gonna completely forget out the app or you’re just gonna go to a doctor. These apps usually have annual subscriptions ’cause they know that users don’t need it anymore after 24 hours. And users get very angry and it feels very scammy.

Shamanth: I’ve certainly seen that trend. And it’s easy to ride the buzz of AI to have this kind of a product and how are you seeing this trend shape valuations and interest among bias?

Evelin: Yeah, so beginning of the year, everything moves so fast. It’s crazy! Q2 this year, AI apps were in high demand, and evaluations were just like any other app.

Evelin: Like the evaluation of a one and a half years old AI app was the same as a five years old in terms of multipliers. But that was Q2 this year. Now we are in Q4. Buyers don’t want AI apps. They are extremely skeptical. We have like maybe five to 10% of our buyers that still take a look at AI apps, but we rarely see this case of them coming inbound, “Hey, I want to buy AI apps” versus Q1, that I was getting like five emails per week, if not more from guys wanting to buy AI apps.

Evelin: I think a lot happened on Twitter. Founders like open up and share their experiences. And what we have seen is like app store launch, like a new privacy policy, not privacy, but a policy against copycats. So if you launch a copycat, they are probably gonna send your app down from the store and that kills like maybe 50% of the new developers from 2025 and even 2024.

Evelin: And like these subscriber retentions, which are shitty. And when they come to sell their app, I think like I also made a lot of noise on Twitter. So founders starting like thinking more about Hey, I can sell this and make the revenue that I will make it like three years. I can just get it in one year.

Evelin: So it’s definitely interesting, but when you start looking at selling, you analyze your business and see their weaknesses. One of these weaknesses was the subscriber retention. some of them had just two or three months of retention from the subscribers, which means that for if one or two months, you don’t send any traffic from paid away.

Evelin: And if you don’t have organic the business, it’s gonna be dead by the month four.

Shamanth: That’s so interesting to hear, and that is a dynamic that I’ve seen across AI products that it’s hard to get retention. I’ve heard this from a lot of investors that retention’s really poor.

Shamanth: Again, I don’t want to generalize for the vast majority of AI products, do you think this is also because with AI products. There’s so much buzz people are willing to try once, even if it’s not an info product like experience, If it’s a real product, like photo editing, video editing, whatever.

Shamanth: People are willing to try once and then they’re just gonna go away. So how are you seeing bias or investors or yourself evaluate? Look, is this a product with real retention? This may not be like an info product, but is if there is the retention really bad just because people are coming because of the buzz.

Shamanth: How are you seeing bias evaluate AI?

Evelin: That’s a really good point. there’s market perception and consumer behavior which is we think that AI is magical and it’s gonna solve all of our problems. we are assistant doctor and so on. But it’s really not. So maybe when you install an app, you have the expectation that app is actually gonna solve anything major. but it’s not, it’s just an app and you get features and push notifications and app pay wants to subscribe. That’s it. So maybe there’s an aspect on that end of they have really high expectations versus before that we knew that it’s just like a tool.

Evelin: It’s just an app. It’s gonna do something here and there. That’s it.

Shamanth: Yeah.

Evelin: But there’s also another thing, which is this trend and this way of AI apps that everybody wanting to write on 2025, and they just launch whatever is functional.

Shamanth: Yeah.

Evelin: It is just functional and Apple gets it approved of the store. That’s it.

Shamanth: Yeah. Interesting. And you mentioned when we were preparing for this that a lot of buyers and yourself are looking at how much value on content is present after the paywall, which again was something you hinted at when you talked about, look, these can be just info products.

Shamanth: So what metrics or qualitative science are you looking at post paywall to understand if this app is actually delivering any ongoing utility versus just being an info product that just tells you what kind of skin cream should you wear and that’s the end.

Evelin: Yeah, so it’s everything related to retention, it can be either usage, retention, like how many hours or times per month they use the app or just their subscription retention for how many months they actually pay for the app.

Evelin: For how many weeks. In the case of VPP subscriptions. And then I see that another interesting case is absolute large amount of DAUs and MAUs, even if they are not monetizing well, because the buyer is always gonna have ideas on how to monetize and they usually romanticize this idea of like large user bases, even if they are not sure how they gonna monetize it.

Evelin: So maybe our recommendations for the developers will be to you have a good idea and you know that you can launch the app. Maybe don’t try to monetize it if your intention is to sell, because you’re gonna sell it for a brand valuation with a large user base instead of a smaller user base with peaks on revenue, but nobody stays more than one or two months.

Shamanth: Interesting. And how do you see that dynamic? You said, a lot of buyers want to pay for audience or maybe not so much for revenue, right? How does that impact valuation of the companies, Because generally I would imagine a lot of valuations happen based on trailing 12 month revenue and if you have a huge audience, but that is probably built on the buzz of AI probably built on TikTok Organic.

Shamanth: How does it impact valuation as compared to a traditional valuation, which is purely financial metrics based?

Evelin: Yeah, so two different things. If they have a strong presence of Instagram and TikTok and organic traffic that’s more perceived from the distribution side. usually we have valuation based on multipliers, and these multipliers have a range within like each buyer decides which range they work with.

Shamanth: right?

Evelin: In this range we have different variants that is gonna affect if it goes on the lower end or in the higher end. everything that is TikTok and Instagram organic. It’s part of the distribution item that they are gonna consider. And then we have the user base. the user base is also gonna affect positively in terms of going at the higher end of the multiplier.

Shamanth: So what you’re saying is there is a range and the user base really pushes valuation to the higher end of the range within the parameters that you’re evaluating. And I think that makes a lot of sense. ’cause eventually, as you said, they can find a way to monetize an audience down the line.

Evelin: exactly.

Shamanth: Yeah. And you talk briefly about how a lot of AI products can look very similar. So what would you see is the big differentiator lately. If anyone can build an AI product, if anyone can build an app from an investor or a buyer’s perspective, what should a developer look to do to make sure they’re differentiated?

Evelin: Yeah, so I will say two things. One is secure. The first one in launching that specific niche for AI. For example, let’s think of the first three plant identifiers. Probably they are doing great. The first three AI calorie identifiers probably they are doing great. The issue is with all the ones that came after, when the market was already well known and they just come to try to steal users and they copy their branding.

Evelin: they are like a copycat of running end users. if you can pioneer a new AI use case nobody’s using yet. That’s one. And then the second one will be if you can get a really good AI model specialized in that specific feature. So for example, we saw a lot of interest on these apps, which are like scanning the barcodes from different products.

Evelin: They tell you the ingredients and how healthy they are the interest or how much they were willing to pay was different depending on how many countries they were covering. So if you can get actual results only for barcodes in the US it’s gonna be different than if you can get for the US, UK, Australia, New Zealand and so on.

Evelin: Yeah. So maybe it’s not only like out launching a product that is unique, maybe it’s not unique, but you cover more countries with better databases because at the end of the day, your AI it’s getting feed from somewhere. Yeah, where is the information coming from? maybe you can get better sources and that’s a way of beating your competitor and it’s even like a messaging you can use for advertising.

Evelin: Hey, you don’t see accurate results in Australia through your app.

Shamanth: Yeah. Interesting. that also reminds me the differentiator, it seems like it is offline. Because if you had to take the example of your barcode app. It is differentiating because of the barcode data they’re getting offline, which we can’t really get by just Googling or having GPT or your AI tool build it in.

Shamanth: And it sounds like that is the hard part in a lot of situations and cases. And that’s what is a differentiator. And I think that makes so much sense because ultimately, I would also imagine. A lot of app developers are thinking, what if Chat GPT builds this tomorrow, or Anthropic builds this?

Shamanth: So is that something you find a lot of buyers or investors asking? What if I buy this app and maybe Gemini built it in the Gemini native app? is that a concern you’re hearing a lot?

Evelin: Yeah, we see usually with photo and video, because every week new of these like AI images and AI videos, and every time they get better.

Evelin: So that’s like a vertical that is very impacted. But for the rest of the AI use cases, we don’t see it as much, to be honest. I wouldn’t say that it’s not something that we hear chat GT is gonna create this.

Shamanth: Yeah.

Evelin: And they are aware that users, like if they really like plants, they like to have a plant identifier app.

Evelin: They don’t like to go to Chat GPT, they like the optimized UX. So that’s usually not an issue. As long as your AI model, it’s better than output Chat GPT will close for the user.

Shamanth: No, that makes sense. And I know you said last time we spoke that there are buyers who look for buying 10-year-old studios that have a very long time horizon.

Shamanth: with AI, given that everything’s changing so fast. Are investors even looking that long term? Or are people just looking for very quick cash flow based deals? How are you seeing this play out given that very little is very predictable lately?

Evelin: that’s a really good question if you buy apps for 10 years from now, you gotta look at apps that are already part of the lifestyle of a person and they are not gonna replace it.

Evelin: This is very extreme, but like broadly, you’re not gonna replace Spotify unless something extremely good comes and beats Spotify. So what are these apps that users are not gonna replace and great examples are everything like Lifestyle, so like Music, FinTech of course Social Media.

Evelin: This is very hard for people to replace. It’s like avid builders apps. So when they are looking to wait for the future, they usually like for like sticky apps. Not necessarily in a weekly basis, but in a monthly basis and in a yearly basis.

Shamanth: Interesting. And let’s just say there’s a founder that’s wanting to get ready for an acquisition.

Shamanth: What are some of the things they should keep in mind and what are some of the preparation that you suggest they should do before they get into an acquisition conversation?

Evelin: Yeah, I will say two different things. if you are less than a 100K MRR and you want to sell quick and get some cash, focus on profit margins and any channel for distribution where you get users.

Shamanth: Yeah,

Evelin: so it can be to organic apple search ads. Anything that works and it’s profitable and low maintenance. Probably you’re gonna get an exit really quickly, like in one to three months for a good amount. So that’s if it’s less than a hundred KMRR. But now if we’re talking more and it’s an actual business, it’s very important that they really understand their market because if we are talking about like seven and eight years exit, then the buyer is gonna allocate time in finding the exact right thing they want.

Evelin: It’s just like when you are hiring people for your company, you’re gonna interview 10, but you’re only gonna select one. And that one must be the best fit. And usually they are very specific on what they want. So it’s we want this feature or we want this audience. Or we want this team to Acqua, hire for them to stay after.

Evelin: And they are gonna want the team and company that knows their market. So if you are developing apps. Knowing their age what they like retention and their parents and so on. If you are developing something like health and fitness, really getting into that market. So I will say if you are, if you’re selling like for seven and eight years, you need to be really specialized in that market rather than having a random portfolio of random ups because you saw it trending.

Evelin: If it’s something you saw trendy, it just like optimize for profit margins and send quick. But if you want to sell for seven, eight years, focus on non-specific niche or one specific category. Like all photo video apps, all education apps.

Shamanth: Yeah.

Evelin: then have something that you are actually really good at that they cannot find in our sellers.

Shamanth: Interesting. I had on this podcast the head of marketing from an INS instant headshot generator app. one of the things he said was, we tried to build for one single use case and we did it really well. I think that lines up with what you are seeing as well.

Evelin: hundred percent.

Shamanth: And they’re huge. And that makes sense. I think for them it was also that they figured out image models before everyone else, and they jumped on that trend and continue to build on that. I also think this ties in with what you said about your example of the barcode app, right?

Shamanth: if you have the barcode scanning coverage in multiple geos, that’s not easy, you need to have the expertise.

Shamanth: You need to have different providers, you need to have business development deals. So that’s not easy.

Shamanth: And it sounds like from what you’re saying, that’s what gets people to a big exit versus, if they’re under a hundred K, it’s relatively easy. You don’t need that much debt and expertise if you want a really big one, it’s not enough if you’re just riding a trend and making something.

Evelin: Yeah, it’s not to hate on anyone. I will just say like the mindset is different. Are you building an asset to exit for like quick cash and then see what you do three months from now? Or are you building A business?

Shamanth: Yeah,

Evelin: different stories and different figures for an exit.

Shamanth: For sure. And are you actually seeing buyer interest in, short term bug based apps and products at all?

Evelin: Also really good question. there is from new buyers or newcomers to the app industry. Okay. And probably they don’t understand the industry as much yet.

Evelin: Interesting. So I saw on Twitter that I killed became Millionaire because of an AI app, and now they are like, okay, bring me an AI app, I’m gonna be a Millionaire two. Yeah. That’s how it works.

Shamanth: Yeah. only until the AI app crashes and then they’re like, oops, here’s what happened.

Evelin: The code wasn’t good.

Shamanth: Yeah. which brings me to a question I’m having with a lot of people. Are we in a AI bubble? I talk to a lot of people. I benefit from AI. I build a lot of things with AI and I’m excited by AI. But some people I speak to also talk about, maybe it’s overhyped, maybe we are in a bubble.

Shamanth: And again we had Karta on this podcast and he said This happened with the internet, there was a boom and then a bust. It happens in every technology cycle. what are you seeing? Are you seeing any signs about whether there could be a bubble or not?

Evelin: I think it’s actually extremely early. I can definitely see that my iPhone is gonna be connected with my robot in my house. So my robot knows when I’m coming back home and that I like to have my banana shake ready. So it’s gonna prefer my banana shake ’cause I’m 20 minutes away and my clothes are gonna be ready and I don’t have to do anything if AI between these positives, understanding what I’m doing.

Evelin: That’s my goal. Yeah. And I see AI going there. I trust all of these tech people in Silicon So I like definitely there are gonna be some pain investments just like in crypto with the internet, but that doesn’t mean that it doesn’t exist.

Shamanth: It’s

Evelin: Some people are gonna make the wrong investments.

Evelin: I’m happy to expect five years from now to have my life organized by AI. It’s like professional, personal trips, family, everything is just gonna be easier. I’m really eager to see, I think we are early besides a bubble.

Evelin: Just enjoy it.

Shamanth: It’s funny I was talking to somebody about this and they were like, yes, you can argue that crypto was a bubble because nobody really knew what it was. But if you’re using AI to automate your team’s reporting, that is nothing that’s real benefit for your team and it’s hard to argue that it’s a bubble if you are automating your team’s reporting or if you’re using, if you’re building an app that’s some actual people actually use, and I think that was that, that there is a point that AI has real utility in many ways.

Shamanth: And even if there is a bubble, I think the utility is gonna stay, I think of the internet as the closest example. We had an internet bubble. But the internet survived, and I think that’s how I envision this playing out. we’ve talked about how hard it is to really look very far ahead, 3, 5, 10 years from now.

Shamanth: What kind of products do you see continuing to stand 3, 5, 10 years from now? And what kind of products do you see Disappearing as the AI hype starts to become more normalized?

Evelin: That’s a really good question. top of my mind, I will say apps like Life 360, which is like family safety.

Evelin: A mom will always want to know where the kid is and the kid is gonna keep going to school and meeting friends and going to parties. they not gonna put a chip on the key, so probably they’re gonna do it through their phones. I think that’s a really good example. Of course, everything, FinTech everything, music and lifestyle.

Evelin: I think it’s very like this have it building apps or where you have an actual need, which is you need to know where your kid is after 10:00 PM I think those are the ones who are gonna stay. And then everything that is complimentary. For example, we have tons of video editing apps that users use to edit for TikTok over IG.

Evelin: So that’s complimentary to an and another existing trend, which is social media. So I think that’s very dependent. And I don’t have enough information to say what’s gonna happen on that end? I think they’re gonna survive as long as the consumer trends don’t change in terms of that specific consumption.

Evelin: Yeah. But it’s so interesting. another one that I see the opposite case is like all the delivery apps, like Uber Eats delivery, They are getting tons of issues because of different ideal things they might be doing. So it’s like what’s gonna happen? And I actually have met all the apps M&A history for the last 17 years and some of the US acquisitions were like these companies, right?

Evelin: That it’s like food delivery. And now if something changes and they cannot operate anymore, that will be crazy.

Shamanth: Yeah.

Evelin: five years ago, nobody could imagine or if it’s gonna be

Shamanth: Yeah, you’re right. It’s hard to look very far ahead in the future.

Shamanth: apps that offer lasting utility, like you said, live 360 or a compliment to Spotify or Instagram, I think because they’re meeting a real need. And you said earlier on this call, right? What happens after the paywall if they’re meeting a real need, real utility after the paywall?

Shamanth: That’s what’s gonna stay. if they’re meeting a need in the real world, like a barcode scanning app that’s more likely to stick around versus something that’s buzzy and might disappear tomorrow.

Evelin: Which ones will you say are gonna stay Shamanth.

Shamanth: Oh. That’s a hard question.

Shamanth: I’m gonna edit out some of the silences while I think, yeah, I think everything that meets a real need. So for instance, I use AI as a thinking partner, which is GPT for thinking it’s almost like a therapist anything that replaces something I do in the real world, I think it’s gonna stay.

Shamanth: I use GPT, I use a lot of AI agents internally for our reporting. That is gonna stay because there was a real need. We were doing it before, we are doing it now, we are just doing it more efficiently. I think that is going to stay. Same thing with video editing, creativity.

Shamanth: I think these are going to stay, but I also see within each category there will be winners. For instance, with video editing, the best apps will stay. Something like Higgs Field, which we use internally is gonna stay The fifth best app is not really gonna stick around.

Shamanth: That’s my read of how things will stay.

Shamanth: Yeah. But maybe you and I can talk in six months time and we will see where the world is.

Evelin: Yeah. I think definitely consolidation is gonna happen. So what you said the fifth up, I don’t know if fifth, but maybe 50.

Shamanth: I will also add I have been forwarded articles about the financials of the AI industry and it is scary because according to a lot of these articles, the big model providers, anthropic, GPT, they’re bleeding money and it’s not sustainable according to these articles. I’m like, I wanna use all these free credits now to build something which I’m doing.

Evelin: I’m building multiple apps right now. I’m building multiple agents internally, so I wanna take advantage of a lot of these. So if we are in a bubble, I almost don’t care. We’re not presidents, We need to care about doing what we do.

Evelin: we are founders. We run businesses, run the business efficiently, make more money, pay better to your employees.

Shamanth: yeah. And we are solving real problems. I would like to think I’m solving real problems with the apps I’m building, with the agents I’m building. I think the example I gave was helping my team do reporting.

Shamanth: I think that’s also a real problem I’m doing it based on cheap API credits from Anthropic. I will take those free API credits, and I’m reminded of Uber and Uber Eats in the early days, 2015, 2016. Congrats. Were really cheap.

Shamanth: I was in New York and I was getting $2 rides on Uber, and I was like, what? Which is insane, right? this was funded by VCs. This is not going to last, but I will take the free ride. I’ll make the discounts. And I feel like I’m in a very similar place with AI now.

Shamanth: Open AI is not profitable. Maybe it’s not sustainable. I take the free API credits because I’m building something useful and I would like to think this is better than taking a $2 Uber in 2015. It’s better to take API credits to build something new and interesting. And maybe they will figure out ways to get more profitable down the line.

Shamanth: And if that happens, great, I want to look at this as a builder and a practitioner, and I’m like, look, what can we build while we can?

Evelin: And maybe we get to learn the right again with way more and all of these newcomers. Yeah. But That’s also a real use case.

Shamanth: Yeah. Indeed. Evelin, this has been incredible. I wanna be respectful of your schedule and time, this has been incredible and I’ve certainly learned a ton just looking at all the data points you’ve seen and collected and connected the dots around. So thank you for taking the time and this is perhaps a good time for us to wrap.

Shamanth: But before we do that, could you tell folks how they can find out more about you and everything you do?

Evelin: Twitter, LinkedIn, very active. I also have a newsletter on Substack where I write about valuations, processes, how to get more money from your business. You can find everything under my name on Google or any social media.

Shamanth: Wonderful. And we will link to all of that in the show notes. this is a good place for us to wrap. Thank you.Evelin: Thank you, Shamanth. It was fun.