AppDirect Raises $8.5M, Partners with Rackspace to Expand White Label App Stores

An app marketplace is a great way to centralize the distribution of software, making it easy and convenient for consumers and businesses with money to spend to find what they’re looking for. AppDirect is a startup that’s providing a digital app sales channel to whoever wants to run one, via a white-labelled, curated collection of cloud-based software that telecommunications companies, internet providers, enterprise solution providers and more can use to better serve and bring in more revenue from their customers. Today the company is announcing an $8.5 million Series A investment to help it continue to expand that vision, as well as a partnership with hosting company Rackspace and the launch of the Rackspace Cloud Tools Marketplace.

Today’s funding round is being supplied by AppDirect’s existing investors, which include iNovia Capital, the first that led the company’s $3.25 million seed round just over a year ago. The startup and its investors both felt that AppDirect needed to take on more capital in order to address demand, which has been considerable and come from a number of top telecommunications companies around the world, including Deutsche Telecom and Bell Canada. The reason? There’s an appetite out there for apps, and discovery is the biggest stumbling block.

“Cloud services are really changing the way businesses operate,” AppDirect co-CEO and co-founder Daniel Saks told BetaKit in an interview. “One of the biggest challenges was that businesses didn’t really know where to go to get these tools. In the past, if you were a small business, you would typically go to a retail store and buy things off the shelf, or go to your software consultant and buy services, but in the cloud space, because of the mechanisms around purchasing services, you have to go directly to the software vendor.”

So AppDirect set out to be the marketplace for cloud services, but it didn’t try to go it alone. Instead, AppDirect partners up with internet service providers, telecommunications companies, and others who are already in the business of providing the tools businesses need to use cloud services. That’s because, according to Saks, people already trust those relationships, so it only makes sense to deliver cloud apps via those channels, too, rather than trying to build a reputation itself with a go-alone approach.

“The way we’re seeing the cloud service market emerge, is that businesses really want to buy from a trusted provider,” he said. “There are huge challenges in the industry right now because businesses have to buy apps directly from the software developer, and that creates challenges in discovering what app is the right app for them, and it also creates challenges in managing all these fragmented providers.” By partnering with enterprise brands businesses trust, AppDirect gets reputation, and can also provide simplified, single sign-on management of a variety of cloud apps distributed through its white label stores.

The approach has big benefits, too, for cloud service providers, since it gives them an easier channel through which to approach potential customers, rather than through cold calls or digital display advertising. That’s helped AppDirect net some big partners on the services side, including startups like TribeHR and Wave Accounting, as well as larger players like McAfee. And for ISPs and other telecommunication service providers, it’s a way to get back in on the content side of the equation, which used to be big moneymakers for cellular service providers, for instance, before Apple and Google essentially shifted the focus of control over what users put on their devices.

This round of funding will help the company bring on new staff to expand the team, as well as open a European office to help capitalize on growing opportunity overseas. Aggressive international expansion is a key goal of AppDirect, and the startup sees plenty of opportunity for expansion into new verticals, too. Telcos were an initial focus, but Saks says that “pretty much everybody wants to launch an app store,” so the demand seems to be strong for what AppDirect provides.

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