Editor's Note: This article is part of Inc.'s 2014 Coolest College Startups package. Read on for more on the hottest startups to watch right now. Also, be sure to congratulate Applits on winning our March Madness bracket.
High school classmates Keith Shields and Joshua Tucker from Marcellus, New York, had always been close. But it took a 380-mile separation and piles of mechanical engineering coursework to inspire them to build a business together.
Back in the spring of 2012--a few months after Fruit Ninja grossed an amazing monthly $400,000 in ad revenue and a few months before Instagram sold for $1 billion--the future seemed clear: "Apps were the next big thing," says Tucker.
And yet despite their interest, Shields and Tucker, who were sophomores at Ohio State University and Alfred University, respectively, had difficulty. "They were expensive to make and hard to code," says Tucker. "We wondered: How do we make this accessible?"
So the duo set up a website that solicited new app concepts and invited users to vote each month on the idea that they found most promising. They named the competition Applits, wrote a business plan, and raised $70,000 among friends and family. There were incentives for all: The founder of the winning concept would take home $1,500, while the Applits team earned the right to take the idea to market.
Right away, the ideas--and votes--came pouring in. The only problem? “We had absolutely no idea what we were doing,” laughs Shields. Neither half of the duo had the first clue about actually creating an app.
Luckily, those tough engineering classes did give them the critical thinking and problem-solving skills to know what they didn’t know--and to go out and find the talent to close that gap. “We started by paying freelance developers,” says Tucker, who transferred to Ohio State that fall to get the business off the ground. “Six months after our first winner, we’d formed a lot of strategic partnerships and had figured out how to do it well.”
Together again, the Applits founders engaged a group of far-flung partners: designers in Romania, developers in Paraguay, and a whole team in India, just for starters. A core group of U.S.-based project managers kept things running smoothly, adds Shields.
By communicating directly with the developers, Shield and Tucker were able to suss out which winning ideas would never see the light of day--and a few of their first winners fit into that category. But those setbacks were small compared with what initial investors saw as Applits’s big value prospect: free market research--in the form of votes--that would otherwise come after the expensive development of the app.
The next crash course was a lesson in value: “We assumed that the guaranteed $1,500 payday would be better than a percentage of uncertain revenue, but we were wrong,” says Shields. “Everyone thinks that their idea is the next Angry Birds.” So he and Tucker reconceived their reward structure: Now, in addition to seeing their idea come to market, monthly winners each receive a 15 percent share of its profits.
As it closes in on its second anniversary, Applits has received more than 2,200 ideas and launched a total of nine apps; 10 more apps are in development. Among its most profitable products is ReadyMic, which turns a Bluetooth headset into a wireless microphone for videos shot using an iPhone. FaceCap, another popular app, which allows users to make custom emojis of their own faces, “has a couple hundred downloads a day,” says Tucker.
Refining the production process has helped Applits in more ways than one: Today, the business is bolstered by Designli.co, an offshoot of the company that markets its design and development services to paying customers.
Still, Shields and Tucker--now finishing up their final few semesters of coursework and living in a house with seven other roommates--remain true to the community that first inspired them. In February, when Applits relaunched its website, the two announced they would apply the crowdsourcing concept to many other aspects of process--from app name to icon design to features. Votes and comments are tracked using a points system; appropriately, out of the thousands who weigh in every month, the three most involved participants are also promised a piece of the action.
Applits in Brief:
Headquarters: Columbus, Ohio
Founders: Keith Shields, 22, and Joshua Tucker, 22
Year Founded: 2012
Revenue: $10,000 a month
Employees: No direct employees; contracts work to a team of seven in Romania, a team of two in Paraguay, and multiple teams consisting of more than 50 people in India