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Life and Death in the App Store

The App Store’s middle class is small and shrinking. And the easy money is gone. One company's rise, fall and ....

The Verge

As last year began, the app developer Pixite held its company retreat at a converted Old West movie set outside of Palm Springs. They spent a few days dreaming about the future while eating barbecue and sipping whisky in the sun. But 2015 was not a good year, and by last month the company’s dreams had narrowed to survival. This year’s retreat took place at the company’s office in San Diego, a handful of rooms perched above a hair salon. The printer was broken, so the agenda was distributed by email.

“I’m sorry it’s called a retreat and we’re still in the office,” says Eugene Kaneko, one of the company’s co-founders, as the daylong meeting begins. The company’s six employees frown at their laptops, where the numbers in a Google Doc chart a steady decline. “If money were better, we’d be in the desert. Unfortunately — that’s not the case.”

Since Kaneko founded the company with Scott Sykora in 2009, Pixite has released eight applications dedicated to photo editing and design. Each has been featured by Apple as a Best New App; photo editor Tangent and design tool Assembly won year-end awards from Apple. Between 2013 and 2014, downloads of Pixite apps jumped from 395,472 to 3.1 million, and annual revenue doubled to $943,000. Pixite grew along with its cash flow, expanding from two to six employees as it explored ways to link its apps together and grow a loyal base of customers.

Then the bottom fell out. Last year downloads flattened, and Pixite’s revenues plunged by a third, to $629,000. Suddenly, a company that needed to bring in $2,000 a day to break even found itself making $1,000 or less. Pixite has no reserves of venture capital to fall back on; aside from a $50,000 seed investment from a Carnegie Mellon fund for alumni entrepreneurs, Pixite has funded itself.

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This article originally appeared on Recode.net.