The flood of new apps won’t let up any time soon, say Silicon Valley investors

Despite a good chunk of the newest applications pulling features from existing applications, there is still an enormous amount of interest in app development that will continue for the foreseeable future, according to a number of venture capital investors. The ideas were kicked around by a panel of investors at the GigaOm Mobilize conference in San Francisco today.

Applications have evolved as a low-cost way for entrepreneurs to experiment and test the startup waters with their own company. In an age where an app developed by two or three people can turn into a $10 million exit, there’s a significant amount of interest in both standalone and derivative app development from both fresh entrepreneurs and venture capital investors, said Timothy Chang, Principal with Norwest Venture Partners and one of the panelists.

“And there’s no question it’ll keep snowballing,” said panelist Matt Murphy, a partner with Kleiner Perkins Caufield & Byers. “Everybody’s just so excited that one or two people can develop whatever they want.”

While returns haven’t grown — likely a result of thrifty consumers in the recession — the number of companies popping up has actually grown, Murphy said. The amount of funding hasn’t grown either, and companies are receiving less funding across the board, Murphy said.

But because apps are a hit-driven business, there will probably be a number of large companies that have distribution power emerging in the near future, Chang said. It’s difficult for smaller app developers to market their apps in the Apple App Store, Android Marketplace and other app ecosystems because of the sheer number of apps on those platforms.

“When there are new distribution landscapes, distribution of content is god almighty,” he said. “And the companies that can synthesize distribution as a muscle crop up, those are the holy grail things to fight for — when you have distribution power that’s almost impossible to replicate.”