B2B Is Unsexy, and I Know It

http://danshipper.com/b2b-is-unsexy-and-i-know-it

by dshipper • 14 years ago

153 83 14 years ago

AlexBlom2• 14 years ago

I'm unsure the perception of B2B among VC's is as bad as commonly thought.

My last startup was pure B2B, and during our valley runs I found most potential partners / vc's / workers were very excited (in part because of the opportunity, in part because of perceived market movements, and in part because B2B can be fun) at the prospect of growing in B2B.

B2B companies may not spawn a media darling, but it doesn't make the business itself unsexy.

debacle• 14 years ago

The problem with B2B is that it doesn't follow the standard startup model.

In B2C, if you have 10,000 users, VCs will just start to look at you. In B2B, except in some specific instances, if you have 10,000 users you're already a million dollar company.

Thus, in B2C the risk/reward inflection point occurs much later chronologically than in B2B, and for a B2B business, I, personally, think that there is far too much ambiguity before that inflection point.

mindcrime3• 14 years ago

> The problem with B2B is that it doesn't follow the standard startup model

Is there even such a thing? Anyway, it's not that VCs don't fund B2B startups... they absolutely do, and there are even firms that specialize in that space (or at least have a heavy focus on it). A16Z, for example, are known for investing heavily into enterprise plays:

http://a16z.com/portfolio/portfolio-enterprise-companies/

btilly• 14 years ago

...doesn't follow the standard startup model.

Remember, the standard startup model is, "Fail."

Anything you can do to not follow that is good. ;-)

AlexBlom2• 14 years ago

I'm unsure this is true anymore. If you know how to play B2B (the same lies true for B2C), it's entirely plausible to get the first 1-5 deals pre-build (I did).

If you consider that equal to the first traction burst in B2C, then I'd argue that the ambiguity for B2C is just as large, if not larger, in the early days.

It is my no means an overall risk / reward inflection point (and if you are referring to 'this company is guaranteed to exit' I agree), but as an early 'this might have something' B2B can validate fast.

mindcrime3• 14 years ago

Good stuff, and I agree with almost 100% of that. The only thing I take exception to is the (seemingly) implicit suggestion that "sexy" is defined by what college kids like:

And that’s true. B2B is unsexy in that I don’t build things that my college friends want to use.

Nah... if you're doing sexy technology, it's sexy even if not a single college kid has ever heard of it.

I'd encourage everyone to NOT buy into the HN echo chamber mentality... there is a LOT more to the business world than consumer facing geo-local-social-mobile-photo-sharing-cat-picture startups.

Do cool shit that solves problems for people, charge for it, and make money... that's not a half-bad formula.

(disclosure: I'm a founder of a very sexy B2B enterprise software startup).

dshipper2• 14 years ago

I agree with your point. I based my definition of sexy on what tends to get media coverage - which are generally ideas that college kids want to use. But I certainly agree that sexy companies exist that no college kid has ever heard of.

hkmurakami5• 14 years ago

Wholeheartedly agreed. My reaction to the headline was: "What!? B2B is awesome! It's REAL!"

bpatrianakos2• 14 years ago

I think you nailed it in the least amount of words. You're right, it's real! B2C has become the land of also-rans. It's the same old, same old but this time with a new interface, a special niche, and so on but in the end it's all the same app with a different logo each time. B2B solves problems that make it easier for customers to solve another problem. They're real tools that create real value as well as wealth for its customers. That's probably why B2B pays while consumer focused startups have a hell of a hard time monetizing.

If I had to pay for Facebook I'd say fuck it and use the phome which I already pay for. If Quickbooks started free then asked me to pay I'd pony up because it not only saves me time and the monetary value of my time but it also saves me on hiring someone to do the work Quickbooks does for less. That's a real problem.

Another example happened to me just today. I'm heading up a project to start A/B testing our marketing efforts where I work. Right now I signed us up for a free Mixpanel account that I'm using to kind of start showing the team hard numbers before actually buying anything. This morning I had a meeting with someone from Optimizely which actually does exactly (literally exactly) what we want to do better than Mixpanel. I was shown how the service works and got a nice run through and at the end of the meeting I was dying to buy their platinum plan because of how much time it would save me personally, how much money it would save our company, and also for what the product itself does. My point here is that you don't see that in the B2C space. Most users would complain if a Facebook disappeared overnight but they sure as hell wouldn't whip out their wallets to keep it alive like B2B customers do when they like a service.

maayank2• 14 years ago

The problem is how to get exposure to B2B processes as a software developer. Unless you have previous work experience as a sales guy/marketing/inventory procurement/etc. or a MBA or already developing B2B tools, how can you learn about the needs and opportunities?

Axsuul• 14 years ago

Try to make a lot of friends in college. You'll gain exposure to more industries that way and will eventually come across something that needs a better solution.

hkmurakami5• 14 years ago

I'm wondering if you went straight into a startup or sole proprietorship?

If you ever spent time in a mid or large sized company and talked with people in various departments and what sucks about their day to day tasks, then ideas are abound (or as previously mentioned, make friends with people who work in such environments, and pick their brains about what sucks). PMs have their pain points, sales guys have their pain points, IT guys have their pain points, etc.

HeyLaughingBoy• 14 years ago

Talk to people. Really, that's how it starts. There are niches you won't even know exist until someone mentions that they have a problem doing X, or that Y is tedious and they spend 5 hours each week doing it.

Many of these niches are technologically very simple. e.g, there's someone I used to talk to online who makes a software package for manufacturing that consists of little more than basic geometry and a good UI. To a customer base that hates math and needs to do certain calculations frequently, that $29.95 program is perfect.

ef42• 14 years ago

Just talk to people. Ask everyone you meet what they hate about their job, what stupid program they're forced to use, what boring repetitive task they do.

People love to talk about themselves, and they love to gripe about what's broken and annoying, so it's much easier than you might think. Finding problems to solve is actually extremely easier. The harder art is doing the follow up to understand if there's a good business model for someone who solves the problem.

dasil0032• 14 years ago

This is where a business co-founder is just as valuable as a technical co-founder. The trick is that business co-founder has to have equal respect for technical crafts of programming and design. If they also have startup experience, or at least good intuition about where to focus when you have extremely limited resources, that's gold right there.

mattmanser• 14 years ago

I completely disagree with this, this isn't an echo chamber, and no-one's buying into that ethos.

Let's be frank, b2b is boring as shit.

It's not even vaguely interesting.

The only challenge to setting up the ultimate competitor to Sage/Quickbooks is that it's so mind numbingly dull. B2B programming is an utter pile of mind-numbingly boring crap. It's not sexy because it's incredibly simple with a colossal amount of edge cases. B2B is mindbogglingly complex simple software.

B2B is just the edge cases.

It's not in the remotest bit interesting to most people. It's often bound by the most ridiculous laws and covenants.

But it'll make you a lot of money.

Do you want to read about it? No, because it's so ridiculously shallow and dull. That why no-one talks about it.

(disclosure: I am also writing b2b software)

EDIT: There was a very recent post by Intuit about the 10 million lines they've written for Quickbooks and how they manage it. That says it all to me really. 10 million lines means something has gone very, very, very wrong to me. Would you want to write a 10 million line essay about accounting? Think about your average words per line programming, that's nigh on a 50 million page essay. Just to do accounting.

Joy.

agwa• 14 years ago

You're defining B2B too narrowly. You describe what sounds like a business logic app, probably mostly CRUD. And yes, that's pretty boring. But that's not the only software that businesses buy. Heroku, for example, is a B2B company because they sell predominantly to companies, not individuals. Heroku might not be something that the founders' relatives and college buddies would use, but it's far from boring.

zcvosdfdgj2• 14 years ago

The only challenge to setting up the ultimate competitor to Sage/Quickbooks is that it's so mind numbingly dull.

Yes, the dullness of the topic is why no one has bothered to enter the market and compete with the $3 billion Intuit, or the $1.5 billion Sage. It's just too boring for them to bother with that kind of money.

You're fing kidding right?

Do you think that maybe, just maybe, the 17,000 pages in GAAP have something to do with it? Or maybe the 3000+ counties.. or the long list of county/city/state/federal rules and regulations? and not just accounting rules, but employment taxes, credit card processing, invoice generation, etc, etc, etc.

I think you don't understand the complexity of the topic and don't know the full feature-set of sage/quickbooks, and that's why you think it's simple software.

bpatrianakos2• 14 years ago

I buy into the ethos that HN is an echo chamber and, in private, many here have agreed with me. In fact I'm almost certain the reason I was forced to create a new account here after over a year in good standing is because I rejected a handful of this echo chamber's views. That said, I still value HN and like it but have learned to filter out a lot of the bad stuff (which keeps on coming faster and harder lately).

I also think a lot of what you said can be applied to the B2C space:

B2C is is boring as shit and not even remotely interesting.

The only challenge to setting up a competitor to Facebook/Twitter is that it's so mind numbingly dull. B2C programming is an utter pile of mind-numbingly boring crap. It's not sexy because it's incredibly simple with a colossal amount of edge cases. B2C is mindbogglingly complex simple software.

B2C is just the edge cases.

It's not the remotest bit challenging to most people. It often lives and dies by the latest fad and undeserved hype in tech blogs.

But you'll get a lot of VC funding.

Do you want to read about it? No, because it's so ridiculously shallow and played out. That's why everyone's sick of it.

(disclosure: I'm actually writing B2C software (no, really, I seriously am, not joking or being sarcastic at all there))

Sexy is in the eye of the beholder. If you characterize all B2B software like Quickbooks then yeah, it'll be boring to most people in the same way that yet another social network, geo-whatever, so-lo-co-mobile app is going to be boring to most people. You're right about the edge cases when you label them as edge cases. But if you think of them as niches then it becomes interesting again and a whole new market is laid out before your eyes.

Your whole comment was very general and you seem to apply your personal opinion to "most" people. I do get what you're saying and I can see how a lot of B2B products can be boring to a lot of people but the way you put it makes your argument weak.

BryanB55• 14 years ago

I think there is a big difference between B2B and enterprise software. Enterprise software, to me, seems very boring. B2B software like, say, the stuff 37signals makes is interesting. I enjoy those business models and reading about b2b web apps and picking apart their UI designs and how they go about solving problems. It seems like it would be a ton of fun to build something like mailchimp.com or basecamp.com, etc..

malandrew• 14 years ago

I think there are two kinds of B2B startups that can be super interesting:

The first is eliminating entire classes of jobs and the second one is eliminating entire "glue industries"/middlemen (disintermediation).

The former may sound callous, but creating a solution that frees up a human so they can pursue greater endeavors is a noble goal.

Those are exciting problems.

IanMechura2• 14 years ago

Setting up a challenger to QuickBooks does sound dull.

Setting up a challenger to SAP on the other hand does not sound dull.

Wanna see a cool B2B company? Check out a tool called CyberArk.

noselasd• 14 years ago

Hmm, I get to write radio communication software, mostly TETRA stuff. Playing around with lots of awesome hardware, writing a lot of both high level management software and low level bare metal code, with many _very_ non-trivial problems. I find this incredibly interesting.

ef42• 14 years ago

This makes no sense. The actual act of programming is completely agnostic to what the bytes you're processing mean.

They could be the most boring data in the world, but if you're trying to juggle enough of them at once, at high reliability, you're going to end up with very deep technical challenges.

I'm sure somebody probably said "why would you want to write code for an online book store? That's so technically shallow and simple." And then we got Amazon.

Great hackers redefine the problem in front of them, and that act of redefinition is the interesting part. No program is interesting if you're simply translating a flawless spec into code. Any program is interesting when it's entirely up to you what the spec should truly be.

krickle• 14 years ago

There is such a massive load of cognitive dissonance about B2B being sexy in the responses you got. Is it really such a blow to one's ego to admit that it's boring but profitable? Yes, there are technical challenges, no, the majority of it is not interesting.

7952• 14 years ago

Can you really think of nothing more interesting than accounting software. You lack imagination.

ThomPete• 14 years ago

So Github is boring? 37Signals is boring? Heroku is boring?, Photoshop, Maya, LogicPro is boring?

There sure are boring things in B2B just as there are in B2C, but there are plenty of B2B business that are great fun and challenging as hell.

drumdance• 14 years ago

B2B can incredibly interesting once you have a grasp of the problem space. My last two companies are B2B and I've loved every minute of if. But to outsiders it's usually not that exciting.

The one type of B2B I won't touch is that which has a lot of external friction in the value chain. Health care and government come to mind.

jsiarto• 14 years ago

We're a B2B shop and have been profitable from day one. Sometimes it takes a while to get paid from the big guys, but once you're in, cash flow is great. There are some downsides (control, last minute BS, corporate things)--but it seems to be easier to get companies to part with their cash than your neighbor or suite-mate.

jacques_chester4• 14 years ago

The secret to B2B is that it's almost never somebody's actual personal money.

If I as the manager approve the $5000 WooFiz 7 Platinum purchase, I might feel a some concern to ensure that the ROI is defensible.

But that's it. Because it's not my money. If WooFiz turns out to be junk ... well, that sucks. But I'm not personally out of pocket.

vkatluri• 14 years ago

How does one enter the B2B market? Does B2B mean you're solving how two companies do business with each other?

mindcrime3• 14 years ago

> How does one enter the B2B market?

Create a product that solves a need that businesses have and sell it to them. Steve Blank's The Four Steps To The Epiphany is a great resource that is heavily focused on the B2B world.

> Does B2B mean you're solving how two companies do business with each other?

No, it just means that your business ("B") is selling "2" other businesses ("B"). So, when IBM sells WebSphere AS to other businesses, that's a B2B market.

B2C, conversely, is when you sell something to consumers. So, Wal-Mart is mainly B2C.

The lines aren't always clear, and there are other models that don't quite fit either definition.

SudarshanP• 14 years ago

Thanks for that clarification. I too was under the wrong idea that B2B were somehow guys involved in connecting businesses to each other though their solutions. So B2B and enterprise software are the same? Does 37signals/Tello count as B2B or B2C?

pnathan3• 14 years ago

Well put. No one has heard of the company I work for, and we do some seriously cool B2B stuff. We're 100% employee owned and are #1 in certain segments of our customers.

No, we're not "sexy", we're not media darlings, and "social media" is really not in our genes. But our products are really awesome. :-)

philwelch• 14 years ago

You also have a rack of exotic blue hardware at every engineer's desk, can't complain with that.

spitfire2• 14 years ago

SGI still exists? What are you talking about?

pnathan3• 14 years ago

Yeah, that's an unusual dimension it's fun to learn about - don't get that everywhere.

rodolphoarruda• 14 years ago

Lots of Jason Fried's influence in the subconscious, I should say. Two or three segments seem to be extracted verbatim from 'Getting Real' book. Nice text, congrats.

dshipper2• 14 years ago

It's funny I've never read that book but love Jason Fried. Thanks for the comment :)

codexon• 14 years ago

The huge advantage of B2B is that businesses get to write off your payment as an expense, so they are much more likely to pay you more.

bdunn2• 14 years ago

I wouldn't ever consider building a product for consumers.

Why?

* Businesses are used to paying for services.

* Businesses can typically make judgements about the ROI of software (X saves Maggie 5 hours a week. That translates to $200 in pay. Sure, $100/mo is worth it.) Consumers can't.

* Businesses pay thousands of dollars a month for each person on staff. If you can eliminate the need for a position, a business will probably willingly pay 3 to 4 figures for your software.

karamazov• 14 years ago

I've never heard the term '3 figures' before :)

StavrosK2• 14 years ago

Do you mean you haven't heard "three", or "figures"? Because you've definitely heard "six figures".

bdunn2• 14 years ago

As in $XXX or $XXXX

I'm also so focused on subscription revenue that I forgot to clarify that. Get a few $XXXX/month businesses and you'll have six figure annual revenue before you know it.

nbashaw• 14 years ago

My response: http://nbashaw.com/post/28654441223/consumer-internet-isnt-d...

In a nutshell, I think there's still a lot of value in creating web and mobile apps for consumers, it's just that there's been a glut in the market, especially for mobile. Too many apps that aren't very differentiated.

In the long run I still think consumer is a good play, though.

diminium• 14 years ago

This feels like deja vu. I asked a similar question in http://news.ycombinator.com/item?id=4182993

B2B is also very dysfunctional. You almost have to operate in a different reality to survive there.

diskdoctor answered with "Marketing and selling software to enterprises is the most dysfunctional cycle of decision making you will ever see in business. In almost all cases the individuals in the business who actually derive value from the technology are entirely disconnected from those who make the purchasing decisions. Many times those purchasing decisions are made based on "perceived" synergies with other software systems already owned from the same vendor, having never been vetted by the actually consumer in the business."

This is probably the biggest difficulty in B2B.

Steve Jobs even said something similar "What I love about the consumer market, that I always hated about the enterprise market, is that we come up with a product, we try to tell everybody about it, and every person votes for themselves. They go ‘yes’ or ‘no,’ and if enough of them say ‘yes,’ we get to come to work tomorrow. That’s how it works. It’s really simple. With the enterprise market, it’s not so simple. The people that use the products don’t decide for themselves, and the people that make those decisions sometimes are confused. We love just trying to make the best products in the world for people and having them tell us by how they vote with their wallets whether we’re on track or not.”

paulsutter• 14 years ago

Dropbox found a way around that. It's heavily used within corporations, but the adoption decision gets made by each individual acting alone.

Ping Li has an excellent paper on this: http://www.accel.com/assets/resources/files/17/original_rena...

theatrus2• 14 years ago

Apple and Dropbox are both successful in the "enterprise" (and more so in the small business) because of this. They didn't sell to the company, they sold to the users and employees.

bmelton• 14 years ago

That's a poignant quote, and also one of the biggest pain points in selling to enterprise / federal customers.

The less spoken, easier way around is to target smaller companies. The people making the decisions have more direct influence on the purchase, and are also a lot more likely to be involved in the actual use of the software. This has worked out well for FogCreek, 37Signals, et al.

IanMechura2• 14 years ago

Interesting case study that was able to buck the trend is Atlassian software. I have personally seen bottom up influence in 3 large publicly traded companies land Atlassian very nice (and well deserved I might add) license and support agreements.

They built a product that would usually be sold at the VITO level, gave it away for open source projects so it became defacto to developers and viola Jira is now replacing IBM products in many enterprise software development shops as we speak.

eli• 14 years ago

I'm doing an ad-supported B2B media startup now. So that's doubly unsexy since free ad-supported media is not a very trendy business model right now.

But it works because we understand our market, we understand marketers, and we've had a dedicated sales staff since day 1. You can make a lot of money with ads if you don't treat them as an afterthought.

dgudkov• 14 years ago

>The biggest opportunities probably aren’t in social anymore

Economy struggles because there almost no new ways to increase labor productivity further. Making business tools more collaborative and social may boost labor productivity to next level. It's too early to dismiss social completely even if it's hit glass ceiling in B2C market.

malkia• 14 years ago

What's B2B?

andrewflnr• 14 years ago

Business to business.

robwhitley• 14 years ago

B2B = better to bet for VCs in the coming years.

j45• 14 years ago

This article speaks to a point that most miss:

The business model can be as sexy, or sexier than the idea itself.

When we build something that is boring to some, I wonder if we forget the magic of what we do.

What is boring to us is magic to someone, stuck suffering with managing details. It's nice to see the maturation of developers who do for the world what's being asked of us: help everyone everywhere, with software.

About B2C or B2B:

1) It's a preference. A reality is, there is not as much B2C out there as we think. Too many consumer facing "successes" do not take money from "customers". Why? The users are the product that are sold to advertisers. They often ask businesses to pay, maybe by advertising, and it's a lot of work.

2) Consumers are quite fickle, irrational and emotional decision makers. They will often think about any decision over $5/month.

Small businesses, on the other hand, don't think about $50/month too much. They're fairly logical (a good fit for developer's tendencies), and very much understand and make decisions based on value -- saving them, or making them money. They'll also be more forgiving about understanding features-based marketing instead of benefit-based marketing if you can't dial in your copywriting. In short, there's more flexibility to learn and still do well enough to keep improving.

3) If you let a sliver of your talent tackle a B2B problem that customers will pay for, you get to keep the panacea much easier: Work on what you want every day without fear of paying the bills, or pursuing a swing for the fences idea without fear of failure or running out of money. Not everyone gets to live in the Valley. I'm sure I'd be open to other possibilities if I lived there, but I don't right now.

If you're out for the first success or two of your life, consider this: check any ego and immature thought habits to fit in. Exchange them with discipline, to learn what you need to about the fundamentals of building a business, it will serve you very well when going after the B2C ideas.

Almost everyone who tries to fit in, inevitably gets left behind. Do what others aren't willing to do to build a business that makes money, because it's worth way more, to customers, and VC's.

As every single person on HN gets older, they will have more responsibilities because of the other things in their lives they want, and cost money every month. There's a chance now to address those very easily and get some great business development experience. That doesn't sound like much to some, but startups are a longer haul game than anyone ever admits.

the_cat_kittles• 14 years ago

william carlos williams couldn't have said it better

unimpressive• 14 years ago

To me, a sexy business is one that helps people and makes money.

By this definition the majority of social startups are as unsexy as possible.

rickmb• 14 years ago

There seems to be an odd notion that B2B must be about accounting and such. Most B2B stuff I've been involved with the past few years has all been "social".

Because, like soylent green, companies mostly consist of people...

pilif• 14 years ago

We're working since 2001 on a b2b software. While it might seem boring, it's not in the least (minus some rare low points, but you get these everywhere).

It's also very rewarding to see users be productive with the software and be grateful for making their lives easier. In fact, many of the end users are to this day computer illiterates and making great software they can use is a very interesting challenge.

Also the technical stuff. Just because it's b2b doesn't mean you can't make it interesting for you. Whatever new technology comes around, I make it a point to try it out and apply it in production where it helps.

We've done AJAX before it was called that. We've been running node.js since the 0.2 days and we've solved interesting scaling problems.

There is nothing we can't do that makers of consumer products can do. The difference is that we are getting paid handsomely ever since and that we don't have to deal with advertisers or, god forbid, VCs.

Thanks mainly to our product Switzerland was and still is one of the countries with the highest percentage of electronic orders among dentists (I only have numbers there. The restaurants numbers might be even bigger).

Combine that with the cool technical challenges to solve and you are left with a very interesting job that just never gets old.

jacques_chester4• 14 years ago

I agree that solving people's pain points is one of the best parts of doing enterprise-y stuff.

DRMacIver• 14 years ago

So I've done a B2B company before and am doing one now (current place isn't intrinsically B2B but that's our main focus. It's certainly not something normal consumers would use).

I think this understates what incredibly hard work selling B2B can be. Large companies will pay you a lot of money, but are ridiculously high maintenance - they expect custom work on your product (often of the "Can you integrate it into our ActiveDirectory/Exchange/etc" form) and the sales process to them is incredibly long.

Small companies on the other hand are often strapped for cash and have weirdly distorted views of the value of their time - If what you're selling them is something they can "do now" by spending 3 hours of an employee per day it can make it very hard to convince them to pay you at a rate you'll be able to sustain a profit on.

Neither of these are impossible to overcome of course. People can and do do extremely well with B2B businesses. I just want to point out that there are real problems with selling B2B as well, and that it's not nearly as easy as it might sound.

B2B Is Unsexy, and I Know It

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