A couple years ago, I was applying to a high-profile conference for my B2B startup.  The application asked how many users we currently had, with no place for us to contextualize what a “user” meant.  The question struck me as silly; it was presented as if a user count was the SAT score of startups, allowing for universal comparison of progress.  Do we know if 10,000 users of a free photo-sharing app are more impressive than three customers paying $5,000 per month for marketing software?

Moments like that have made me realize many of the adages of startup wisdom are implicitly aimed for consumer startups.  This is understandable based on sheer volume of consumer startups –AngelList shows over four startups tagged “consumer” for every one tagged “B2B” or “enterprise.”  But this is also problematic for entrepreneurs trying to launch a B2B startup.  Consumer-centric advice may be irrelevant at best and misguiding at worst if you’re building a B2B business.  I recently heard a well-known guru insist startups should never pay for users – a downright asinine suggestion for many B2B acquisition strategies.

I enjoy compiling the differences between consumer startups and B2B startups; a sampling is below.  If enough fundamental differences exist, perhaps we need entirely separate schools of thought for consumer and B2B startups.

1. Different investor metrics: Investors are happy to put money into a startup with an exploding number of free users, especially if they’re bound by a network effect.  Free users won’t get you nearly as far with investors in the B2B world.  They’ll expect revenue early on, and revenue – not users– will likely be the primary metric they’ll track, even for nascent companies.  Rules of thumb like “10 million users in the new 1 million users” won’t be germane to a B2B investor pitch.

2. Capabilities over cosmetics.  Consumer products need to look pretty and be simple to use.  Sometimes, that’s their primary value. Mint.com built a beautiful interface on top of Yodlee’s bank-connecting capabilities.  Certainly, ugly consumer products (hello, Craigslist!) can survive with a powerful network effect.  But it’s far more common for B2B products to be wildly successful while drawing the ire of designer experts.  Business customers generally pick products for their capabilities, not their cosmetics.  So a marginal hour of effort might be better spent adding a request feature than simplifying a design.  (Arguably, B2B2C companies are an exception to this, as I hear payment company Stripe applauded for their gorgeous design almost as often as their ease of integration.)

3. Mobile’s not the be-all and end-all: My friends building consumer startups tell me if you’re not building mobile-first, you’re doing it wrong.   That’s likely the case for certain types of B2B startups, but not all.  If your product involves a more complicated function that someone will prefer to do on a larger screen (like launching a display ad campaign, then mobile won’t be your No. 1 priority.  Contrast this with consumer startups, where new applications are expected to be buttons on the “remote control for your life” that is your smartphone.

4. Longer conversion cycle.  Naturally, it will take longer to convince a company to swap out their CRM software than to convince a consumer to try a laundry delivery app.  But even when evaluating simple products, an individual may take longer to deliberate in the workplace than at home.  Using a new product at work may involve getting a colleague’s buy-in, processing a vendor approval form, or getting a purchase order from accounting. The flipside is once a customer decides to move forward, they’ll of course be significantly more price insensitive when their company is paying the bill.

5. Simpler demand testing: Testing demand for new consumer products is generally less straightforward than testing demands for new B2B products.  Many consumer products have the “they won’t value it until they use it” problem: Imagine interviewing consumers about

Twitter
before it was built.  B2B startups are more likely to solve a specific, palpable problem that someone encounters in their everyday work.  Thus, showing crude sketches, or even just a succinct description, of a B2B idea to potential customers can fairly accurately gauge interest.  (However, I should note there are numerous effective ways to measure demand for new consumer businesses.)

6. Different unit economics and acquisition channels: Due to the price insensitivity of B2B buyers mentioned above, the lifetime value of B2B products can be massively higher than consumer products.  This allows customer acquisition costs to be much higher, which opens up acquisition channels not accessible to consumer startups.  Certain B2B companies can attend expensive conferences if they expect to simply meet a handful of leads.  For consumer companies, despite what your event planner tells you, even a launch party with 100 attendees is not a cost-effective acquisition strategy.

This list will certainly grow over time as technological change alters the consumer landscape differently than the B2B landscape.  Let’s just remember to always separate the two.

Source: here