It can often be hard to pitch business-to-business startups. The guy with a consumer-facing mobile app that promises to capture millions of smartphone-toting consumers just sounds a lot more exciting to a venture capitalist than an entrepreneur explaining how his software will disrupt a vertical business process. But there’s signs that B2B startups are finally getting some of the lime light, according to an article from Inc.com.
Why are they starting to be more attractive to venture capitalists? It’s all about money. Savvy investors are starting to realize that startups targeting businesses are targeting customers that reliably pay their bills, have access to budgets they want to spend, and are generally more reliable in sticking with something they’ve signed on for than the fickle consumer market. For another perspective on why B2B firms are better revenue generators, just consider the channels a consumer-facing startup will use versus the channels a business-facing startup will use. An app for consumers might be in Apple’s App Store and Google’s Play store – both of which have been completely commoditized so that free is the only purchase price option that most will consider, or at best a one-time spend of a few dollars. An app for businesses might be in Salesforce.com’s App Exchange or a cloud market place like Bell’s app store – a place where its expected that some monthly subscription price will be attached.
Incubators and accelerators are getting in on the B2B trend too. Where it was more common to see consumer-facing businesses under the roofs of Extreme Startups, Incubes, and Hyperdrive in 2011, more recent cohorts have been full of B2B startups. Take the recent Incubes cohort that featured Qoints and Lightening Platform, for instance.
While Krasny highlights three consumer facing startups that have sputtered out recently, I’m going to point to three B2B startups that are succeeding lately:
- Toronto-based Locationary, a graduate of Extreme Startups’ program, was acquired by Apple for an undisclosed amount to help improve its mobile mapping technology. Locationary created Saturn, a federated data exchange platform. Locationary’s Web site is focused on helping data providers and distributors, enterprises, and app publishers to manage and analyze large amounts of data cross different formats. Before it as bought by Apple, Locationary raised $2.5 million in venture capital in July 2011.
- Toronto-based Kira Talent raised $2 million from Relay Ventures and others, adding on to seed funding it raised in December 2012 from Relay Ventures and Wind Mobile’s Anthony Lacavera. Kira helps organizations find the best prospective employees with an online video-based interview software.
- Toronto-based Class Messenger won a $1 million investment from Scholastic for its software used to by teachers to send short multimedia messages to students and parents about homework, meeting requests, etc.