If I Start A Startup, It Will be B2B
I ran my computational photography startup NoctaCam and Futurecam for multiple years:
I won’t start a startup again, but if I did, it would be a B2B startup, not a B2C one. Why?
B2B is easier, since you get to talk to users. With B2C, someone somewhere downloads your app, and you don’t know why. If they’re unhappy, they’ll just uninstall your app without telling you why. This makes it hard for you to get feedback to improve your product. B2C can be like trying to shoot while blindfolded. On the other hand, when I work with businesses, they tell me in no uncertain terms what they want.
B2B has a lower UI bar, since businesses are interested in getting to an outcome, not in a pretty UI 1. I want to build a great UX, but a startup can’t do everything at once, so having extremely demanding users makes it harder.
Consumers want free stuff, which gives an advantage to tech giants like Google. And to companies that are big in your country, like Flipkart in India. Or extremely well-funded startups like Notion that had a 10-year runway when they completed their fundraise! All this is to the detriment of early-stage startups, who can’t afford to give the product away. When consumers don’t get what they want for free, they’ll make do with what they can get for free, even if it’s not what they want. Or they’ll go without it.
B2C has a low LTV, so the CAC can make marketing unviable. If you assume a reasonable CAC of $100, and apply the rule of thumb that your LTV should be at least 3x the CAC, that’s $300, which is too much for most consumers. There’s probably only one software for which I’ve paid that much — Google Drive. Almost all the software I’ve paid for, I’ve paid less. I prefer to pay a few dollars. Not a few dollars a month, but a few dollars once. This makes marketing unviable.
Even if you manage to get significant money out of a consumer, they’ll switch more easily than companies. When my one year subscription to Google Drive runs out, I’ll check if OneDrive is cheaper and if so, switch. A company wouldn’t shift so easily to another software to save 20% 2.
Consumers are emotional, while companies are logical 3, and I like to work with logical buyers.
In B2B, each business pays more, so it’s enough to acquire fewer to generate revenue. On the other hand, consumers pay a pittance, so you need to acquire tons of them. In theory, this would work out if consumers are proportionally easier to acquire, but they’re not. To put rough numbers to it, if a business pays $1000/year, and a consumer pays $10/year, you need to acquire 100x more consumers. This would work out if acquiring a consumer is 100x easier. It’s easier, but not that much. I found that consumers agonise over spending a pittance, as if it’s a life and death decision.
I did a B2C startup earlier, so I’ll learn more by doing a B2B one than by doing more of the same.
I personally know how to acquire businesses more than I know how to acquire consumers.
It’s changing now, with consumer-class user experiences in B2B, but I feel you can still get away with a rough UX in B2B more than in B2C. If your experience says otherwise, let me know.
Not all, especially in India. But still more rational than consumers.
Not all, just more than consumers.