To B2B or not to B2B? Ah. This is the question.
For me the answer is clear. With all things being equal, if you are a Philippine-based startup, you should try building a B2B first.
Waitaminit! What do mean by B2B again?
You can generally classify as startup as being a B2B (Business to Business), as opposed to a B2C (Business to Consumer). A B2B company sells to other companies (also called enterprise business), while a B2C sells its wares directly to consumers.
I think there is an underlying reason for my own preference as well – I just find it a bit easier to build a B2B.
Here are six huge reasons why.
1) More than Two Can Tango
For direct consumer businesses, you mostly either have to be NUMBER ONE or NUMBER TWO to be successful in a certain market segment.
Think about it.
Why has it been so difficult for a third telco to get established? Why has it been forever Mcdo versus Jollibee? Apple vs. Samsung? Coke or Pepsi? Jobstreet vs. Jobsdb? Nike and Adidas? There are countless examples.
In fact, for a HUGE number of B2C industries, there’s only space for one or two players.
But in B2B?
You can secure a certain segment of the market as long as you can service them well.
This time, think about how many ad agencies there are, or headhunting firms, or IT development firms.
There are a lot, right? And yes, they’re able to co-exist.
B2B might not be sexier (for some at least), but its a hell of a lot safer.
2) Experts Everywhere
I was DEEP in HR Management for ten whole years. I finished an advanced degree in basically HR Management. I know it well.
What’s the great thing about about knowing things well that from an entrepreneur’s lens?
I know a LOT of problems companies face when it comes to HR.
I can probably rattle off 20 different HR-related problems which companies are struggling with.
And of course, problems are where startups are born. That’s literally 20 startup ideas (which I mistakenly tried to pursue at the same a few years back – but that’s another story)
Guess what? Dive in Linkedin and there will be scores of people like me in a variety of different fields (sales, supply chain, finance, customer service, etc…) in a variety of different verticals (medicine, real estate, education, etc…). Heck, if you’re from corporate, over 30, and you’re reading this, chances are YOU are a subject matter expert who is knowledgable about big problems in specific areas.
Some of the best ideas for startups will come from these people. And there are a ton of them.
3) Funding Is Obtainable
While it may seem that funding headlines are always dominated by B2C’s (quite natural, because on the average, the addressable market for B2C’s would seem larger than B2B’s – and this return potential excites VC’s), you WILL get funding for a great B2B idea if you raise money for it.
I’ve had first-hand experience in raising fundraising last year as well, with both STORM and STRATA getting Series A funding.
You got a sound B2B idea? There are a LOT of people who can help out with startup capital.
4) Companies Are Flush
Over the course of the last 12 months, we’ve been hearing headlines like:
“The Philippines will be a top 50 economy by 2050!”
“Execs bullish on Philippine economy!”
Who’s feeling this sudden abundance?
Go have coffee with your friends who dabble in the stock market. They’re probably smiling. Most likely they have spanking new shoes.
Boatloads of companies are killing it in the stock market.
Businesses are flush. Companies who are flush tend to invest more – and tend to be just a tad more interested in improving things. Or even trying out new stuff, like you know, startups.
What does the first “B” in “B2B” stand for again?
Go where the money is.
Adding this one quickly: I remember when we first started Mobile Academy, we wanted it to be aB2C - a place where anyone can learn about how to create a mobile app. We did “lean” methodology, developed some quick mobile courses and threw them out into the market, seeing who would bite.
We quickly realized who the market was. Direct consumers waffled at our prices, with a good number saying they’d much rather learn on their own than pay up.
After a few weeks, some tech firms heard about our courses. Boom. Booked a whole class full, just like that. Then another.
I think experience can sum up this whole post.
5) Dinosaurs Create Opportunity
You know one thing I’ve seen in my years servicing and selling to corporations?
A number of them do things very, very, very inefficiently.
Some of them hire full-time encoders.
Some of them (actually, a LOT of them) use mammoth, outdated “legacy” systems.
Internet Explorer 5 (!) anyone?
Some of them don’t take advantage of mobile technology, even if there’s a big, obvious advantage in doing so.
A lot of them don’t understand tech and social media.
6) Hard Habit To Break
So how does a B2C company lose a customer? He or she just stops purchasing if and when she feels like it.
If you’re a B2B, it’s MUCH more difficult for a client to drop you. For starters, deals are usually governed by contracts. These typically span 1-2 years.
They also KNOW you, so they’re going to have to tell you to your face that they’re not renewing your service. That’s MUCH more difficult
One other thing? They’re not using their own money to make the purchase!
So you know, unless you completely BOMB and make them look bad, you are MUCH MORE LIKELY to keep a business client. Companies are creatures of habit. Once they get to get used to being serviced by your firm, you become a hard habit to break.
(Of course, what we missing in this discussion is a very key ingredient – what you are passionate for. But again, all things being equal – if you had one solid B2C idea and one solid B2B idea with roughly the same economic potential? For me, it’s a no-brainer.)
(While this post explains WHY you have consider building a B2B, you can find some crucial suggestions on HOW to build B2B’s in this post.)