Monthly Archives: November 2014

Why are SaaS (B2B) companies significantly different than B2C companies?

In the last few months, since I left my full-time position at Webcollage (and our acquirer, Answers), I’ve had the opportunity to work with many entrepreneurs and early-stage companies — both business-to-business (B2B) and business-to-consumer (B2C).

While B2B and B2C ventures share several areas of commonality (company and leadership values come to mind), it is interesting to notice deep areas commonly different between the two: all the way from the business perspective to the (somewhat surprisingly) technology perspective.

The recent write-up by Michael Eisenberg at Aleph VC highlights one of the key differences and eloquently explains why in many cases the product matters more in B2B companies. The write-up is written from the viewpoint of an Israeli VC (and hence references challenges in hiring B2B/SaaS executives) but the merit of the write-up is agnostic to geography.

See here: Israel’s Subscription Challenge.

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Are small businesses doomed to fail, or can SaaS help?

According to the Bureau of Labor Statistics in the US, only 44% of small businesses successfully make it through four years of operation. One reason is that because of their size, small businesses cannot master the skills that larger organizations have (such as marketing, sales, service and technology). So, it should not be a surprise that they have a hard time competing in the marketplace.

One of the areas that has been a weak spot for small businesses is the use of technology in general and software in particular.

From a software vendor standpoint, small businesses were traditionally overlooked as a target market. In fact, in the 1990’s, common wisdom was that successful software vendors should focus on large enterprises, where the money resides, and apply the direct sales model, with a $100K+ price tag. The wisdom at the time was that smaller price tags did not justify a direct sales force, and required indirect selling. Selling through resellers, however, was and still is hard to crack. It’s hard to get resellers to commit to sell a product before it gets traction. And even later, it’s hard to educate resellers to sell a product proficiently.

From a small business point of view, buying software is—simply put–not easy. How can a small business be expected to have the skills to evaluate new software? How can they be expected to master how to operate the software? How can they be expected to integrate it with other software? And, when it comes to on-premise software, how can they afford to deploy and manage the software?

But then SaaS came along.

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