Punditology - Postings by Jerry Kestenbaum
(CEO of BuildingLink)
As Founder and CEO of BuildingLink.com, (a 12-year-old
"SAAS" company that has weathered a few booms and busts and come out
okay) maybe I think I've got a few tidbits of insight
worth sharing.
And maybe you'll agree and you'll "follow' me.
Or maybe you won't.
Monday, August 29, 2011
A recent posting by Geoff McQueen on the
challenges of launching
B2C startups versus B2B startups has some good lessons for
"grown-ups" who are playing around with the idea of quitting
their jobs and starting their own "whatever".
"Startups for GROWNUPS"? What do I mean by that?
Grownups are people who would like to start a venture for a new or
better idea but want a much lower risk/reward
ratio than is usually associated with startups, 90% of which fail!
Grownups are people who don't need to chase a $100 million buyout
exit plan to get their juices flowing (or any exit plan at all!) and
who are looking to minimize as much as possible the
heart-stopping, "all-in", doubling-down of risk
associated with these types of monnshot startups.
People whose go/no-go criterion can emerge
from answer to life-size questions like: "Can I start something
that will pay off at least as good as, or maybe 2-3 times better than my
current job", and "Can I start something that, if successful, could
on the up side provide more "earnings and job" security long-term
than what I am now doing, but at any rate, on the down side would probably be
no less secure long-term".
People who simplywant a
chance to create something of their own, leveraging their own talents and
experience, and live off the fruits of their creation, instead of working for
"the man" their entire lives.
For people like this, B2B is a much better fit than B2C, even though B2C
gets all the press coverage. For starters, businesses are used to paying
real money for solutions that remove pain and improve function, so you will not
spend forever trying to answer the "how will you make money - who is going
to pay for it" question. To quote just one line from Geoff's post:
The biggest reason why business customers make a great market for your
startup is that they have money, and aren’t afraid to
spend it to solve a real problem. There are lots of
unsolved problems in business today in areas such as sales, marketing, finance,
operations, management and more where technology can be disruptive and highly
valuable.
Recently, I spent an afternoon with a younger family member, who was
having an understandably depressing experience of being a real estate
attorney in a contracting economy, trying to hang in there while try to guess
the arrival date of the anticipated pink slip. He talked of wanting
to start a legal technology business in an area that he felt he had
above-average expertise. But the risk of leaving a job, of jumping before
being pushed, of making a mistake, was all but
paralyzing.
We chatted, and I asked him to project his salary for the next two years -
which at $65K/year came out to $130K. I asked him "If you
worked your butt off for the next two years, what is the likelihood that you
could earn at least $130K of business during that 24-month period".
Based on his knowing that contract jobs in that area of legal technology tend
to be in the $5K - $20K range and typically take 1-5 weeks to complete, he
estimated that hard, relentless work would produce an 80% likelihood of at
least that earnings level. So where's the
risk? There really wasn't any. We didn't even need to project a huge upside potential to see
that it made sense to go forward.
The biggest challenge to viability in most start-ups is the "cost of
acquiring a PAYING customer". Because his was a B2B idea based on
doing something that is already being done, but
better and cheaper, and because it was possible to see what people
were ALREADY paying for solutions to the problem he was addressing, it was
possible to quantify the risk and the likelihood of modest success. And that allowed him to jump before being pushed.
(4 years later - the business continues to be working out for him ,
growing nicely but slowly, not yet reaching the tipping point of easy,
organic growth, but having already left the other alternative of the
"job" far behind. No regrets)
So read Geoff McQueen's article above, about the advantages of
the less "sexy" B2B sector for your startup. And if it
inspires you to follow it, you'll have a much better shot at success and
at being proud of what you've done ("proud" with a lower-case
"p"), and you'll be happy with a life-sized start-up endeavor,
because that's good enough for you and your family and your other life
goals. Life-sized is really good enough for most
of us - once we learn to ignore the media telling us how big we are
"supposed to" want to be.
But if you are a strictly larger-than-lifesize person who is drawn to only the
"moonshot"ideas that if successful will
have everyone jealous and admiring of what you have created,
then you had better stick with your big B2C idea. It's a guaranteed
narcissistic success, because even when you fail financially, you can still talk
about what an incredible idea you had, and spread your own "if
only" story: if only you hadn't failed you'd have been
someone really special who would have changed the world (or at least
changed the way that teenagers shop).
And if you are lucky, maybe a grown-up B2B friend of
yours will buy you a "Vente" size cup of
coffee at Starbucks. If only.