„B2B“ stands for „Business to Business“ – we are talking about startups that make a conscious decision not to target end consumers, but to sell their products and services to other companies. In this context, digitalization is an enormously important aspect. After all, more and more established companies want to digitize processes – or even the entire business model. This requires appropriate technologies for all areas of business activity, and this is where tech startups enter the game. The need for digital improvement and new technologies, which is growing more and more in established companies, has great potential for startups to be the supplier of tomorrow’s technology.
Why to start a B2B Tech Startup
What’s different between B2C and B2B?
There is no completely blanket answer to this question, but there are some key differences. In business with end customers you will always have to fight to convince as many individuals as possible. B2C is almost always mass business, unless you are in the luxury segment or absolute niches. With B2B, on the other hand, your target group may be a little smaller. Customer relationships are often long lasting and you have the chance that your startup grows with your customers. A joint further development not only ensures regular income, but also brings you valuable learnings.
Another important point is that in the B2B segment, higher hurdles tend to be set up compared to other market participants to enter your niche or even your client-basis. If you work intensively with your business customers, you can tie them closely to you and your products or services.
What are the benefits and challenges compared to B2C?
Let’s take a look at the advantages and disadvantages for a startup focusing on B2B compared to the B2C.
- There is a high demand for new solutions, new technologies and any kind of improvement of business models and processes in B2B.
- In terms of sales, it is easier to address a manageable number of business customers than to carry out broad marketing measures for a mass product, for example in the FMCG-field.
- In the B2B segment you can (of course, depending on product and industry) become profitable with comparatively fewer customers – break even can be reached earlier, which makes your startup more attractive for investors.
- Business customers decide less emotionally and are fact-based. If you succeed in developing a product or service that creates real added value, you can convince with numbers, data and facts.
- Compared to most consumer goods (let beside brand-new, totally innovative products), the B2B sector is even less competitive for startups. You have the chance to get to the top faster!
- Business customers can improve their everyday life with your products or services. If they are satisfied, you will be able to grow with them and conclude follow-up business.
- While B2C is moving towards public ratings and evaluations, which are often not very constructive, in the B2B sector you usually receive direct, open feedback in a personal conversation. This is a valuable advantage, especially in a phase in which you are building up your startup and your product or service is still being worked on intensively. You can develop faster and become better and better by consistently incorporating the feedback of your customers into your product development
- Some B2B startups require large amounts of financing, for example when developing hardware. These costs have to be made possible by appropriate investments, which you need to raise upfront, in an early stage.
- Not all industries are equally open to innovation – so make sure you target areas where new solutions are not yet established, but where the mindset is there to be open to new ideas.
- You need to align your business with the B2B focus. Depending on the industry, you need good salespeople who can convince potential early customers, conduct intensive negotiations and at the same time take feedback constructively.
Why is there so much potential for B2B startups?
The described advantages in the B2B sector basically speak for themselves. In principle, the point is that many companies are willing to use new technologies – but they don’t know exactly what they could do or how exactly they could use digitization. This is why there is a huge opportunity for B2B startups to prepare developed solutions accordingly. It is a good approach to present specific use cases, calculate cost savings and thus show a clear benefit for potential customers to use the products, services or technologies offered.
It is important to really engage in discussions with pilot customers and show them what is possible. If you deliver good results, they will thank you for it with solid business-relationships. At the same time there is the chance to tie the companies to your startup with annual contracts, framework agreements or subscription models. A classic example of this are various software subscriptions.
What could help in starting a B2B Tech Startup?
Basically, you need to identify a real pain point in a specific customer segment, put together a particularly strong team and a bring lot of stamina – no matter whether you want to focus on B2B or B2C. When financing your company, you can also make sure that you find investors with experience in the B2B sector. They must be convinced that this is the right way and ideally, they can support you with their own practical experience in this field. In this way, you also build up a working environment for yourself that is designed to develop B2B solutions.