With the world buzzing over Apple’s reveal this month of the iPhone 6 and Apple Watch, it’shard to believe that this multi-trillion-dollar tech giant was once a small computer startup.
For many entrepreneurs, the epic trajectory of Apple AAPL -0.87% — or Facebook FB -1.63%or Twitter TWTR 0.07% , for that matter — serves as evidence that the consumer space iswher you go to launch a winning startup.
But that doesn’t always hold true. By foregoing the potentials of selling to business (asopposed to consumers), entrepreneurs are missing out on a world of opportunities — andlucrative ones at that.
As a board member at 1871, Chicago’s entrepreneurial hub for startups, I see a lot ofstartups and know what B2C companies can learn from B2B startups, including Fieldglass,MarkITx and Eved.
The B2B space is rife with potential; by integrating new technologies into traditionalbusinesses, entrepreneurs can dramatically improve efficiencies, uncover new markets, solvelongstanding problems and, in some cases, disrupt entire industries. Indeed, an increasingnumber of B2B startups are experiencing rapid growth while achieving enviable profit margins.
Take Fieldglass, for example. Once a small startup, the Chicago-based software company is nowthe biggest vendor management system (VMS) provider in the world. In May, it was reportedlyacquired by SAP for more than $1 billion, one of the largest sales of a privately held techcompany in recent years.
Or consider MarkITx, an online marketplace to trade enterprise IT hardware, which earned a$12 million valuation after only eight months of operations. After speaking with its co-founderFrank Muscarello, the company’s revenues are up 300 percent this year compared to last.
To launch the next great startup, here are six lessons that entrepreneurs can learn from B2Bcompanies about how to launch the next great startup:
Target your first customers wisely
Many B2B businesses design their products and services around their initial clients, making itcritically important to take a strategic approach to recruiting those first customers. TaliaMashiach, founder and CEO of Eved, went after large firms like Dell when her company was stillin its early stages. She then designed Eved’s platform and online marketplace to addressthose customers’ needs and provide visibility into their meeting and the total amount spent onan event. That set the stage for the recruitment of other large-scale firms and helped herstock her online marketplace with more than 5,000 companies.
Long-term value of customers is critical
Generally speaking, B2B companies have longer sales cycles than B2C firms. However, mostB2B customers are long-term customers and, in the end, companies can extract greater valuefrom them. After Jai Shekhawat founded Fieldglass in 1999, it took him more than a year toland his first customers, which included Verizon VZ -0.80% , AIGAIG -3.34% , GlaxoSmithKlineGSK -1.33% and Johnson & Johnson JNJ -2.36% . But he held on to them, and now eachspend billions on contract labor annually. To date, Fieldglass boasts a customer retention rateof more than 99%.
To generate steady revenue, focus on opportunities to generate reoccurring revenue
Prioritize customers that are most likely to use your product or service repeatedly.
Muscarello knew that financial companies would serve as ideal suppliers for his online exchangebecause they invest heavily in IT and frequently purge their inventory to make room for thelatest technology. MarkITx’s first customer, the Chicago Mercantile Exchange, is now on its22nd trade since August 2013.
Build something that sticks
To develop a long-term relationship with your customers, you need to create products orservices that are inherently “sticky” and provide several levels of integration within acompany. MarkITx’s dashboard plugs into companies via API and provides real-time data aboutthe mark-to-market value of their assets and the optimal time to refresh their ITinfrastructure. As a result, these companies regularly check the dashboard and are more apt touse MarkITx when it comes time to sell their assets. Fieldglass takes integration a step furtherby staying enmeshed in its customers’ problems. It monitors, for example, changes in laborlaws (in Europe alone, Shekhawat estimates that there are 25-30 changes per month) andensures that its software immediately reflect those shifts. In turn, customers grow moredependent on Fieldglass to manage their problem for them.
Look for a business idea on your desk
Think about the problems your company is facing or how you might address issues in yourindustry. There are business ideas there — maybe not sexy ones, but solid, profitable ones.Shekhawat came up with the idea for Fieldglass after serving as a contract developer, workingfor a technology vendor and consulting for buyers and customers, wher he witnessed thechallenges of managing contract labor. That insider knowledge also enabled him to build acompany that easily overshadowed the five preceding competitors (all have since gone out ofbusiness).
Know when to venture further
Consider whether the work you’re doing now could parlay into something bigger. Before Evedwent global in 2010, it was a local service company that grew to $10 million in four years andlanded on the Inc. 500. But Mashiach knew that there was a bigger opportunity out there. Soshe sold Eved’s service side, took its R&D and re-launched it as a global company, withher sights set on a billion-dollar goal. (www.chinainout.com)
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