Can a startup be both B2B and B2C?
Historically, most companies have either been focused on selling to consumers, or selling to businesses. But some companies can successfully do both.
When I teach entrepreneurship, I tell my students that you have to be either B2B or B2C; you can’t be both. Consumer and enterprise are two very different businesses and you need to pick one or the other. For the most part, companies have failed when they’ve tried to do both.
During the PC boom of the 1980’s, IBM launched their very first consumer product, the IBM PC. Everyone said they were totally crazy to go into consumer products—their entire history was of being a B2B company! Five years later they realized their mistake, decided B2C was too hard, and went back to their B2B roots. Today IBM is a $77 billion company with no consumer products at all (as far as I know).
But the other day I was talking to one of the entrepreneurs in my current accelerator program, giving her my usual admonition about how she needed to choose either B2B or B2C for her startup. She said “But what about Uber — they serve individual riders and they also serve corporate passengers on expense accounts!”.
And that got me thinking about this topic and how the traditional bifurcation of B2B and B2C does get a bit blurry these days. Amazon sells to consumers and it’s also where many businesses buy their office supplies. Retail banks serve both consumers and businesses. Microsoft sells business software and consumer gaming consoles.
What remains true, of course, is that the process of getting a customer in the consumer world is typically different from the process of getting a business customer. With consumer products, advertising and marketing are expensive, but the sell-cycle tends to be short. In the enterprise world purchasing is more relationship-driven, and it tends to be a multi-step process the leads to longer sell-cycles. A company the size of Microsoft can put consumer products in a different division (Xbox) that uses completely a different customer acquisition process than selling enterprise software. Amazon’s most profitable business today, of course, is AWS which is strictly focused on B2B and is run much differently than their consumer business.
So I think my general advice for startups remains true: focus on one or the other. Without the scale of a large business you can’t chase two rabbits.
But online marketplaces may be somewhat different. Uber is essentially a marketplace connecting drivers with people who want drivers — a use case that applies to individuals as well businesspeople on the run. TaskRabbit is a marketplace for finding freelance labor, a use case that ranges from moms to business owners. Same with Upwork and Thumbtack.
The entrepreneur in my accelerator is the co-founder of a new managed marketplace for hiring professional photographers. So in her case she’s a bit like Uber in the sense that some of her customers will be individuals looking to hire a photographer, and some will be businesses.
So I guess I need to amend my “you have to be either B2B or B2C” declaration. There are some kinds of companies (online marketplaces in particular) that can do both.