Why aren’t there more enterprise startups?

I read an article about this in Business Insider (here) and then again saw a similar question asked on Quora. It is a very interesting topic that touches on many general aspects of startups and I think I am in a good position to address this (being a B2B startup myself).

Perception Skew

The argument is that the apparent numbers may seem a lot more skewed that they actually are. That needs to be the first thing out before the other points.

Social focused startups by their very nature are good at generating “buzz”. It’s hard to ignore them in the media/internet. Media also loves them back, there is just a much wider audience that such ventures and efforts will appeal to. These companies also tend to be started by a younger demographic. I do not mean that they are better faces for media, just that they tend to be first time entrepreneurs and hence want to own the world, they want to be everywhere (the segmentation will certainly kick in at some stage when they begin streamlining). All these factors contribute to them being perceived as the “next cool thing”, refueling and inspiring the social/B2C startup trend.

B2B starups on the other hand are often related to problems that are conventionally tied to the things that are a little more serious. Average person is likely to know Mark Zuckerberg but unlikely to know someone like Martin Casado. It is hence not difficult to see why media buzz on “cool” social startups are significantly more likely to be “trending”. The astute observations made in the article at Business Insider (quoted above) are not very apparent to someone not explicitly looking for this data.

Source Set Skew

Human nature is a very interesting subject to study; humans are very good at emulating and continuously improving. Our machinery and design continue to get inspired by our observable universe. Why should industry trends be any different? To a budding entrepreneur Facebook is significantly easier to understand conceptually than say, Nicira (quoting the companies of Zuckerberg and Casado above). The set of budding entrepreneurs who can understand social (and hence see gaps in the exponentially evolving field) is much larger than set of people who are looking at disrupting some business problem.

Also the amount of technical expertise required to start businesses has also gone down (I said “start” not “scale”), hence it may not necessarily be true that the set of B2B companies is going down as much as its the set of the social entrepreneurs is growing rather disproportionately (and being far more permissive).

Age (experience) Skew

Starting a company is much cheaper now than it has ever been. It is now within reach of young , free-thinking bravehearts. The flip side is that they have far fewer years of “vertical” experience (not just professionally, academically as well, Ph.D. does take quite a few years to pursue). One don’t often see gaps in practices, one do not experience personally. Consequently, the problems they want to solve are less likely to be B2B and far more likely to be social and mobile (in both of which they have been “baptized”, in school/college).

Vinod Khosla advocates young entrepreneurs, almost exclusively (http://www.businessinsider.com/vinod-khosla-young-entrepreneurs-2012-9). There are several ways to interpret it, but since I am 31 and can do nothing about it, I like to believe he only really means this about the verticals I do not care for :-)

Truth may hence have more to do with “social” being a low threshold trend, than to do with the entrepreneur community missing an opportunity.


3 thoughts on “Why aren’t there more enterprise startups?

  1. There are many startups in B2B, Highly Technical Startups, but they dont make buzz since they don’t look for investors. Having a B2B startup really does not require a investor to generate revenue (this is purely my opinion) but to scale it you need investors, but then you are too successful to be a buzz word? how many of us knew about Blackstone investing in CMS in 2008? B2B is a fantastic space since you really don’t have to depend on others, you can make money as soon as your product is done.

  2. Nice article Jitu. Mr. Khosla seems to be generalizing for startups and entrepreneurs in US :) Startup and entrepreneurial scene in India is quite in its infancy.

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