07 Jul Vancouver tech startups joining enterprise market ‘gold rush’
Content provided by Business In Vancouver
More companies shifting from consumer-driven apps to higher-profit B2B platforms
Debating whether tech startups should focus on consumer rather than enterprise markets is similar to how people think airplanes are more dangerous than cars, according to Clayton Weir.
Statistics don’t back up the notion air travel is riskier, but “it’s just so much more [dramatic] when airplanes crash,” said the BC Technology Industry Association’s (BCTIA) senior analyst for IT and digital media.
“People are more aware of consumer-facing technology. You have no reason to know about these enterprise-focused companies. It doesn’t relate to your life, and it’s not as exciting as Facebook.”
But the enterprise market is the Vancouver tech community’s bread and butter.
Weir said 80% to 90% of startups participating in the BCTIA’s Innovation Hub accelerator program have some sort of business-to-business (B2B) application.
“If you look at the DNA of Vancouver, outside of some of the gaming and digital media stuff where we’ve been really successful, there is not a ton of consumer-facing-type tech companies,” Weir said, adding that even high-profile social media management provider Hootsuite generates its revenue from B2B applications.
And entrepreneurs are catching on.
A February VisionMobile study determined that the number of developers worldwide focused on enterprise markets rose to 20% in 2015’s first quarter from 16% in 2014’s third quarter.
The report found the “gold rush” of enthusiasm for companies getting into the enterprise market makes business sense: 43% of enterprise app developers generate more than US$10,000 in monthly revenue compared with 19% of consumer app developers.
“It’s very hard to convince consumers to part with their cash for software and digital services,” the VisionMobile report said. “We can see this reflected in the revenues of developers who target enterprises versus those who target consumers.”
Vancouver-based startup Control, which offers an application allowing merchants to monitor payments in real time, launched a year ago and has since raised $1.5 million in seed funding.
CEO Kathryn Loewen said part of the reason the enterprise market has been growing so rapidly is that B2B customers have realized it’s not worth investing $100,000 in resources when solutions cost $30 a month.
“We’re appealing to a less price-sensitive market,” she said. “We’re appealing to their sensibilities around not building all these services internally and looking to external providers.”
Meanwhile, even Stewart Butterfield – the co-founder of Flickr, one of the few notable consumer-facing tech companies to emerge from Vancouver – has moved on to the B2B market, where pastures appear to be greener.
The VisionMobile report noted that Slack – a business-messaging app CEO Butterfield helped develop – boasts about 500,000 users compared with the consumer-driven WhatsApp’s 500 million users.
Facebook (Nasdaq:FB) bought WhatsApp in 2014 for US$22 billion; Slack’s valuation as of April 2015 sits at US$2.8 billion.
Slack might have only 0.1% of WhatsApp’s users but it has managed to convert that into 12% of WhatsApp’s value.
“This is common – businesses are very willing to pay for software that helps them be productive and make money,” the VisionMobile report said.
But in Vancouver, Weir said it simply comes down to how the tech culture has developed.
“In Seattle, a lot of it is consumer-facing,” he said, noting giants like Amazon (Nasdaq:AMZN) and parts of Microsoft (Nasdaq:MSFT) are directly oriented toward that market.
“We just don’t have the anchors in that space to inspire more entrepreneurship in that space.”
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