Photo: Tse Chuen Tsai via Flickr
For all the talk of rising startup valuations and a potential bubble in Silicon Valley, that hasn’t affected business-to-business startups nearly as much as consumer startups, reports the WSJ.Part of this is surely some short-sightedness from angel investors. These days it’s cool to be a business angel, so everyone is doing it, and consumer startups are sexier and easy to grasp, so they get more investment from greener angels.
But part of this is also part of fundamental trends, namely the fact that thanks to social networks and cloud computing, it is much, much faster and easier to get traction with a good consumer web product than with a good business product.
For all the talk about the “consumerization of IT” and small businesses “getting” the internet, most business products still do involve long and expensive sales cycles. These two trends are real — witness sensations like Yammer and Groupon — but they’re certainly not happening overnight.
It doesn’t mean that there isn’t as much opportunity in B2B as in B2C, but that’s it’s harder to prove in the early stages, which affects fundraising.
At the end of the day, the best way to get early stage funding is to show strong traction out of the gate. If you have a good product, that’s much easier for a consumer startup to do than for a business startup.
It’s only slightly a sign of a bubble; more importantly, it’s a big arbitrage opportunity for smart investors.
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