The Battle of B2B and B2C Startups

Figuring out what potential investors are looking for from startups in emerging markets such as Alberta can be worlds apart from what they’re expecting in more established hotspots such as Silicon Valley, Stockholm or even Toronto.

For example, In July Silicon Valley-based software company Teknol announced plans to move its engineering headquarters to YYC, a $12.5-million investment which is predicted to create 125 jobs over the next three years, with the company’s CEO hailing Cowtown for the “positive buzz” of its tech sector.

This year’s annual Tech Talent report also found Calgary to be Canada’s second largest tech hub (trailing behind Vancouver) with job growth in the sector increasing by a massive 61 per-cent.

Most companies, however, can be separated into two different groups with unique factors driving their investability from a VC perspective: 

Business to Business (B2B)

B2B simply means the business will focus on selling its product, service, or technology to other businesses. A company dedicating itself to this strategy needs to make sure potential investors understand why they have chosen to target other businesses (as compared to individual consumers) and the benefits of doing so.

A B2B sales strategy allows for larger purchase orders or broad installations of technology, as other businesses usually have significant buying power (much more than the average consumer), as well as a willingness to sign long-term contracts.

When preparing to pitch a B2B business to potential investors, founders should make sure to highlight the advantages of targeting other businesses and clearly explain why this is the strategy that provides the largest avenue for further growth for their company.

Business to Consumer (B2C)

Where B2B’s target other businesses, B2C’s target the retail consumer. By going direct to consumer, companies are targeting an audience with much lower buying power when compared to other businesses. However, the size of the potential market is usually much larger.

Typically, B2C businesses benefit from higher gross margins, as well as a much wider reach in terms of who they can market their product/technology to.

As an entrepreneur begins to think about presenting their B2C business to venture capitalists they should remember to articulate the breadth of the market, high margins and (again) why specifically this is the best decision for their company.

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