Friday, November 30, 2012

Here’s how to build a red hot business-to-business startup

Things have become a lot more interesting now for B2B entrepreneurs. With the consumerization trend gaining speed, SaaS and cloud B2B companies look more like consumer startups: They’re exciting, customer-focused — and for the victors, translates into big money. As a result, investors are flocking to B2B-focused startups capable of disrupting the IT landscape, attracted by increasingly large IPOs and buyouts (Yammer, for example, which was recently acquired for over $1 billion by Microsoft, or Workday, with a current market cap of $8 billion).

However, despite the similarities, B2B-oriented startups have to contend with challenges that consumer-focused startups just don’t face. These include:

  •     Building products with the security, scalability and performance that businesses require.
  •     Facing high recruiting and retention costs for engineers and sales people.
  •     Convincing customers their products or services will enable them to save more while gaining a competitive edge.
  •     Re-assuring business customers that the startup will be around for the long haul.

Here are my three fundamental tips for startups, which are based on the lessons I have learned during my career.
Spend big on engineers

Long before a company can even dream of customers (and revenue), it has to spend — and spend big. It needs to hire an army of highly expert developers who understand business needs and are proficient at building modern, B2B-hardened platforms and apps that meet stringent corporate demands. This level of skill and experience isn’t easy to find, and those who possess these know their worth.

Competition to hire these engineers capable of building scalable apps and platforms is especially fierce in the San Francisco Bay area, where startups go head-to-head against behemoths like Twitter, Google and Facebook. Because of that local competition, a number of  companies prefer to recruit from other technology centers such as Austin, Portland, Ore., and Boulder, Colo., which offer substantial talent pools of  talented engineers.

Personally, I prefer to recruit from my home country, the Czech Republic, which boasts a good combination of technical talent and business acumen.

And one more point: It’s been my experience that the best way to entice talented developers is with the promise of incredibly interesting projects in a successful company. After all, great engineers — like great artists — want their work to be seen.

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