[Posted on November 9, 2007 - 11:10 AM]
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DiggVenture capitalists appearing on a panel at the Rice Alliance Information Technology and Web 2.0 conference in Houston on Thursday urged entrepreneurs to make a fundamental choice for their startups: whether to focus on consumers or enterprise customers. The reasoning is that small businesses lack the financial and managerial resources to target two different markets.
Business customers are lining up to test the company's software platform for aggregating and distributing podcasts and video, which they want to use to distribute information to employees. However, as CEO Alexander Clark put it in his presentation at the Rice show, valuing Podcast Ready based on 2,000 corporate salespeople generating $10 to $20 per user isn't nearly as exciting as the idea of 1 million consumers signing up for the service.Another startup appearing at the conference, Whiteboard Labs LLC, that has built a video messaging system it believes could serve as the next generation of e-mail, also faces the "problem" of having a willing corporate client for its product, which is called MotionNotes (see how it works here). The company hopes to attract 700 corporate customers in the travel sector, along with 10 million consumer users, and forecasts $12 million in sales in three years. That means the company must focus on business clients, while also courting consumers and the ad dollars that follow them.
It's an interesting problem for executives, especially those who are soliciting venture capital. A startup seeking slower, bootstrapped growth can afford to build a brand -- and a revenue stream -- with enterprise customers before going after the masses. But VCs can't afford to be patient. That often results in young companies chasing the big, but riskier, return from consumer sales without the safety net of actual paying customers. With their risk (more or less) safely dispersed across their portfolios, venture investors can afford to take such risks in hopes of knocking a given investment out of the park. But can entrepreneurs? - Stacey Higginbotham
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