Want To Build A Startup? Entrepreneurs & App Developers Are Going B2B

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You may have heard someone say, or said yourself: “I want to build a business, what should I focus on?” Obviously, the possible answers are nearly infinite. Steve Poland wrote a great post in December that addresses this question directly. I would agree with Steve’s main piece of advice for founders and entrepreneurs: Focus on problems. Start with a space you know, and ask yourself what’s broken — big or small.

Or, here’s an alternative approach, which applies to both app developers and founders. Not only should you do market analysis to see what is already working (and not working), but find out which spaces/categories are already saturated. It’s not that high frequency alone should be a deterrent, but just because one category is popular, it doesn’t necessarily follow that you can’t make money (or more importantly, build something disruptive) in another.

Consider 148Apps’ breakdown on the number of iOS apps in the App Store by category. As you can see, Games, Books, and Entertainment apps dominate in terms of sheer numbers. That’s because, where developers perceive demand, they supply. And because it’s easy. Believe me, there’s no shortage of meaningless games and Angry Birds rip-offs out there in app stores. “Hey, people love games, so I guess I’ll build a Fruit Ninja for ice cream fanatics”. This is the type of thinking from app developers that obviously goes nowhere.

Of course, this graph shows the collective data since the app store’s inception, and, surprisingly I know, but there have been some changes in what’s popular since 2008. So, consider this: Earlier this month, we covered BetaBait, a startup, which, simply put, connects startups with the eager, professional beta testers they need to get their products/apps/startups in fighting shape. Beta testers are extremely important for app developers and early-stage founders to use as sounding boards and to help them work out the kinks and bugs in the user experience — and later to promote their wares.

BetaBait Co-founder Cody Barbierri checked in recently to share some of the data that they’ve collected on the apps/startups that are coming to them for beta testers. Now, before anyone jumps down my throat, admittedly the sample size here is somewhat small — 255 ideas have been submitted to BetaBait since launch. But I think it provides a few surprises, as well as some important examples of what entrepreneurs and app developers are focusing on right now, which are intriguing given 148Apps’ statistics.

Perhaps somewhat surprisingly, social networking applications are the most submitted type to BetaBait — not so for the App Store. This is interesting because most consumers are saying that they don’t want any more social networks, even if clearly it’s impossible to get away from the impending “Share-pocalypse.” (Of course, the very definition of a social network is changing, Myspace is flailing, and Facebook is making people nervous, so the demand may very well shift.)

Next, like the App Store at large, Lifestyle and Entertainment are at the top. But, what’s most interesting is the second most popular category — Business apps — which Barbierri said are also receiving the most clicks from beta testers. Not only that, but the top 15 apps (by clicks) are nearly all business-focused, ranging from app builders to meeting organizers.

Secondly, Games, Books and Entertainment apps are at the bottom of BetaBait’s list. Of course, this could mean that app developers in these categories already have it figured out and don’t need beta testers, but Barbierri says he thinks it might be indicative of the fact that newer startups in 2012 are trying to stay away from the popular apps already in the market, thanks to a growing sense of saturation. I pray that it’s true.

So, what about this high incidence of Business apps? Why should it intrigue? Well, for one, Peter Thiel is a smart guy, and one of his many alternative approaches to investing has been to look for companies not that are big among consumers, but that are big among small businesses. A ha!

While Thiel says that small businesses are both hard to reach and traditionally resistant to change, I think that SMBs and startups happen to be a pretty open-minded customer base, as long as your startup or app doesn’t charge an armload. It’s also often overlooked that B2B services don’t need to have quite as much polish — or the same level of flawless design that a consumer-facing app or business demands. (BetaBait is a great example.) As long as you can prove that you have a high value proposition — are going to save them money or make their life significantly easier — it doesn’t matter quite as much if the paint hasn’t completely dried. (Perhaps because SMBs operate on different value systems and are more rational in their decision making.)

I think this is why companies like Salesforce.com have been so successful. Building a consumer web business, like Pinterest, Twitter, or Spotify is difficult. It takes years, and these companies are few and far between. Obviously, it’s difficult to resist the urge to build for the consumer web, what with the funding available, and the promise of millions of users, but the B2B and B2B2C spaces, I would argue, don’t always have higher barriers to entry, and their business models tend to be a bit easier to define.

With an idea that helps startups save time or money (which they likely don’t have much of), your startup has a good shot. There are lots of B2B companies out there that don’t have millions of users and may not be sexy at first glance, but they have solid, sustainable customer bases, and enough revenue to continue building. And I think BetaBait’s metrics may just indicate that app developers and founders are getting the message. I know it’s one that professors in business schools are selling.

What do you think?

Excerpt image from Printmediacentr.com