4 ms·

One characteristic is that they all provide enterprise software. The end-consumer market is very difficult since internet-users are used to get everything for f

One characteristic is that they all provide enterprise software. The end-consumer market is very difficult since internet-users are used to get everything for free.

RyanGWU82 19y ago
The term "enterprise software" usually refers to software products sold to very large companies, or at least "small and medium businesses" which have 200-500 employees. David's examples were geared more toward the "Fortune 5,000,000" -- the much larger market of small businesses with a handful of employees. The economics of the "Fortune 5,000,000" are very different than true enterprise software, as it avoids employing a direct sales force. Obviously 37signals wouldn't turn away a team from General Motors who wanted to use Basecamp, but they don't actively market their products to large companies. You're right about the difficulty of charging for online products in the consumer market. DHH said that they were having trouble getting customers for their personal organization product, Backpack, even at $5 a month. After they repositioned Backpack to be used by small businesses, they were able to increase the price and sales still grew tremendously.
- mattjung 19y ago
  You are right. I used the term "enterprise software" only as a contrast to "consumer software". The "Fortune 5,000,000" is probably the best target market for a startup. Why? Targeting large enterprises (what the company I work for does) is also an extremely difficult market, but for other reasons than the consumer market. Selling to large enterprises requires professionel and experienced sales people with very good industrie contacts. You also might run into the "small company problem", i.e. you don't sell because you look too small and you don't have enough customer references. Not much fun!
  - davidw 19y ago
    Reaching a bunch of relatively small, and perhaps not well-connected companies does, of course, present some obstacles of its own.
- tptacek 19y ago
  We sell to large enterprises almost exclusively. It's "different" than selling to consumers, but not "harder". Longer sales cycle, higher average deal size.
mechanical_fish 19y ago
The end-consumer market is very difficult since internet-users are used to get everything for free. ...except for Mac users, who support a healthy little industry made up of one- and two-person software companies. In other words, consumers don't spend money for software, except for the ones who do.
- davidw 19y ago
  So - for the analysis part of the question: why? What makes them different?
  - run4yourlives 19y ago
    I would say what makes them different is the thing that makes them different enough to pay premium for a laptop/computer in the first place: These people place a value on quality. Add to that that I'd venture 80% of the windows users have never "bought" software (except games). Windows is either pirated or comes with the computer... office is acquired from work, some other programs are freeware/never paid for shareware.
    - SwellJoe 19y ago
      It's also a different culture. No one could possibly claim that vim or emacs aren't "quality" software. UNIX/Linux users also place value on quality, but the form of value is just different--historically the value you pay for something like vim or emacs is you send patches, you add syntax support for your favorite new language, you file coherent bug reports, etc. It's not in dollars, but it has a price. So, there's this somewhat smug notion that Mac users are arbiters of quality and taste and the only honest computer users in existence...but there are different means of valuing software than money. And, saying that Windows users are universally pirates is simply disingenuous. Paint Shop Pro made millions as a small software development shop, and then sold to Corel for millions and became part of a big development shop. This wouldn't have been possible if Windows users never paid for software from small shops. In fact, I suspect one could find more Windows-based small development shops making a good living than similar Mac-based shops just based on the size of the respective markets. (I'd never want to do it...but it's a viable model.) I'm just saying, "don't be a smug Mac weenie". Many people are making a good living building and selling software on many different platforms.

One characteristic is that they all provide enterprise software. The end-consumer market is very difficult since internet-users are used to get everything for free.

RyanGWU82 19y ago

The term "enterprise software" usually refers to software products sold to very large companies, or at least "small and medium businesses" which have 200-500 employees. David's examples were geared more toward the "Fortune 5,000,000" -- the much larger market of small businesses with a handful of employees. The economics of the "Fortune 5,000,000" are very different than true enterprise software, as it avoids employing a direct sales force. Obviously 37signals wouldn't turn away a team from General Motors who wanted to use Basecamp, but they don't actively market their products to large companies. You're right about the difficulty of charging for online products in the consumer market. DHH said that they were having trouble getting customers for their personal organization product, Backpack, even at $5 a month. After they repositioned Backpack to be used by small businesses, they were able to increase the price and sales still grew tremendously.

mattjung 19y ago
You are right. I used the term "enterprise software" only as a contrast to "consumer software". The "Fortune 5,000,000" is probably the best target market for a startup. Why? Targeting large enterprises (what the company I work for does) is also an extremely difficult market, but for other reasons than the consumer market. Selling to large enterprises requires professionel and experienced sales people with very good industrie contacts. You also might run into the "small company problem", i.e. you don't sell because you look too small and you don't have enough customer references. Not much fun!
- davidw 19y ago
  Reaching a bunch of relatively small, and perhaps not well-connected companies does, of course, present some obstacles of its own.
tptacek 19y ago
We sell to large enterprises almost exclusively. It's "different" than selling to consumers, but not "harder". Longer sales cycle, higher average deal size.

mechanical_fish 19y ago

The end-consumer market is very difficult since internet-users are used to get everything for free. ...except for Mac users, who support a healthy little industry made up of one- and two-person software companies. In other words, consumers don't spend money for software, except for the ones who do.

davidw 19y ago
So - for the analysis part of the question: why? What makes them different?
- run4yourlives 19y ago
  I would say what makes them different is the thing that makes them different enough to pay premium for a laptop/computer in the first place: These people place a value on quality. Add to that that I'd venture 80% of the windows users have never "bought" software (except games). Windows is either pirated or comes with the computer... office is acquired from work, some other programs are freeware/never paid for shareware.
  - SwellJoe 19y ago
    It's also a different culture. No one could possibly claim that vim or emacs aren't "quality" software. UNIX/Linux users also place value on quality, but the form of value is just different--historically the value you pay for something like vim or emacs is you send patches, you add syntax support for your favorite new language, you file coherent bug reports, etc. It's not in dollars, but it has a price. So, there's this somewhat smug notion that Mac users are arbiters of quality and taste and the only honest computer users in existence...but there are different means of valuing software than money. And, saying that Windows users are universally pirates is simply disingenuous. Paint Shop Pro made millions as a small software development shop, and then sold to Corel for millions and became part of a big development shop. This wouldn't have been possible if Windows users never paid for software from small shops. In fact, I suspect one could find more Windows-based small development shops making a good living than similar Mac-based shops just based on the size of the respective markets. (I'd never want to do it...but it's a viable model.) I'm just saying, "don't be a smug Mac weenie". Many people are making a good living building and selling software on many different platforms.