10 ms·

Why are you still building consumer apps? Enterprise pays 4x more

146 points by MatosKap 13y ago

PaulHoule 13y ago
Because the selling costs to the enterprise are 16x!
- tannerc 13y ago
  Not always. Look at the app marketplace, for example. Businesses are in dire need of better quality apps for managing employees, HR, payroll, networking, etc. And to get your app into their hands is as simple as making a unique app.
  - ams6110 13y ago
    Businesses--well, big businesses anyway; sole proprietors and small partnerships are more like consumers or will just use whatever their accountant recommends i.e. Quickbooks--are not going to just buy an app for HR or Payroll. They will have a committee and a long checklist of requirements and you'll need to go on-site probably several times to make sales presentations and give demos to various constituencies.
    - tannerc 13y ago
      That's absolutely true. Which means the options for getting a product into their hands would be either to work with them, wait for them to change, or create something they don't know how to categorize and hope it captures the interest of their executives/board?
  - calinet6 13y ago
    > And to get your app into their hands is as simple as making a unique app. No, it isn't. It's about marketing to them, selling to the decision-maker, working through existing competition, wining and dining, proving your value with an on-site sales team, proving your integration... and most of all, proving beyond a shadow of a doubt that you will not fail or disappear in the next 5 years. The problem with getting into Enterprise is not product-related. You can imagine all kinds of better products than what exists today. It's easy to build that better product that solves the same problems but prettier and with better UX. And make a great demo for it. Sure. I've done that. The hard part is proving that your startup will be around in 5, 10, 15 years and won't leave them high and dry, proving that you will have a support team serving their every need, and ensuring you have the ability to implement and customize to the specific company's process and requirements (because every large company is so different and with such ingrained processes that it's not them that will change, but you. Or else.) It seems easy, but it isn't. This isn't even a problem of the "build it and they will come" fallacy—it's on an entirely different scale. And you'd have to be ready for all of that if you want to enter into enterprise.
    - tannerc 13y ago
      To a degree, I completely agree with you. But then, on the other hand, we see that making something unique does often propel the "build it and they will come" mentality. Because it works. What marketing have you seen from Snapchat (not directly related to the enterprise discussion though)? I'm reminded of the words of the great Steve Martin: "Be so good they can't ignore you." It this always the case? Absolutely not, which is where I do agree with you. But when an executive walks into a quarterly meeting and asks: "I keep hearing about xyz app/tool, are we using that?" you've won a huge part of the battle. Possibly with no marketing. Make something unique, something a good majority of people will want to use and talk about, and your marketing/selling is half-way done for you.
      - calinet6 13y ago
        Statistically speaking, that's not an average experience. It's an outlier. Don't count on it.
tannerc 13y ago
Well, the word is out. I have a friend, we'll call him Jon. Jon has been making apps for the past three years. He never learned to code, or design, or market, but he somehow managed to pickup xcode and started making fun apps for his nieces and nephews. Eventually a day came when his sales skyrocketed, roughly $5,000 in a single day (a figure I made up, but he has stated before is realistic for him). Seemingly by chance. As Jon dug around a little he realized that a school -- who regularly provide iPads to students -- had bought his app in bulk. Now, years later, he specializes in developing apps not for children or parents, but explicitly for schools. That's where the money is right now, he tells him. You can make a lot of decent money selling quality apps or tools to consumers, but if you want to make boatloads you have to think in terms of those who would buy what you make via bulk purchases; from organizations large enough who need the thing you've made. Isn't this how 37signals found their way?
- beachstartup 13y ago
  > He never learned to code, or design, or market sounds to me like he was never taught how to code, design or market. he sure did learn it though.
  - nomedeplume 13y ago
    Thanks for the value adding clarification, genius.
    - skeoh 13y ago
      That was uncalled for.
      - nomedeplume 13y ago
        I disagree.
  - tannerc 13y ago
    Precisely. I could have thought the wording through a bit better in my reply. Thank you!
bradleyland 13y ago
We're in the enterprise space. While I'm constantly amazed at how much we're able to charge for our product, I'm equally amazed at the reasons deals go sideways. In the consumer space, you're working with averages over large quantities. The number of potential buyers is huge, so you need to build a product that, on-average, will result in more sales than non-sales when the customer reaches the point of making a decision. This decision point might happen tens of thousands of times -- sometimes millions -- a year for consumer products. In the enterprise world, the number of sales opportunities are smaller by orders of magnitude. Every sale becomes a huge gamble, and as a result you tend to throw an immense amount of resources at every sale. This is also one of the primary reasons enterprise software ends up so bloated and unmanageable. On the front-end, the decision making process for purchasing enterprise software is driven by checklists and "due diligence" procedures that are horrible at accounting for software quality. You're more likely to win an enterprise contract by saying "sure, we'll add that feature" than you are carefully explaining how maintaining product focus results in a more usable product. This makes enterprise software a high-stakes game. A sale results in windfall revenue, but a non-sale can severely strain cash-flows. At the end of the day, you're still trying to beat the averages, but you're working with a much smaller number of opportunities, so wins and losses move the needle in a big way. I think this is a significant incentive for small shops and independent devs to avoid the enterprise space. You need a larger bank roll to attack the enterprise market. We bootstrapped our company, and we hit several gut checks along the way. The days of writing large checks to my company are not quickly forgotten.
- chrislomax 13y ago
  I find this applies in developing custom apps for larger companies. When we were smaller, we dealt with smaller companies. Most of the work was brochure sites. Although these bring in around 4-5x less than larger companies I found that it was easier to secure the deal and equally please the client. You can't build the same brochure site for a corporate and charge 4-5x more, it just doesn't work. Now we are larger we deal with larger companies. The apps we build are larger and bring in greater deals. The chance of securing the deal though is a lot more than 4-5x harder. I also find the client harder to deal with. You end up dealing with people who are further removed from the people really making the decisions. You end up developing to the people you are talking to then you end up reworking projects when they actually show it to the people making the decisions. All this process ends up costing us more but we are slowly refining processes for this. I suppose it's a learning curve in dealing with larger companies but I find each client has their own set of challenges. We now service both types of clients. The quick and easy brochure sites for quick turnover and high profit and the higher end client who pays more but the profit is always less than if we did (x) amount of smaller sites.
6cxs2hd6 13y ago
It seems like there are a variety of challenges: - Selling costs are high. - Sales cycles can be long. - Harder to MVP and iterate. - Domain expertise required. I think the last one is the biggest challenge. To be successful with any product you need to understand the customer. Usually that means, you are the customer. With a consumer app, it's easier for you to be an example of the customer. With an enterprise app, you need to know that sort of enterprise -- its ostensible and implicit product needs, but also the decision-making processes and culture and so on. As a result, you probably need to be an ex employee of that sort of company. Who became ex only after having been there long enough to understand the business and to make enough contacts at that company and its industry. And who became ex on sufficiently good parting terms. So I would guess that's the "funnel" narrowing who can pull this off?
- dangerboysteve 13y ago
  I was going to mention the exact same points. The article was a total waste of time and flimsy on any real content. How does a 6 month sales cycle sound? What about expensive skilled sales reps?
- deleted 13y ago
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- rahoulb 13y ago
  It was the sales cycle that killed my company off (many years ago). When three or four deals, with a 6 month lead time turned into an 18 month lead time, as things got pushed into next year, it meant we simply ran out of cash. And with such a long and intensive sales cycle, we couldn't afford to have a large number of fallback leads at the same time.
- mattzito 13y ago
  Domain expertise is definitely a challenge, but it depends very much on the type of application you're trying to build. Building something to help manage clinical trials of drugs? Heck, you better have a ton of specialized expertise in the drug research vertical in one way or another. Building a generalized platform that allows you to store legal records or other sensitive data in a secure and standardized fashion? Well, you might want to build custom sales plays based on individual verticals, but then you just hire a domain expert consultant to put the words in the right order and structure for that vertical. One of the other benefits of the enterprise is that if you get the right enterprise, they will work with you to build your application. You have to find the right champion at the customer, someone with enough balls to take a risk, but basically you work out a deal: - they will give you money for a product that barely works/barely exists today - You will become their roadmap bitch for 12 months - They will pay a comparatively cheap price for the software There's a ton of risk associated there too - enterprises sometimes make irrational decisions that you're now bound to abide by, and it can make your product more of something custom as opposed to a general purpose application you want to sell. However, it is a way to get an MVP out the door and get some money.
g8oz 13y ago
Because consumer apps bedazzle VCs who in turn bedazzle Wall Street which uses them to bedazzle institutional investors who need unrealistic growth projections to pay for unsustainable pension promises. The money being sloshed your way for obviousbullshit.io is a Hail Mary pass by a society facing a demographic tsunami.
jmathai 13y ago
We recently made a switch from the consumer space to the b2b space. There are two things about the change which are very refreshing. First, we're talking with people who want to pay us money and the amount doesn't even really matter. We're priced 10-100x over what we were charging consumers. Second, the support overhead of supporting a crapton of free uses has dwindled and we're now able to provide significantly better support to paying business customers. We do phone support even. All I've ever done in the past have been consumer startups. I don't think I'd ever do one again. Edit: It's no silver bullet by any means. But it just feels much saner than the homerun derby which is the consumer Internet.
- bmelton 13y ago
  Are you referring to B2B, or Enterprise? I've blown my proverbial load on Enterprise, and while I appreciate the money to be made, I've found that my psyche is more suited to 100 small wins than one win worth 100x the others. In short, enterprise isn't for me, at least, not if I'm involved in the sales process. The sheer arbitrary-ness of it was so mentally exhausting that it affected my productivity. I can work on enterprise software, but if I'm in any way involved with the sales channel, it's a hardship. For me, the happy middle ground is vanilla B2B, e.g., the same general demographic that 37Signals sells to. You still have customers that want to pay you money, but while cost is a factor, it isn't usually the driving factor -- there's likely little difference between $25 a month and $125 a month, assuming you're solving a problem that isn't cost-centric, and you're saved from the mental turmoil of enterprise whale-hunting.
  - jmathai 13y ago
    B2B, really. We did have quite a few conversations with enterprise customers and the B2B conversations were so much better. We haven't ruled out enterprise but I hope and imagine that our sweet spot is B2B. As you said it has much of the benefits of consumers (little friction to get in the door) and enterprise (willing to pay).
wandernotlost 13y ago
Because I'm not solely motivated by money.
sosuke 13y ago
How do you get enterprise clients? I'd love to have some tips or direction because all I can find reliably are small fries.
- sbarre 13y ago
  It's about who you know more than how good you are.
  - csmuk 13y ago
    This. Certain disreputable companies in my sector are recruiting staff from competitors just for their contact list.
    - sbarre 13y ago
      I'm sure this happens in all industries and sectors.. The takeaway I feel here is that if you are considering working at an enterprise-focused company (or especially startup), try to get a feeling for how well connected the leadership is, because that will make or break a lot of deals.
      - csmuk 13y ago
        Not all industries and sectors although it's more common than not. I've done a bit in most industries. The most successful companies I've worked for have no contacts and sell directly. The most politics-filled and most likely to fail enterprise products have always been sold via the "old boys networks".
- deleted 13y ago
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- sdesol 13y ago
  If you don't have the budget like IBM, Microsoft, etc. to schmooze with those with purchasing power, you can do what Atlassian does, which is sell from the bottom up. The idea is to make the product cheap enough that individuals/departments will not have to go up the purchasing chain to pay for it. Hence their use any of our products for $10 for up to x number of users. If your product is able to solve a problem of theirs, you'll have evangelist within the company and they'll spread the word within the company. And eventually their product will reach somebody with purchasing power.
Aloha 13y ago
The market for consumer apps is several orders of magnitude larger however.
- greenyoda 13y ago
  In terms of number of customers, yes. In terms of money, enterprise software is a much bigger market. Oracle's revenues alone were $37 billion in 2013.
famousactress 13y ago
Sure. Lots of money to be made. The reason I got out of enterprise though is that the feedback loop is flawed. Your users are rarely your decision makers, large capital investments and stickiness that comes with adopting an organization-wide solution means the best product is less likely to win than the best sales force. I want to build the best products, so I chose to go find a company who's business model was better aligned with that value.
- swills 13y ago
  Good point about the feedback loop. My experience in the educational software industry was that it was the worst of both worlds: the broken feedback loop, but slower because of yearly cycles, plus they don't want to pay as much as enterprises.
booop 13y ago
In my experience SMBs are a much bigger cash cow than enterprises.
- wudf 13y ago
  Likewise. Their demands are practical and they retain their humanity in dealings... probably even moreso than mass market consumers.
  - sourc3 13y ago
    This is an area where I have tried and failed with my SmartPointment (online appointment scheduling). Are there any words of advice you can share in reaching out to SMB market?
- rokhayakebe 13y ago
  Friends and Family.
- fbliss 13y ago
  +1 this. SMBs all the way. It's a good balance between too small and too large. I always saw it as better to be standing on 100 legs rather than 5. Less instability when you lose one.
krapp 13y ago
It would be a rung up the ladder from "wordpress plugin builder and PHP monkey for hire"
sputknick 13y ago
Everyone is making good points about why enterprise is harder. Another one is barrier to entry. You need to have relationships in a given space in order to get in.
- vidarh 13y ago
  Relationships helps, but you can make good money even by cold-calling.
saturdayplace 13y ago
From Joel Spolksky's "Camels and Rubber Duckies" (which is a great read in its own right): >The joke of it is, big companies protect themselves so well against the risk of buying something expensive that they actually drive up the cost of the expensive stuff, from $1000 to $75000, which mostly goes towards the cost of jumping all the hurdles that they set up to insure that no purchase can possibly go wrong. Personally, I'm just not interested in playing that game. *Edit: Yet. Not interested in playing that game yet.
agibsonccc 13y ago
B2B is an interesting animal. I find I can only do enterprise sales. I frankly suck at consumer. I love having a sales pitch being as simple as: my product saves you this much money and time or gets you this much profit. It's a gigantic numbers game. Aside from that, get an internal project champion to gather all the necessary stakeholders necessary to make a sale. (Yes I just threw out a lot of buzzwords there, sue me) Those are usually how you speak to bigger customers though. If you want, internalize the lingo as something you'd think of it as( a guy on the inside who becomes my sales guy!) . This may take a while, so budget your cash flow accordingly. I've found if your product offering is compelling enough you 'll get calls returned. Many people just try to throw a bunch of buzz words out there to random people working at a place and think that's sales. Talk to the right people who would want to use your product and build up internal evangelists. The rest will play out in the form of meetings and other random exchanges. Typical SaaS businesses also seem to think that you can just put up a pricing page and expect that to close a sale. There will be contracts going back and forth, custom pricing negotiations, SLAs being signed, among other things. I typically attribute the sales cycle being similar to freelancing. Just replace that with a product.
pg 13y ago
Enterprise customers pay a lot once you get them paying, but selling to them is brutally hard.
- apaprocki 13y ago
  Cold selling a large org is brutally hard. Usually what winds up happening is that internally in the org, there are people who follow what options are available in a particular space and are in a position to champion them. Companies need to find these people and then help these people make the convincing argument. If users internal to an org want to use product X, they will do much of the hard part of selling for you. You can find these people all over the place -- meetups, confs, blogs, etc.
  - tptacek 13y ago
    That's true, but what you can't really do is target those people passively. You need hunter-gatherers to find them, corral them, and set up a collaborative sales process with them. Graham calls this "brutally hard", but what it really is is expensive: it requires direct sales teams, which in turn requires a founding/managing team that knows how to (a) hire and (b) manage direct sales teams. Those tasks, tasks (a) and (b), are probably what's really brutally hard about enterprise sales. When an inexperienced founder/manager hires a direct sales team, the sales team sets to work on selling the founder/manager instead of the customer base. An alternate path to getting a beachhead in an enterprise market is consulting. It's much easier to sell services to bigcos than products. Delivering services to someone gets you ~60% of the way to being able to sell products to them. The other 40% you can do on your own. That's worked for us (to greater/lesser extent depending on the specific offering we're talking about). But "consulting" is toxic to the species of startup we talk about on HN.
    - napoleond 13y ago
      When an inexperienced founder/manager hires a direct sales team, the sales team sets to work on selling the founder/manager instead of the customer base. This made me spit out my coffee. I've never heard it expressed that way, and it's a hilarious image, but come to think of it I've observed that situation more than once. Can anyone recommend some resources for learning to manage direct sales teams?
jmount 13y ago
Your startup will never live long enough to survive the procurement process.
wellboy 13y ago
Because you can't be passionate about B2B apps. When we're reading about that to become an entrepreneur you can't be after the money, you have to do something you're passionate about, something you would die for. All this, passion, solving a problem to die for, disappears by doing B2B and you're only going for the money again. Of course there are exceptions, but that's the difference between B2B and B2C.
- msrpotus 13y ago
  Find an aspect that you are passionate about. There are a lot of niches, whether it's specific types of companies, specific problems, or whatever. It's like saying "you can't make money with consumer apps." The space is far too large to permit such blanket generalizations.
  - wellboy 13y ago
    I agree, you can't make blanket generalizations. However, there is just a stark difference that are few consumer apps that the founder ISN'T passionate about and there are few B2B apps that the founder IS passionate about.
- johnward 13y ago
  You don't have to be passionate at all to make money. Actually being passionate can blind you to the fact that a business idea sucks.
badman_ting 13y ago
Well - have you worked on enterprise software? It's not fun.
elorant 13y ago
In the enterprise market you have to talk to 15 different people inside a company before you can make a sale. And often you have to go out of your way to convince them trying to cover every little insecurity they have and learn to live with the anxiety of failing because of actors outside your influence. You also have to dine them and wine them and laugh with their stupid jokes and generally try to be as pleasing and understanding as possible. The hell with that. In the consumer market things are a bit more straightforward. You focus your energies on the product and marketing and that’s all there is.
jarjoura 13y ago
Working in the consumer space is not just an easier sell from a sales prospect, it's also easier to persuade talented people to join your company. Great engineers and designers want to show off their work to friends and get bonus points for working on cool stuff. Working on an enterprise application/system tends to be process heavy and requires lots of QA before shipping. It's driven not by the engineers or designers working on the product, but by requirements outside of their control. If you're someone who just wants to work on hard problems, then enterprise is a no brainer. Though the common theme I hear amongst startup folk is that they want to be part of the decision making process too. They aren't interested in being handed a list of requirements and just asked to make it work.
m3mnoch 13y ago
to put it succinctly and in gamer terms: would you rather have a giant sword that does 16 points of damage with a 10% chance to hit? or a dagger that does 4 points of damage, but with an 80% chance to hit? it's all about the dps, baby. note: that metaphor obviously assumes "A little over 12% of the money-making developers" means that it's 8x easier to actually make money in the consumer space. not that 80% of consumer plays make money. not to mention it's way, way easier to build a company with 10 people than 45.
mamcx 13y ago
Not only because is very hard to a sale, you also become a kind-of-employee where your work for them, and have less freedom. And the requeriments change all the time. And the development can (and WILL) take years. Plus, the corruption. Without "sales comissions" you can't even get the foot in. And you need to know people, and give them vines, go to a fancy restaurant, etc. IF exist a enterprise somewhere that just do this: I need x, you can do it, let's do it, then I love to get in. I'm not afraid of "boring" CRUDs apps and that stuff. But without the social connections and bribes,is a not start for me.
joeblau 13y ago
If you're just building products and your end goal is making money, then Enterprise is the way to go. While innovation comes from both spaces, I feel like the consumer market has a better more realistic feedback cycle. In enterprise, it's usually a small group of people making large decision deals which impact a large group. Salesforce is a great example of a company that's widely successfully and their products are critical in enterprise, but I've never personally heard an Enterprise consumer say "Oh I love the Salesforce software." By contrast, I've heard people rave about apps like Pinterest, Instagram and Snapchat even though none of them are profitable businesses. For me, If I wanted to build a money making product, I would go enterprise, but I choose consumer because I want to make a great product--very rarely do I find great enterprise products.
- UVB-76 13y ago
  > Salesforce is a great example of a company that's widely successfully and their products are critical in enterprise, but I've never personally heard an Enterprise consumer say "Oh I love the Salesforce software." By contrast, I've heard people rave about apps like Pinterest, Instagram and Snapchat even though none of them are profitable businesses. I think there is a certain inevitability to these things when you compare software that people are required to use as part of their job, and software they choose to use in their spare time. It strikes me as a vicious cycle. People don't enjoy using enterprise software, so developers don't enjoy making it. The incentives are all wrong, the purchasing decisions are made by the wrong people, for the wrong reasons, and it's near impossible to avoid locking yourself into a particular solution or provider. Welcome to enterprise software.
neakor 13y ago
A lot of us are in it not just for the money. Sure enterprise companies can pay many times more, but who cares? Literally, who cares? You will never be "cool" by building the next oracle. And that's why most of us don't want to be the next oracle.
jannes 13y ago
Really? How do you target enterprises? It seems impossible to me to know which companies are actually willing to pay decently for apps. All the enterprises that I've encountered generally didn't like to pay more than ~10k euros for an effort of roughly two months of work, which isn't that much if you factor in the expenses (mostly wages). It seems to me that the enterprise app development space is a low-margin business. At least over here in Germany. There seems to be quite a lot of competition in this space.
- freehunter 13y ago
  It depends on what kind of product you're selling. Certain budgets in enterprise are seemingly unlimited, generally when it comes to improving sales. If you're selling security products (outside of the compliance-driven market), you won't find much appetite for large margins. If you're selling CRM products (which are a dime a dozen), you won't find large margins. You have to find out where a business is willing to invest no matter what the price. I know it exists, unfortunately each industry (and each subset of each industry) is going to have a different area where price is no concern.
Bahamut 13y ago
With enterprise, you end up supporting IE8 :(
- alien3d 13y ago
  IE6 -> Welcome to incompibilty of ORACLE form.
- jpkeisala 13y ago
  Well we here in enterprise space are just starting to warm up to jQuery.
tn13 13y ago
Enterprise might pay 4x more even for a product that is crappier by 10x than a consumer product but enterprise is also 100x smaller than consumer in sheer number of opportunities to make a sale. Not to mention there are too many legalities around B2B sales some of which might threaten the very existence of your business.
tn13 13y ago
The enterprise product we built cost us close to $1m in building it and around 300k per year for maintenance. [The engineering costs]. Each sale was supposed to bring in around $50k for a two yearly contract. A dedicated team of 25 people could barely make 20 sales per year. Bringing around $1m in revenue. Remember the salaries of these 25 people ended up being the biggest cost component which made the entire business into a loss making proposition.
benoitg 13y ago
When discussing B2B sales on HN, I often see black and white arguments. Either you're in the B2C space, or you sell your products for north of 50K. This is IMHO a false dichotomy, there are lots and lots of opportunities between these extremes. I'm currently in a project at the intersection of software and shipping, it sells like hotcakes, we currently have a conversion rate (inbound prospects to signed clients) of more than 75%. This is far from easy to pull off, and there are a few points I'd like to make based on my current situation (we're pulling a gross margin of $500 to $5000 by client): * Selling pure software is hard. At the most basic level, we sell shipping rates and the accompanying software is the cherry on top (I'm saying this even tough I run the technical side of things). We're doing well because our target market understands the value proposition even better than we do, we manage to offer a free product and make money on it. * Co-founders matter. I couldn't even have had the idea on my own, much less the resources (contacts, skills, ...) to launch the business. I'm very fortunate to have met co-founders that are beasts on the business and shipping & logistics sides of things, we form an awesome triptych, which is a very delicate balance to have. * Everything takes much more time than you expect. You're at ease in the technical domain, this won't be much of a problem while developing your core product. But selling will take much of your time, it's is a time-consuming activity and you don't know anything about it. Plugging your product in your client's systems will take time, either because your client hasn't any in-house developer or they're less than half as skilled as you are. If you're a solo hacker selling pure software in the B2B space, you are, I believe, in for a rough, rough ride.
alien3d 13y ago
To me, it just break even. It might be large sump value but the process of approval payment and user acceptance are way to long. There aren't much diffirent 30 buck subscription accounting software and 30 million erp software. The way much diff is building for enterprise system take lot of time doing discussion and reporting rather then make software itself.

146 points by MatosKap 13y ago

PaulHoule 13y ago

Because the selling costs to the enterprise are 16x!

tannerc 13y ago
Not always. Look at the app marketplace, for example. Businesses are in dire need of better quality apps for managing employees, HR, payroll, networking, etc. And to get your app into their hands is as simple as making a unique app.
- ams6110 13y ago
  Businesses--well, big businesses anyway; sole proprietors and small partnerships are more like consumers or will just use whatever their accountant recommends i.e. Quickbooks--are not going to just buy an app for HR or Payroll. They will have a committee and a long checklist of requirements and you'll need to go on-site probably several times to make sales presentations and give demos to various constituencies.
  - tannerc 13y ago
    That's absolutely true. Which means the options for getting a product into their hands would be either to work with them, wait for them to change, or create something they don't know how to categorize and hope it captures the interest of their executives/board?
- calinet6 13y ago
  > And to get your app into their hands is as simple as making a unique app. No, it isn't. It's about marketing to them, selling to the decision-maker, working through existing competition, wining and dining, proving your value with an on-site sales team, proving your integration... and most of all, proving beyond a shadow of a doubt that you will not fail or disappear in the next 5 years. The problem with getting into Enterprise is not product-related. You can imagine all kinds of better products than what exists today. It's easy to build that better product that solves the same problems but prettier and with better UX. And make a great demo for it. Sure. I've done that. The hard part is proving that your startup will be around in 5, 10, 15 years and won't leave them high and dry, proving that you will have a support team serving their every need, and ensuring you have the ability to implement and customize to the specific company's process and requirements (because every large company is so different and with such ingrained processes that it's not them that will change, but you. Or else.) It seems easy, but it isn't. This isn't even a problem of the "build it and they will come" fallacy—it's on an entirely different scale. And you'd have to be ready for all of that if you want to enter into enterprise.
  - tannerc 13y ago
    To a degree, I completely agree with you. But then, on the other hand, we see that making something unique does often propel the "build it and they will come" mentality. Because it works. What marketing have you seen from Snapchat (not directly related to the enterprise discussion though)? I'm reminded of the words of the great Steve Martin: "Be so good they can't ignore you." It this always the case? Absolutely not, which is where I do agree with you. But when an executive walks into a quarterly meeting and asks: "I keep hearing about xyz app/tool, are we using that?" you've won a huge part of the battle. Possibly with no marketing. Make something unique, something a good majority of people will want to use and talk about, and your marketing/selling is half-way done for you.
    - calinet6 13y ago
      Statistically speaking, that's not an average experience. It's an outlier. Don't count on it.

tannerc 13y ago

Well, the word is out. I have a friend, we'll call him Jon. Jon has been making apps for the past three years. He never learned to code, or design, or market, but he somehow managed to pickup xcode and started making fun apps for his nieces and nephews. Eventually a day came when his sales skyrocketed, roughly $5,000 in a single day (a figure I made up, but he has stated before is realistic for him). Seemingly by chance. As Jon dug around a little he realized that a school -- who regularly provide iPads to students -- had bought his app in bulk. Now, years later, he specializes in developing apps not for children or parents, but explicitly for schools. That's where the money is right now, he tells him. You can make a lot of decent money selling quality apps or tools to consumers, but if you want to make boatloads you have to think in terms of those who would buy what you make via bulk purchases; from organizations large enough who need the thing you've made. Isn't this how 37signals found their way?

beachstartup 13y ago
> He never learned to code, or design, or market sounds to me like he was never taught how to code, design or market. he sure did learn it though.
- nomedeplume 13y ago
  Thanks for the value adding clarification, genius.
  - skeoh 13y ago
    That was uncalled for.
    - nomedeplume 13y ago
      I disagree.
- tannerc 13y ago
  Precisely. I could have thought the wording through a bit better in my reply. Thank you!

bradleyland 13y ago

We're in the enterprise space. While I'm constantly amazed at how much we're able to charge for our product, I'm equally amazed at the reasons deals go sideways. In the consumer space, you're working with averages over large quantities. The number of potential buyers is huge, so you need to build a product that, on-average, will result in more sales than non-sales when the customer reaches the point of making a decision. This decision point might happen tens of thousands of times -- sometimes millions -- a year for consumer products. In the enterprise world, the number of sales opportunities are smaller by orders of magnitude. Every sale becomes a huge gamble, and as a result you tend to throw an immense amount of resources at every sale. This is also one of the primary reasons enterprise software ends up so bloated and unmanageable. On the front-end, the decision making process for purchasing enterprise software is driven by checklists and "due diligence" procedures that are horrible at accounting for software quality. You're more likely to win an enterprise contract by saying "sure, we'll add that feature" than you are carefully explaining how maintaining product focus results in a more usable product. This makes enterprise software a high-stakes game. A sale results in windfall revenue, but a non-sale can severely strain cash-flows. At the end of the day, you're still trying to beat the averages, but you're working with a much smaller number of opportunities, so wins and losses move the needle in a big way. I think this is a significant incentive for small shops and independent devs to avoid the enterprise space. You need a larger bank roll to attack the enterprise market. We bootstrapped our company, and we hit several gut checks along the way. The days of writing large checks to my company are not quickly forgotten.

chrislomax 13y ago
I find this applies in developing custom apps for larger companies. When we were smaller, we dealt with smaller companies. Most of the work was brochure sites. Although these bring in around 4-5x less than larger companies I found that it was easier to secure the deal and equally please the client. You can't build the same brochure site for a corporate and charge 4-5x more, it just doesn't work. Now we are larger we deal with larger companies. The apps we build are larger and bring in greater deals. The chance of securing the deal though is a lot more than 4-5x harder. I also find the client harder to deal with. You end up dealing with people who are further removed from the people really making the decisions. You end up developing to the people you are talking to then you end up reworking projects when they actually show it to the people making the decisions. All this process ends up costing us more but we are slowly refining processes for this. I suppose it's a learning curve in dealing with larger companies but I find each client has their own set of challenges. We now service both types of clients. The quick and easy brochure sites for quick turnover and high profit and the higher end client who pays more but the profit is always less than if we did (x) amount of smaller sites.

6cxs2hd6 13y ago

It seems like there are a variety of challenges: - Selling costs are high. - Sales cycles can be long. - Harder to MVP and iterate. - Domain expertise required. I think the last one is the biggest challenge. To be successful with any product you need to understand the customer. Usually that means, you are the customer. With a consumer app, it's easier for you to be an example of the customer. With an enterprise app, you need to know that sort of enterprise -- its ostensible and implicit product needs, but also the decision-making processes and culture and so on. As a result, you probably need to be an ex employee of that sort of company. Who became ex only after having been there long enough to understand the business and to make enough contacts at that company and its industry. And who became ex on sufficiently good parting terms. So I would guess that's the "funnel" narrowing who can pull this off?

dangerboysteve 13y ago
I was going to mention the exact same points. The article was a total waste of time and flimsy on any real content. How does a 6 month sales cycle sound? What about expensive skilled sales reps?
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rahoulb 13y ago
It was the sales cycle that killed my company off (many years ago). When three or four deals, with a 6 month lead time turned into an 18 month lead time, as things got pushed into next year, it meant we simply ran out of cash. And with such a long and intensive sales cycle, we couldn't afford to have a large number of fallback leads at the same time.
mattzito 13y ago
Domain expertise is definitely a challenge, but it depends very much on the type of application you're trying to build. Building something to help manage clinical trials of drugs? Heck, you better have a ton of specialized expertise in the drug research vertical in one way or another. Building a generalized platform that allows you to store legal records or other sensitive data in a secure and standardized fashion? Well, you might want to build custom sales plays based on individual verticals, but then you just hire a domain expert consultant to put the words in the right order and structure for that vertical. One of the other benefits of the enterprise is that if you get the right enterprise, they will work with you to build your application. You have to find the right champion at the customer, someone with enough balls to take a risk, but basically you work out a deal: - they will give you money for a product that barely works/barely exists today - You will become their roadmap bitch for 12 months - They will pay a comparatively cheap price for the software There's a ton of risk associated there too - enterprises sometimes make irrational decisions that you're now bound to abide by, and it can make your product more of something custom as opposed to a general purpose application you want to sell. However, it is a way to get an MVP out the door and get some money.

g8oz 13y ago

Because consumer apps bedazzle VCs who in turn bedazzle Wall Street which uses them to bedazzle institutional investors who need unrealistic growth projections to pay for unsustainable pension promises. The money being sloshed your way for obviousbullshit.io is a Hail Mary pass by a society facing a demographic tsunami.

jmathai 13y ago

We recently made a switch from the consumer space to the b2b space. There are two things about the change which are very refreshing. First, we're talking with people who want to pay us money and the amount doesn't even really matter. We're priced 10-100x over what we were charging consumers. Second, the support overhead of supporting a crapton of free uses has dwindled and we're now able to provide significantly better support to paying business customers. We do phone support even. All I've ever done in the past have been consumer startups. I don't think I'd ever do one again. Edit: It's no silver bullet by any means. But it just feels much saner than the homerun derby which is the consumer Internet.

bmelton 13y ago
Are you referring to B2B, or Enterprise? I've blown my proverbial load on Enterprise, and while I appreciate the money to be made, I've found that my psyche is more suited to 100 small wins than one win worth 100x the others. In short, enterprise isn't for me, at least, not if I'm involved in the sales process. The sheer arbitrary-ness of it was so mentally exhausting that it affected my productivity. I can work on enterprise software, but if I'm in any way involved with the sales channel, it's a hardship. For me, the happy middle ground is vanilla B2B, e.g., the same general demographic that 37Signals sells to. You still have customers that want to pay you money, but while cost is a factor, it isn't usually the driving factor -- there's likely little difference between $25 a month and $125 a month, assuming you're solving a problem that isn't cost-centric, and you're saved from the mental turmoil of enterprise whale-hunting.
- jmathai 13y ago
  B2B, really. We did have quite a few conversations with enterprise customers and the B2B conversations were so much better. We haven't ruled out enterprise but I hope and imagine that our sweet spot is B2B. As you said it has much of the benefits of consumers (little friction to get in the door) and enterprise (willing to pay).

wandernotlost 13y ago

Because I'm not solely motivated by money.

sosuke 13y ago

How do you get enterprise clients? I'd love to have some tips or direction because all I can find reliably are small fries.

sbarre 13y ago
It's about who you know more than how good you are.
- csmuk 13y ago
  This. Certain disreputable companies in my sector are recruiting staff from competitors just for their contact list.
  - sbarre 13y ago
    I'm sure this happens in all industries and sectors.. The takeaway I feel here is that if you are considering working at an enterprise-focused company (or especially startup), try to get a feeling for how well connected the leadership is, because that will make or break a lot of deals.
    - csmuk 13y ago
      Not all industries and sectors although it's more common than not. I've done a bit in most industries. The most successful companies I've worked for have no contacts and sell directly. The most politics-filled and most likely to fail enterprise products have always been sold via the "old boys networks".
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sdesol 13y ago
If you don't have the budget like IBM, Microsoft, etc. to schmooze with those with purchasing power, you can do what Atlassian does, which is sell from the bottom up. The idea is to make the product cheap enough that individuals/departments will not have to go up the purchasing chain to pay for it. Hence their use any of our products for $10 for up to x number of users. If your product is able to solve a problem of theirs, you'll have evangelist within the company and they'll spread the word within the company. And eventually their product will reach somebody with purchasing power.

Aloha 13y ago

The market for consumer apps is several orders of magnitude larger however.

greenyoda 13y ago
In terms of number of customers, yes. In terms of money, enterprise software is a much bigger market. Oracle's revenues alone were $37 billion in 2013.

famousactress 13y ago

Sure. Lots of money to be made. The reason I got out of enterprise though is that the feedback loop is flawed. Your users are rarely your decision makers, large capital investments and stickiness that comes with adopting an organization-wide solution means the best product is less likely to win than the best sales force. I want to build the best products, so I chose to go find a company who's business model was better aligned with that value.

swills 13y ago
Good point about the feedback loop. My experience in the educational software industry was that it was the worst of both worlds: the broken feedback loop, but slower because of yearly cycles, plus they don't want to pay as much as enterprises.

booop 13y ago

In my experience SMBs are a much bigger cash cow than enterprises.

wudf 13y ago
Likewise. Their demands are practical and they retain their humanity in dealings... probably even moreso than mass market consumers.
- sourc3 13y ago
  This is an area where I have tried and failed with my SmartPointment (online appointment scheduling). Are there any words of advice you can share in reaching out to SMB market?
rokhayakebe 13y ago
Friends and Family.
fbliss 13y ago
+1 this. SMBs all the way. It's a good balance between too small and too large. I always saw it as better to be standing on 100 legs rather than 5. Less instability when you lose one.

krapp 13y ago

It would be a rung up the ladder from "wordpress plugin builder and PHP monkey for hire"

sputknick 13y ago

Everyone is making good points about why enterprise is harder. Another one is barrier to entry. You need to have relationships in a given space in order to get in.

vidarh 13y ago
Relationships helps, but you can make good money even by cold-calling.

saturdayplace 13y ago

From Joel Spolksky's "Camels and Rubber Duckies" (which is a great read in its own right): >The joke of it is, big companies protect themselves so well against the risk of buying something expensive that they actually drive up the cost of the expensive stuff, from $1000 to $75000, which mostly goes towards the cost of jumping all the hurdles that they set up to insure that no purchase can possibly go wrong. Personally, I'm just not interested in playing that game. *Edit: Yet. Not interested in playing that game yet.

agibsonccc 13y ago

B2B is an interesting animal. I find I can only do enterprise sales. I frankly suck at consumer. I love having a sales pitch being as simple as: my product saves you this much money and time or gets you this much profit. It's a gigantic numbers game. Aside from that, get an internal project champion to gather all the necessary stakeholders necessary to make a sale. (Yes I just threw out a lot of buzzwords there, sue me) Those are usually how you speak to bigger customers though. If you want, internalize the lingo as something you'd think of it as( a guy on the inside who becomes my sales guy!) . This may take a while, so budget your cash flow accordingly. I've found if your product offering is compelling enough you 'll get calls returned. Many people just try to throw a bunch of buzz words out there to random people working at a place and think that's sales. Talk to the right people who would want to use your product and build up internal evangelists. The rest will play out in the form of meetings and other random exchanges. Typical SaaS businesses also seem to think that you can just put up a pricing page and expect that to close a sale. There will be contracts going back and forth, custom pricing negotiations, SLAs being signed, among other things. I typically attribute the sales cycle being similar to freelancing. Just replace that with a product.

pg 13y ago

Enterprise customers pay a lot once you get them paying, but selling to them is brutally hard.

apaprocki 13y ago
Cold selling a large org is brutally hard. Usually what winds up happening is that internally in the org, there are people who follow what options are available in a particular space and are in a position to champion them. Companies need to find these people and then help these people make the convincing argument. If users internal to an org want to use product X, they will do much of the hard part of selling for you. You can find these people all over the place -- meetups, confs, blogs, etc.
- tptacek 13y ago
  That's true, but what you can't really do is target those people passively. You need hunter-gatherers to find them, corral them, and set up a collaborative sales process with them. Graham calls this "brutally hard", but what it really is is expensive: it requires direct sales teams, which in turn requires a founding/managing team that knows how to (a) hire and (b) manage direct sales teams. Those tasks, tasks (a) and (b), are probably what's really brutally hard about enterprise sales. When an inexperienced founder/manager hires a direct sales team, the sales team sets to work on selling the founder/manager instead of the customer base. An alternate path to getting a beachhead in an enterprise market is consulting. It's much easier to sell services to bigcos than products. Delivering services to someone gets you ~60% of the way to being able to sell products to them. The other 40% you can do on your own. That's worked for us (to greater/lesser extent depending on the specific offering we're talking about). But "consulting" is toxic to the species of startup we talk about on HN.
  - napoleond 13y ago
    When an inexperienced founder/manager hires a direct sales team, the sales team sets to work on selling the founder/manager instead of the customer base. This made me spit out my coffee. I've never heard it expressed that way, and it's a hilarious image, but come to think of it I've observed that situation more than once. Can anyone recommend some resources for learning to manage direct sales teams?

jmount 13y ago

Your startup will never live long enough to survive the procurement process.

wellboy 13y ago

Because you can't be passionate about B2B apps. When we're reading about that to become an entrepreneur you can't be after the money, you have to do something you're passionate about, something you would die for. All this, passion, solving a problem to die for, disappears by doing B2B and you're only going for the money again. Of course there are exceptions, but that's the difference between B2B and B2C.

msrpotus 13y ago
Find an aspect that you are passionate about. There are a lot of niches, whether it's specific types of companies, specific problems, or whatever. It's like saying "you can't make money with consumer apps." The space is far too large to permit such blanket generalizations.
- wellboy 13y ago
  I agree, you can't make blanket generalizations. However, there is just a stark difference that are few consumer apps that the founder ISN'T passionate about and there are few B2B apps that the founder IS passionate about.
johnward 13y ago
You don't have to be passionate at all to make money. Actually being passionate can blind you to the fact that a business idea sucks.

badman_ting 13y ago

Well - have you worked on enterprise software? It's not fun.

elorant 13y ago

In the enterprise market you have to talk to 15 different people inside a company before you can make a sale. And often you have to go out of your way to convince them trying to cover every little insecurity they have and learn to live with the anxiety of failing because of actors outside your influence. You also have to dine them and wine them and laugh with their stupid jokes and generally try to be as pleasing and understanding as possible. The hell with that. In the consumer market things are a bit more straightforward. You focus your energies on the product and marketing and that’s all there is.

jarjoura 13y ago

Working in the consumer space is not just an easier sell from a sales prospect, it's also easier to persuade talented people to join your company. Great engineers and designers want to show off their work to friends and get bonus points for working on cool stuff. Working on an enterprise application/system tends to be process heavy and requires lots of QA before shipping. It's driven not by the engineers or designers working on the product, but by requirements outside of their control. If you're someone who just wants to work on hard problems, then enterprise is a no brainer. Though the common theme I hear amongst startup folk is that they want to be part of the decision making process too. They aren't interested in being handed a list of requirements and just asked to make it work.

m3mnoch 13y ago

to put it succinctly and in gamer terms: would you rather have a giant sword that does 16 points of damage with a 10% chance to hit? or a dagger that does 4 points of damage, but with an 80% chance to hit? it's all about the dps, baby. note: that metaphor obviously assumes "A little over 12% of the money-making developers" means that it's 8x easier to actually make money in the consumer space. not that 80% of consumer plays make money. not to mention it's way, way easier to build a company with 10 people than 45.

mamcx 13y ago

Not only because is very hard to a sale, you also become a kind-of-employee where your work for them, and have less freedom. And the requeriments change all the time. And the development can (and WILL) take years. Plus, the corruption. Without "sales comissions" you can't even get the foot in. And you need to know people, and give them vines, go to a fancy restaurant, etc. IF exist a enterprise somewhere that just do this: I need x, you can do it, let's do it, then I love to get in. I'm not afraid of "boring" CRUDs apps and that stuff. But without the social connections and bribes,is a not start for me.

joeblau 13y ago

If you're just building products and your end goal is making money, then Enterprise is the way to go. While innovation comes from both spaces, I feel like the consumer market has a better more realistic feedback cycle. In enterprise, it's usually a small group of people making large decision deals which impact a large group. Salesforce is a great example of a company that's widely successfully and their products are critical in enterprise, but I've never personally heard an Enterprise consumer say "Oh I love the Salesforce software." By contrast, I've heard people rave about apps like Pinterest, Instagram and Snapchat even though none of them are profitable businesses. For me, If I wanted to build a money making product, I would go enterprise, but I choose consumer because I want to make a great product--very rarely do I find great enterprise products.

UVB-76 13y ago
> Salesforce is a great example of a company that's widely successfully and their products are critical in enterprise, but I've never personally heard an Enterprise consumer say "Oh I love the Salesforce software." By contrast, I've heard people rave about apps like Pinterest, Instagram and Snapchat even though none of them are profitable businesses. I think there is a certain inevitability to these things when you compare software that people are required to use as part of their job, and software they choose to use in their spare time. It strikes me as a vicious cycle. People don't enjoy using enterprise software, so developers don't enjoy making it. The incentives are all wrong, the purchasing decisions are made by the wrong people, for the wrong reasons, and it's near impossible to avoid locking yourself into a particular solution or provider. Welcome to enterprise software.

neakor 13y ago

A lot of us are in it not just for the money. Sure enterprise companies can pay many times more, but who cares? Literally, who cares? You will never be "cool" by building the next oracle. And that's why most of us don't want to be the next oracle.

jannes 13y ago

Really? How do you target enterprises? It seems impossible to me to know which companies are actually willing to pay decently for apps. All the enterprises that I've encountered generally didn't like to pay more than ~10k euros for an effort of roughly two months of work, which isn't that much if you factor in the expenses (mostly wages). It seems to me that the enterprise app development space is a low-margin business. At least over here in Germany. There seems to be quite a lot of competition in this space.

freehunter 13y ago
It depends on what kind of product you're selling. Certain budgets in enterprise are seemingly unlimited, generally when it comes to improving sales. If you're selling security products (outside of the compliance-driven market), you won't find much appetite for large margins. If you're selling CRM products (which are a dime a dozen), you won't find large margins. You have to find out where a business is willing to invest no matter what the price. I know it exists, unfortunately each industry (and each subset of each industry) is going to have a different area where price is no concern.

Bahamut 13y ago

With enterprise, you end up supporting IE8 :(

alien3d 13y ago
IE6 -> Welcome to incompibilty of ORACLE form.
jpkeisala 13y ago
Well we here in enterprise space are just starting to warm up to jQuery.

tn13 13y ago

Enterprise might pay 4x more even for a product that is crappier by 10x than a consumer product but enterprise is also 100x smaller than consumer in sheer number of opportunities to make a sale. Not to mention there are too many legalities around B2B sales some of which might threaten the very existence of your business.

tn13 13y ago

The enterprise product we built cost us close to $1m in building it and around 300k per year for maintenance. [The engineering costs]. Each sale was supposed to bring in around $50k for a two yearly contract. A dedicated team of 25 people could barely make 20 sales per year. Bringing around $1m in revenue. Remember the salaries of these 25 people ended up being the biggest cost component which made the entire business into a loss making proposition.

benoitg 13y ago

When discussing B2B sales on HN, I often see black and white arguments. Either you're in the B2C space, or you sell your products for north of 50K. This is IMHO a false dichotomy, there are lots and lots of opportunities between these extremes. I'm currently in a project at the intersection of software and shipping, it sells like hotcakes, we currently have a conversion rate (inbound prospects to signed clients) of more than 75%. This is far from easy to pull off, and there are a few points I'd like to make based on my current situation (we're pulling a gross margin of $500 to $5000 by client): * Selling pure software is hard. At the most basic level, we sell shipping rates and the accompanying software is the cherry on top (I'm saying this even tough I run the technical side of things). We're doing well because our target market understands the value proposition even better than we do, we manage to offer a free product and make money on it. * Co-founders matter. I couldn't even have had the idea on my own, much less the resources (contacts, skills, ...) to launch the business. I'm very fortunate to have met co-founders that are beasts on the business and shipping & logistics sides of things, we form an awesome triptych, which is a very delicate balance to have. * Everything takes much more time than you expect. You're at ease in the technical domain, this won't be much of a problem while developing your core product. But selling will take much of your time, it's is a time-consuming activity and you don't know anything about it. Plugging your product in your client's systems will take time, either because your client hasn't any in-house developer or they're less than half as skilled as you are. If you're a solo hacker selling pure software in the B2B space, you are, I believe, in for a rough, rough ride.

alien3d 13y ago

To me, it just break even. It might be large sump value but the process of approval payment and user acceptance are way to long. There aren't much diffirent 30 buck subscription accounting software and 30 million erp software. The way much diff is building for enterprise system take lot of time doing discussion and reporting rather then make software itself.