Why B2B start-ups shine

Sexy consumer start-ups traditionally grab the headlines at the semi-annual Demo conferences. This year was no exception, with excitement centering around Micello's "Google Maps inside a building" and Emo Labs "invisible speakers."

But some of the fledgling companies at DemoFall 09 didn't seem fully hatched.

Take Lunchster and its Web app for automatically scheduling lunch meetings. USA Today reporter Ed Baig was "a little baffled" by it, while Microsoft director of business development Don Dodge wondered about Lunchster's potential business model.

Or take dotSyntax LLC, which showed off a Twitter client for its IM app, Digsby. One Demo attendee wrote that he was "baffled looking for the innovation."

Some see the premature launches as the result of "Release early, release often" agile development models favored by some Web companies combined with a lack of resources in today's tough funding environment.

"You may have a big vision, but sometimes you need to chew it off in steps," said Chris Shipley, the longtime executive producer of Demo, who is retiring after running the show for 13 years.

But that tactic can leave start-ups struggling to distinguish themselves in a crowded market, said Venetia Kontogouris, a managing director with venture capital firm Trident Capital.

"If you're a small firm, how do you cut through the worldwide clutter?" she asked.

Finding success in niches

Business-to-business start-ups, by contrast, tend to target more obscure niches and problems.

Keen Systems Inc., for instance, launched a turnkey e-commerce Web store for independent commercial printing companies at Demo.

Vitaly M. Golomb, CEO of the San Francisco start-up, is a former turnaround executive of commercial printing companies. He said the opportunity is sizable: a $162-billion-a-year industry in the U.S. composed of 36,000 businesses. Most of them either have built expensive-to-operate custom Web storefronts, or they continue to do some work, such as process graphics files and bills, in a laborious, non-integrated fashion, he said.

Targeting a niche allows B2B start-ups to operate in low-pressure stealth mode for longer periods, giving them time to perfect their product before hitting the market.

FuzeBox Inc., for example, had 30 developers working for a year and a half before it launched its high-definition, video-enabled webconferencing tool.

"There was the sense that the business customer is more discriminating, and thus you only get one chance to get it right," said Rafael Alenda, director of marketing for FuzeBox.

For $29 a month, FuzeBox supports up to 1080p video streaming to PCs and 720p streaming to iPhones and BlackBerries. That is better quality on a wider variety of devices than incumbents like Cisco Systems Inc.'s WebEx, according to the San Francisco start-up.

Hosts invite attendees via Twitter and FaceBook, or via instant messaging sent to the most popular IM networks, including AOL Instant Messenger, Yahoo Messenger, Windows Live Messenger and even Microsoft's corporate Office Communication Server (OCS), according to Patrick Moran, chief marketing officer for FuzeBox.

Granted, Demo has been the launch pad for successful consumer companies.

The PalmPilot and the Tivo both debuted at Demo. But so did Salesforce.com, VMware, Adobe's AIR platform, WebEx, blogging platform Six Apart and wireless chip maker Atheros Communications Inc.

And eight of the 11 start-ups honored by Demo's "lifetime achievement awards" on Wednesday roughly fall on the B2B side of the fence.

"In this economy, enterprises are sexy," said Ravit Lichtenberg, a Silicon Valley start-up consultant with Ustrategy.

Not that some of the B2B firms at Demo didn't try to rise transcend the label.

Swedish start-up Burt AB named its Web ad metrics tool "Rich." The ironic names capture the personality of Burt's CEO, Gustav Van Sydow, and his fellow 20-something employees. But they also appeal to the software's target market -- artsy designer types -- along with the features, which Van Sydow boldly claimed, "are the first that give designers a report they can actually read, and metrics they are interested in."

Besides conventional stats, such as ad clickthroughs, Rich also measures "visibility" -- whether visitors scrolled down low enough on the Web page to see an ad -- and "view-throughs" -- how many of those people then noticed the ad. These stats help designers figure out if the ad succeeded or failed because of its quality, or because of factors beyond their control such as its placement on the Web page, Van Sydow said.

Another firm, RumbaFish, helps Web marketers set up and track promotional campaigns on Twitter, MySpace, LinkedIn and FaceBook. RumbaFish's real-time analytics let marketers quickly fine-tune their campaigns, such as raising the value of rewards like gift cards for consumers who tweet about their brand, said CEO Michelle Bonat.

"You never really know as a marketer what will work," Bonat said. "This is an easy way to iterate and change your campaign."

Launched this week, Rumbafish costs between $50 a month for a small company to $10,000 a month for a large enterprise. That's still a bargain, maintains Bonat, compared to the costs for custom, short-term Twitter campaigns by some corporations.

Other noteworthy B2B product releases from DemoFall 09:

* Enroute Systems Corp.'s ShipIt! Web app for cutting postage costs

* 80legs Inc.'s custom webcrawling service.

* Hashwork, which wants to bridge the gulf between personal and corporate Twittering.

* Symform Inc.'s unique cloud storage 'co-op'

* LeapFILE Inc., which promises enterprise-grade file collaboration for any app.

This story, "Why B2B start-ups shine" was originally published by Computerworld.

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