How One Company Took Off by Moving From Consumer to B2B

BostInno

by Walter Frick

Back in 2009, Cambridge startup Backupify was targeting the consumer market with its cloud backup application, helping users store a copy of their data from GMail and elsewhere. That same year some of the company’s investors suggested that businesses would happily pay for such a service, especially to back up data for services like Salesforce. It would take three years for the company to fully transition to the B2B market, but those investors turned out to be right. Today, the company backs up Google Apps and Salesforce data for business customers of all sizes.

In an investment environment where B2B is suddenly cool again, Backupify’s story should be of interest to anyone watching the trend toward consumerization of enterprise software. The company built consumer applications and then realized the true potential was with business customers.

In 2012, Backupify grew its revenue 500% year over year, raised $9 million, and signed its first Fortune 500 customer. The B2B market has been good to it. But as CEO and co-founder Rob May explains, shifting to business customers isn’t easy, and won’t save most struggling consumer startups survive.

You Can’t Be Both

Though business software is starting to look more and more like consumer applications, and though May believes marketing for the two is more similar than many think, he told me that it’s still very difficult for a small startup to bridge the gap between the two business models.

“We realized, wow, it’s difficult to build an organization that serves multiple customer segments that are so disparate,” he said. Customers want all-you-can-eat pricing, for instance – see: cellular data plans – while businesses hate to pay for anything they don’t use. “It’s very difficult for a company to support both models.” So while Backupify toyed with the idea of trying to do both, it ultimately opted to focus on business customers. (It still offers its consumer application, but doesn’t market it or prioritize it.)

Businesses Have Different Needs

May used the example of photos to illustrate the frequently divergent needs of consumers and businesses. Internet users love photos; most businesses have no interest in a better way to manage them. In that sense, Backupify was a lucky case. Backup is one application that spans both; most consumer startups won’t be so fortunate.

MVP Doesn’t Always Work in B2B

Lots of consumer applications aren’t built with particularly robust backends, May pointed out. And that’s on purpose. The mantra of startups, and in particular of consumer startups, is to ship quickly. But this can mean that some consumer applications lack the reliability necessary to satisfy business customers. Since backup is all about reliability, Backupify was forced to spend more time on its backend from the beginning.

May also noted that while the MVP strategy can still be workable in the SMB market, it’s generally a poor fit for enterprise. For that reason, he sees value for B2B startups in building for smaller customers to prove out a concept, and then migrating up the market to the more profitable enterprise customers.

It’s to May and his team’s credit that the company executed it successfully and has thrived in the past year. Even with an application generally aligned with business customers, the transition from consumer to B2B took place over a matter of years for Backupify, illustrating the difficulty of such a pivot. Though B2B is looking sexier to VC’s, it won’t save most of the consumer startups in the market for an A round.