To B, or not to B

“To be, or not to be” is the never-ending challenge Shakespeare asked every one of us in life.

“To B, or not to B” is the equivalent challenge every person interested in startup life faces: should I work on a 2B domain, or a 2C domain?

To state the obvious that everyone probably already knows, 2B or 2C is defined based on who’s the primary target customer:

• A 2B company has businesses as the primary target customer. One example is Stripe, which offers payment service for other companies to easily integrate with.

• A 2C company has consumers as the primary target customer. One example is Uber, which offers car ride services in many cities around the world.

Notice the emphasis on the word “primary”.

• A 2B company can also have consumer facing services. For example, Zoom is a 2B company, but the video conference calling feature is freely available to any consumer (up to 40 min).

• A 2C company can also have business facing services. For example, X (formerly Twitter) is a 2C company, but it has business facing services to verify identity and offer advertising.

• The key is who’s first order audience, and who’s second.

Sometimes the line can be very blurry, especially for those companies who operate on a 2-sided market.

• OpenTable is a well-known consumer brand, but it’s foremost a 2B company. Its primary customers are restaurants, since OpenTable offers Restaurant Management System.

• DoorDash on the other hand is mostly a 2C company, but with significant investment on restaurant facing integration solutions.

There are some key differences between 2B and 2C companies:

• Total number.

  • Roughly speaking, 2B : 2C = 2 : 1. There are many more 2B companies.

• Competition.

  • Each 2B company tends to have a long list of direct competitors. 2B sector does not follow “winner takes all” paradigm. Competitors can live in co-existence for a very long time, and slow grooming is fine.

  • Each 2C company tends to have very limited competitors. “Winner takes all” is often true, resulting in a limited number of surviving competitors (normally 2-3) after the initial winner stands out. If virality doesn’t come in a year or two, likely it will never come.

• Revenue source.

  • 2B company revenue comes from businesses, subscription based (pre-pay), or invoice based (post-pay).

  • 2C company revenue can come from consumers directly, or businesses (advertising business model).

• KPIs.

  • While there are common metrics shared on both sides, e.g., CAC - customer acquisition cost, LTV - life time value, CVR - conversion rate, there are specific metrics different sides look at.

  • 2B companies talk about MQL - marketing qualified leads, SQL - sales qualified leads, ARR - annual run rate.

  • 2C companies talk about DAU - daily active users, NPS - net promoter score.

• Internal structure.

  • Marketing, Sales, and Customer Success orgs have significant influence within 2B companies.

  • Design, User Research, and Data Science orgs have significant influence within 2C companies.

• Eng culture.

  • For most engineers in a 2B company, they don’t have direct experiences of the pain points their customers are facing. Therefore extra effort needs to be made for engineers in 2B companies to understand the customer challenges - trade conferences like AWS Re:invent are common annual trips for such eng.

    • Notable exception here is dev tool SaaS companies where eng understands their audience directly.

  • For most engineers in a 2C company, they tend to resonate with their audience’s pain points. Dogfooding is a common practice and eng are full of ideas on what to improve.

• Tech stack.

  • 2B companies product development is very likely web first. Some could even survive without any mobile development.

  • 2C companies nowadays are mostly mobile first. Some might not even have a web version.

• Social life.

  • If you work for a 2B company, chances are your family doesn’t understand what you do, and you try and fail to explain a few times and eventually give up.

  • If you work for a 2C company, you are likely to be popular at every family party, and people won’t stop telling you how much they love or hate your product.

So, how to choose “to B, or not to B”? I’m specifically limiting the scope of this question to engineers.

• My #1 suggestion is personality match. Both 2B and 2C companies have interesting technical problems to solve, so it’s more about “will I stay interested in this problem for long?”

  • If the answer leans significantly towards one side, that’s the decision. (I’ve seen people only interested in 2B, and people only interested in 2C; both are fine.)

  • If it’s neutral, then consider the following.

• How much do you want to influence the product / feature direction?

  • Because engineers tend not to resonate with 2B company customer needs, engineers in 2B companies rely on marketing / sales / customer success and PM to prioritize product / feature direction. Some engineers don’t mind being told what to prioritize / build. For them, 2B is fine.

  • For some engineers, being able to influence product / feature direction is must have, then they should focus on 2C side. Being a possible end user themselves, they have much more credibility when they propose a feature to build.

• Do you enjoy hustle?

  • If hustling gives you a headache, and you enjoy a stable work environment, 2B likely is a better option.

  • If you get extra dopamine when being thrown in a complete pivot, 2C likely is a better fit for you. 2C products normally need to reach maturity / success in less time, so in nature more hustling.

  • In other words, if you tend to be risk averse (no judgment here; it’s totally fine to be risk averse), 2B is a safer option.

For me personally, I prefer 2C, mostly because I instinctively get more fired up by consumer challenges. What about you?