In the last few years we have seen an explosion of enterprise software startups that are embracing consumer technologies and delivery models to revolutionize the enterprise software ecosystem. The industry has baptized this phenomenon as the “consumerization of the enterprise” and has produced complete industry segments such as enterprise social networking, gamification or enterprise mobility within the enterprise software market. In the middle of this phenomenon we can regularly find people within large enterprises that use consumer based technologies to do their job and bypass the complexities of the equivalent enterprise technologies.
All these factors have made me questioned if a startup can be really successful in both the enterprise and the consumer market. At this point, my answer would be that is possible but highly unlikely.
The financial attractions and the clear opportunities for building meaningful business in the enterprise market, have drawn more and more consumer-focused startups to attempt to make inroads into that space. By and large; most of those attempts have resulted on either failures or mediocre successes. From large companies like DropBox to a decent number of the social and mobility players, we’ve witnessed consumer startups continuously being unsuccessful trying to growth a presence within the enterprise. It certainly has taken giants like Google or Microsoft years to be relevant in both the enterprise and consumer markets.
Without doing a forensic analysis, I believe we can trace the roots of most of these failures to the drastic differences between the technical DNA and the business models of consumer and enterprise software. As a startup, defining a successful business model and capturing a solid market segment is a very difficult endeauvor that will consume most of your time and resources. Trying to be relevant in drastically different areas such as the consumer and enterprise markets will entail an exponentially higher effort that can, sometimes, drive the company in completely opposite directions in a lapse of a few weeks.
Even though there are a few exceptions to this rule, I don’t think a startup can be really successful in both the enterprise and the consumer markets without hurting their identity and customer base. After chatting about this topic with a few VCs friends and other executive advisors to companies, some of them have bluntly confessed that they often see a startup trying to tackle both the enterprise and consumer markets as a clear sign of a lack of vision and execution focus and a clear recipe for disaster. In my opinion, as a startup, is always better to stay focused on a specific market, gain solid traction, learn some lessons and try to expand into different areas from there.
What do you think? Can a startup be successful in both the enterprise and consumer markets?