Demo: Why B2B start-ups shine

Find a niche, solve a problem

Sexy consumer start-ups traditionally grab the headlines at the semi-annual Demo conferences. This year was no exception, with excitement centering around Micello Inc.'s "Google Maps inside a building" offering and Emo Labs Inc.'s "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 blogged that he was "a little baffled" by it, while Microsoft Corp. director of business development Don Dodge wondered about Lunchster's potential business model.

Or consider 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" in that offering.

Some see the premature launches as the result of the "Release early, release often" agile development models favored by some Web companies combined with the lack of resources that many small firms must endure 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 start-ups that take things slowly could find themselves struggling to stand out 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, in 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. made up of 36,000 businesses. Most of those companies 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, as Keen Systems is doing, allows B2B start-ups to operate in low-pressure stealth mode for longer periods, giving them time to perfect their offerings before hitting the market.

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

"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 at Fuze Box.

For $29 a month, Fuze Box 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.

With Fuze Meeting, hosts invite attendees via Twitter and FaceBook, or via instant messages sent to the most popular IM services, 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 at Fuze Box.

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

The PalmPilot and 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 at Ustrategy LLC.

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 name captures the personality of Burt's CEO, Gustav Van Sydow, and his fellow twenty-something employees. But it also appeals to the software's target market -- artsy designer types. And the software itself, Van Sydow boldly claimed, is "the first to give designers a report they can actually read and metrics they are interested in."

Besides conventional statistics, such as ad click-throughs, 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, according to the company. Those statistics 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 Technologies Inc., 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 what it can cost to set up custom, short-term Twitter campaigns.

Here's a look at some other noteworthy B2B product releases from DemoFall 09:

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