Demo: Why B2B start-ups shine

Computerworld - 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.