When you look at the seed deals made in recent years, you will notice a new and interesting development. The majority of seed deals are investments in start-ups focusing on the Business-to-Business market (B2B) rather than the Business-to-Consumer market (B2C), where historically the majority of investment has been placed. The US investors increasingly shifted their focus in 2019, where B2C start-ups attracted 2,932 investments with a total value of $40.3 billion, while B2B start-ups attracted 4,968 investments worth $61.3 billion. 

The development has continued throughout the first and second quarter of 2020, where B2B businesses have raised 79 % more funding than B2C businesses in venture capital rounds. The numbers of deals and dollars invested reflect that US B2B venture activity reached an all-time high in 2019. It is, in other words, an interesting time to be an enterprise with ambitions in the US market.

The increased focus on the B2B segment can be understood by asking venture capitalists in Silicon Valley. In TechCrunch's interview with 6 VCs, one central argument was, that B2B industries have been overlooked during the recent years, where consumer-focused technologies have dominated the attention of investors. This has, according to some investors, left a high untouched potential on the B2B market, which can be unleashed in the coming years.

Another reason, mentioned among investors, is the concern around consumers as a target group. Consumers are becoming more unpredictable, harder to acquire, and harder to retain. Their lifetime value is, as a consequence, declining. B2C business models are, in addition, becoming increasingly dependent on generating traction through Facebook, Amazon, and Google. A desire to avoid over-reliance on FAMGA (Facebook, Apple, Microsoft, Google, and Apple) and achieve cost-effectively breakouts can therefore be an additional force behind the development.

Finally, some investors explain the shift with demand. There is an urgent need for businesses to adapt to a new world, where digitalization is key. B2B solutions that deliver measurable results are therefore in demand. Others argue that the first generations of SaaS-founders have reached a point, where they are reinvesting in what they know best. A new wave of venture capitalists can, in other words, explain the increased investments in B2B start-ups. There is, in short, a reason to be optimistic on behalf of B2B start-ups, who intend to become a part of the wave of change and strive for intensive growth.

Scaling a B2B business – Becoming a global service provider

The Danish SaaS business, Netlify, was founded by the two Danish friends, Christian Bach and Mathias Biilmann Christensen, in 2014 after which they moved from Copenhagen to San Francisco to scale their start-up. Netlify´s platform empowers developers to manage and coordinate web projects in one system. Christian and Mathias are now leading a SaaS business with more than 100 employees and they have received more than $100 million in funding from prominent investors, such as Andreessen Horowitz, Bloomberg Beta, Tank Hill Ventures, and Kleiner Perkins & Byers.

The move to the US Westcoast was important for their business and has provided them with the tools and insights they needed.

I left Copenhagen for Silicon Valley back in 2015 to build Netlify with a high school friend and a vision for a better web. 5 years, $100M+ in funding and a lot of wins and failures later, we are starting to see the web changing just as we had hoped. It stills feels like our story is just beginning, but I have already gained a lot of important learnings along the way,

Christian Bach

Co-Founder, Netlify

He will share his insights on the many things he has learned in our open webinar “Know your B2B SaaS – Silicon Valley Insights and perspectives” on Thursday, October 8th. Besides Christian who will pass on hands-on advice that he wish he would have gotten five years ago, we will also be joined by our keynote speaker Nathan Lakta. Latka has founded a SaaS database, a fintech platform for SaaS founders, hosts a daily SaaS podcast as is the author of the book ‘How to be a capitalist without any capital’.