Desh Deshpande sold his first company, Coral Networks, in 1987 for a modest $15 million. He followed that up by selling his next company, Cascade Communications, in 2007 for $3.7 billion. The next year he started Sycamore Networks, which IPO’d with a peak market cap of $44.8 billion.
Why Is This The Case?
The best consumer startups catch lightning in a bottle. Like any startup, you need to have a great team, a compelling product and a credible market. But there’s also a fourth variable that’s hard to recognize, and almost impossible to distill. Call it the zeitgeist, ether, or whatever, but the greatest consumer companies have it and it has proven remarkably difficult to capture twice, even for the most talented founders.
B2B tech is different in a lot of ways. Corporations have clearly articulated needs, long-term plans and budgets. Many larger organizations even have budgets for experiments and teams dedicated to finding the latest and greatest efficiency tools. Learning to navigate these organizations isn’t easy, but once the skill is mastered, it’s more repeatable.
Once you understand corporate buying patterns, how to build an SaaS product and sales team and uncover a latent need at a big company, the route to success becomes a bit more formulaic. Founding B2B companies will usually net fewer magazine covers, but it has a way of repeatedly filling bank accounts.
it’s not clear that a decade spent at a B2C giant will give you any greater insights than just getting busy. However, it may expose you to interesting co-founders, which is worth the cost of admission.
If you’re weighing job offers, one from a well-funded repeat founder and the other from a scrappy crew with little credibility but crazy growth, you should definitely opt for the latter.
On the flip side, if you’re interest is in B2B technology and you don’t have a credible insight into what you might want to build, join a fast-growing B2B startup to learn the ropes. Unlike the world of consumer tech, there seem to be a fair number of transferable skills to be learned.
As a VC, I’ve become slightly more skeptical about prior success in consumer spaces. Even with founders who have had a “base hit” in the past, I’m more likely to want to see metrics or other early measures of success.
Building large communities of users for consumer-facing companies is a rare skill, and one that hasn’t proven to be especially repeatable. It’s actually most astonishing that most of the big consumer companies we can think of have emerged from dorms and people with no impressive credentials to their credit.
If your business model is to be built around status updates, be prepared to update VCs on your status!
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