I came across this article recently covering a session at TechCrunch Disrupt.

During this session, American venture capitalist Jim Goetz complains that very few startups focus on building products for businesses. Most of them pay attention to consumers. However, Goetz pointed out that twice as many "enterprise" startups have become billion dollar companies themselves as compared to "consumer" startups.

Goetz explained that the advent of cloud computing offers more opportunities to compete with firms like SAP, Oracle, Cisco and EMC. These companies offer legacy solutions which don't fit today's technology.

I have the following questions: do you agree with Goetz in that the enterprise market is a good place to focus for a startup? Is this the case in Canada? What kinds of products should startups be bringing to market to help enterprises work better?

This is an interesting debate. On the one hand, a consumer-focused play has the benefit of having nearly infinite market potential, which excites both entrepreneurs and the people who fund them. however, there are multiple downside risks: consumers don't pay a lot (or anything) for web services, so you need a lot of connected users to be a credible business, you can spend an immense amount of money courting consumers and still not succeed in attracting a critical mass, and even successful consumer ventures can pass out of favour pretty quickly (witness Facebook, at least from a stock perspective).

B2B ISVs (cloud or conventional), on the other hand, generally target a specific market - meaning that the total opportunity is narrower than in the consumer world, but that marketing spend can be applied systematically to a defined base and set of objectives - which in turn reduces the likelihood of vast quantities of marketing money disappearing without impact.

I've spoken with VCs who prefer the "lottery ticket" approach of the consumer market, but not recently; I've spoken with others who prefer B2B companies with defined market targets. Either way, it's important to understand that the VC itself isn't investing in an idea, but rather, an exit - they need to find a way to convert an initial investment into an eventual payout. B2B makes sense because this exit can come in the form of a buyout by a B2B company looking to expand its product breadth - as it did, for example, for Radian6, GoInstant, Rypple, and Sitemasher, all of which were acquired by Salesforce.com since 2010. This can happen in the consumer world as well, but it's less frequent. Consumer companies can provide the basis of a massive IPO, as was the case with Facebook (and Google, etc., before it) but these IPOs have been much less frequent - and far riskier for all involved - since the collapse of the dot.com bubble twelve years ago...