I wrote a post a few weeks back on B2B, B2C and C2C technology companies in Indianapolis. Here are a couple of paragraph excerpts:
It makes sense to me that local investors are less interested in investments in C2C companies. C2C Internet companies, usually social media sites, build scale rather than profit in the early years. The company value is ultimately in the consumer database that is built over time rather than well thought through cash flow models.
Savvy venture capital and private equity investors who invest in C2C companies hedge their bets by investing in several C2C companies in a given period of time. C2C companies are high risk - they usually will either be phenomenal and show a 150x return or more or they will crash and burn. Let's say 1 of 10 C2C companies is successful - a wise investor will hedge his investments and put money in 10 to 20 companies over a period of time - knowing that most will crash and burn but a couple will work out. The success stories realize a return large enough to make the entire portfolio of investments worth while.
In a market like Indianapolis, which has not fully embraced C2C business models, I have seen investors invest in 1 or 2 C2C companies in their portfolio of investments made up mostly of B2B and B2C companies. This seems like playing roulette with all money on one number.
Indianapolis has done some amazing things in SaaS technology markets. As many readers of this blog know, much of my business law practice focuses on SaaS law, Internet law and funding law. Most of this is in business-to-business (B2B) SaaS markets. This week I was thinking about how this is not just true of my practice, but it also is true for Indianapolis as a whole. Most software companies in Indianapolis are in B2B markets.
It is clear that the Indianapolis entrepreneurial culture accepts and supports B2B companies. It is less clear to me how much it supports or fully understands B2C and C2C markets. I have seen companies in these markets struggle to win peer support or obtain first-money funding locally; Whereas I see coastal investors much more willing to back companies in B2C and C2C markets.
It is clear that the Indianapolis entrepreneurial culture accepts and supports B2B companies. It is less clear to me how much it supports or fully understands B2C and C2C markets. I have seen companies in these markets struggle to win peer support or obtain first-money funding locally; Whereas I see coastal investors much more willing to back companies in B2C and C2C markets.
It makes sense to me that local investors are less interested in investments in C2C companies. C2C Internet companies, usually social media sites, build scale rather than profit in the early years. The company value is ultimately in the consumer database that is built over time rather than well thought through cash flow models.
Savvy venture capital and private equity investors who invest in C2C companies hedge their bets by investing in several C2C companies in a given period of time. C2C companies are high risk - they usually will either be phenomenal and show a 150x return or more or they will crash and burn. Let's say 1 of 10 C2C companies is successful - a wise investor will hedge his investments and put money in 10 to 20 companies over a period of time - knowing that most will crash and burn but a couple will work out. The success stories realize a return large enough to make the entire portfolio of investments worth while.
In a market like Indianapolis, which has not fully embraced C2C business models, I have seen investors invest in 1 or 2 C2C companies in their portfolio of investments made up mostly of B2B and B2C companies. This seems like playing roulette with all money on one number.
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