B2C social apps are dead and it’s the consumer’s fault!
B2C social apps/platforms are dead, and the reason is only 10% investors are risk averse and actually 90% consumers are too selfish. Some may think I am bitter that my own B2C social app (KiddyUP) hasn’t been more successful so that is why I am writing this. But I assure you that is only 50% of the reason. You see I also mentor and advise many other entrepreneurs with “B2C social” solutions and all too often I find myself advising and thinking “don’t bother.”
Why do I put the “B2C Social” into inverted commas, because it is a classification given to many potentially amazing platforms that with the right business model and given the real chance to grow, could go on to be another FB, or Instagram etc… but the reason they don’t — isn’t that the team wasn’t amazing, the idea wasn’t amazing, they didn’t raise funds (more on that later), they didn’t pivot enough times, they didn’t execute fast enough, they didn’t focus on the right market, they didn’t … I could keep going on. The number 1 reason in my humble and very experienced opinion, is that the consumer is too selfish!
Did you know that you are your own worst enemy? Why? Because you want everything for free, you don’t want to pay for anything anymore, you are making it impossible to get things for free and to advance your status, technology, life… past what you currently have. Why? Because VC’s and investors are too risk averse. Once apon a time they were happy to invest their hard earned money in B2C social solutions, ie: solutions where the success of the idea depended on hundreds of thousands of users to bring value to the solution with nary a $ in sight, and lots of money was needed to market that solution to you and continue to improve it to give you the value you crave. Confused, let me see if I can make this easy for you.
Let’s say you want a way to immediately get discounts and vouchers to local events for your children and know when/where events are happening around you. Great! Along comes a startup called XX, with an idea for a platform that will solve that exact problem for you. Now XX needs to create that platform, they need to be able to design and develop just about enough features to get a minimal viable product into your hands and convince you that this minimal product is good enough that you will get hooked and continue to use it. Then XX needs to go and pitch to some Angel investors and convince them that their solution answers a real pain and that they have a solid enough go-to-market strategy, team, and business model to make this venture a future success. But herein lies the 10% investor problem:
1. Most investors have invested in and been burned by failed similar platforms like this so they are VERY sceptical. In fact in Israel, where I live and run my startup, I would say there is almost 0% chance of raising money anymore for a B2C social app, and here is why:
2. Most investors want you to prove “virality” in either your own market, or if you are unfortunate like me and other start-ups, for example 99Dresses.com, in a totally foreign market where the pure expense of doing so will almost guarantee your failure. (Check out 99Dresses CEO, Nikki Durkin’s, very hard to read post mortem on her failure and then imagine if she had just focused on growth in Australia and hadn’t bothered trying to crack the US when she did and hadn’t wasted all that time fighting for a US VISA to allow her to move her venture overseas. Imagine how much more money could have been put into the product, development and growth had she not had the expense of moving her team to the US. Would that have guaranteed her success, no, but it sure has hell would have given her a much better fighting chance.)
NOW! Imagine if you, ‘the non-selfish consumer,’ had agreed to pay a “minimal” subscription fee for that “minimal” service. A nominal fee that increases as the value you are given increases. Say $1/month for basic app/features. Suddenly startup XX has income, their need to raise funds decreases, which hopefully will allow them to focus on adding value to the solution and growth. When they do go to pitch to investors, they have measurable value FROM DAY 1, and the risk to investors will hopefully be minimized. In the meantime, as the service improves, the amount the consumer pays increases or a business model kicks in. In the case of XX’s platform, maybe they have enough runway to be able to develop the ability to take a %fee from every transaction in the app, adding to their revenue potential, once again reducing their risk to investors or even their need to raise huge amounts of money.
Of course, I am not TOTALLY naive, the onus will still be on the start-up to prove the model, execute well etc… but dear consumer, perhaps by actually paying for something, you may just end up getting what you need rather than expecting everything for free and getting, well… NOTHING.
Stay tuned for my next post on how being a mentor means being a dream killer. From an only 50% bitter almost-failed (I refuse to give up) entrepreneur.