B2B Tech Startups Finally Catch A Break

In a bit of a switch, startups that concentrate on serving businesses rather than consumers are garnering a bit more money from venture capital firms — who, as Reuters noted, want to see investment returns “sooner rather than later.”

That’s a marked change of pace but perhaps explained by the consumer-centric firms, where valuations are high and VC leaders are growing wary of froth in the private markets. One data point: B2B investments were the source of 60 percent of exits in Europe last year, according to data compiled by Tech.eu.

Overall, investments in B2B were up 40 percent to nearly $12 billion, as measured by year-over-year trends through the end of March. Consumer firms were still relatively larger in terms of investments, with $24 billion over the same timeframe, though that was down 9 percent.

In an interview with the newswire, Dave McClure, who heads the venture capital outfit 500 Startups, said that more than half of his firm’s investments are in consumer outfits, but B2B is having relatively better performance. In his remarks, he said: “For a lot of consumer startups, it’s not always obvious how you are going to monetize, and there is a lot of competition for eyeballs. For a lot of B2Bs, as long as you are able to get the initial customer in place, there is a lot of potential for making money and continuing that business.”

In one notable funding event, Zenefits, a human resources firm, gathered up more than $500 million in what was the biggest U.S. fundraising in B2B over that timeframe.