Bowery Capital and Balance explain how B2B marketplaces can think about payments.
Over the past two decades, there has been an influx of mega-successful business-to-business (B2B) companies. Much of this landscape, but not all, can be attributed to the advent of cloud computing and Software-as-a-Service based businesses. As the B2B landscape experiences tremendous growth, it is important to acknowledge the ample growth potential that remains. However, as entrepreneurs create new B2B companies it is critical that they understand the scope of what they are up against. Given our position in the industry, we thought it would be beneficial to provide some insights about the major players in the private markets. These companies are valued over $1.0B, have probably raised more than $100MM, and have a lot of momentum and weight behind them. They are no joke and you should pay attention to them. We have aggregated data on the top private B2B unicorns and analyzed it. Here are four things to note if you are an entrepreneur creating a B2B company and thinking about where the existing B2B unicorns are at.
1. Today There Are Roughly 44 Private B2B Unicorns. From the approximately 200 private unicorns, roughly 44 are B2B businesses. The total estimated valuation of the B2B unicorns is $106.3B with an average valuation of $2.4B. Palantir Technologies, sitting at a $21B valuation, is a notable outlier. The companies can be categorized into a wide variety of industries such as Cybersecurity, Customer Experience Management (CEM), Cloud Data Management, IoT Software, Advertising Technology, Robotics Process Automation and many more. The good news is that for most people starting a company there are many areas of opportunities against the B2B unicorns.
2. Cybersecurity Unicorns Are The Most Prevalent. Out of the 44 companies, cybersecurity companies represent the highest concentration of all industry types. The aggregate valuation of the 8 companies in this ecosystem is $11B. The largest company on the list is Tanium, sitting at a $3.7B valuation. The company provides cyber protection to enterprises and government organizations. One of the more unique companies is Lookout, a smartphone security company dedicated to helping clients like Microsoft make the mobile experience safe. With the exception of Duo Security, each of the companies exclusively targets enterprises. While cybersecurity is quite populated, there is still room for innovation, such as SMB-focused cybersecurity, which was entirely underrepresented in the list.
3. The IT Buyer For 15% Of The Unicorns Is A Marketing Professional. The top private B2B unicorns contain a sizable portion of sales, creative design, and advertising technology businesses. 7 of the companies sell to an IT buyer that would accurately be labeled as a marketer. This could be a Chief Marketing Officer all the way down to an individual marketing director at a company. While there is significant variation among the companies in this category such as Applovin, a mobile advertising technology company, all the way to Canva, the graphic-design-tool company, each sells directly to a marketing professional at the end of the day. Out of all the possible IT buyers, marketers seem to have some of the highest purchasing power and flexibility and as a result are great targets. New SaaS companies should be cautious given the amount of B2B unicorns in this category.
4. There Is Still A Lot Of Opportunity In Vertical Software. Only 3 of the unicorns are vertical specific, while almost all others take a horizontal approach and sell into multiple industries or verticals. It is possible that horizontal B2B companies have greater scalability because they aren’t limited to one industry. It is also possible that because there are more prospects they have more opportunities to find customers. Independent of the reason, it is clear that the horizontal companies have had more success to date but there is still a lot of opportunity in the vertical software segment.
If you liked “How You Stack Up Against The B2B Unicorns” and want to read more content from the Bowery Capital Team, check out other relevant posts from the Bowery Capital Blog. Special thanks to Ben Marans for his writing and contributions to this topic.
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