Feb 2011

WooThemes is a predominately B2B business. We sell products to people that use them in their own businesses or for their personal projects; most of which has a direct or indirect focus on generating a financial return of some kind.

So whilst we have a pretty diverse customer base, they share one characteristic that has been hugely profitable to us: they do not mind spending money on our products.

I guess this is sounding really simple and obvious right about now, but I've got a point here. :) To do so, we just need to back up a bit and look at a very basic example of how a business / entrepreneur operates...

Entrepreneur A invests $100 in his new trading business. He buys $100 worth of goods, sets up a little stall somewhere and proceeds to sell all of his goods with a nifty profit mark-up for $150. To re-stock he again purchases $100 worth of goods and re-invests his profit of $50 in making spiffy new (premium) packaging for his goods. Due to the new packaging, he manages to sell his goods at an increased mark-up and generates $200 in revenue.

Simple take-away from this story: Entrepreneur reinvested the $50 profits (from his first round of sales) in packaging, because he knew that it'd contribute positively to his revenues (and ultimately his ROI). He didn't spend the money on a new office (which may not have contributed to his ROI), but reinvested directly in something that would enhance his business.

Back to B2B

Back to what I said about WooThemes' users... I believe that WooThemes' users are happy spending money on our products, because it enhances their businesses and / or personal projects. Because this is directly or indirectly linked to generating a financial return, the expenditure of buying a WooThemes product could potentially turn into a simple reinvestment in enhancing those businesses.

The fact that the majority of our sales are thus B2B-esque, has meant that even though economies worldwide has suffered from economic recession we've been able to grow our business. Recession doesn't mean that people stop spending money; they're just thinking twice about every dollar that leaves their bank account, which means they're more than happy to spend money on something that will enhance their businesses / potentially generate more revenue.

VC Focus

I spoke with a prominent, US-based VC a couple of weeks ago about WooThemes and asked him point-blank why they were interested in our company, considering that we'd never rack up the kind of user numbers that the "platforms" like Facebook, Twitter & Tumblr can boast. He remarked that they believed there to be a shift in the marketplace where companies - like WooThemes - could profitably provide value-added, B2B-type products to users within those platform ecosystems.

Whether that has influenced their firm's investments, I don't know, but - to me anyway - it made a lot of sense.

B2B products and services just seem to be less sensitive in tough times and I certainly don't think that we have to fight as hard for every single sale on WooThemes when compared to general consumer expenditure.

So if you're thinking about starting a startup, I don't think it's a bad idea to create something that will enable other people to make more money. Even VC's seem to be liking that model.

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