Product
How to classify a startup: SaaS vs B2B vs B2C
, Community Leader
28 minutes
If you are trying to classify a startup, terms like SaaS, B2B, and B2C can make the process more confusing than it needs to be. A founder might describe a company as “SaaS,” while an investor calls the same startup “B2B.” Someone else might call it a “B2B SaaS company.” All three descriptions can be correct because they answer different questions about the business.
The simplest way to understand startup classification is to separate what the company provides from who buys it. SaaS describes a software business and delivery model. B2B and B2C describe the relationship between a company and its customers. A SaaS product can therefore serve businesses, individual consumers, or both.
This distinction matters beyond terminology. How you classify your startup affects how you think about SaaS pricing, customer acquisition, sales cycles, go-to-market strategy, and the SaaS metrics that matter. It can also make it much easier to explain your startup idea to customers, investors, employees, and potential partners.
SaaS vs B2B vs B2C: what’s the difference?
The key mistake when comparing SaaS vs B2B vs B2C is treating them as alternatives on the same axis. They are not. SaaS tells us what kind of product and delivery model a company uses, while B2B and B2C tell us who the company sells to.
This means a startup can belong to more than one category at the same time. A software company that delivers an application over the internet to businesses might be classified as B2B SaaS. A similar application sold directly to individual consumers could be B2C SaaS. A company could even operate both B2B and B2C offerings simultaneously.
A useful way to think about the classifications is:
Classification | What it describes | Main question |
|---|---|---|
SaaS | Product and delivery model | How is the software provided? |
B2B | Customer type | Does the company sell to businesses? |
B2C | Customer type | Does the company sell to individual consumers? |
B2B SaaS | SaaS + customer type | Is SaaS sold to businesses? |
B2C SaaS | SaaS + customer type | Is SaaS sold to consumers? |
Once you separate these dimensions, the difference between B2B and B2C becomes much easier to understand, and so does the relationship between SaaS and B2B or B2C.
What is a SaaS business model?
Software as a service (SaaS) is a software and delivery model in which the provider operates an application and makes it available to customers as an ongoing service. AWS describes SaaS as a cloud-based model in which the vendor hosts applications and customers access them on demand, commonly through a web browser.
Instead of buying traditional software, installing a particular version, and maintaining it locally, customers generally access a SaaS platform over the internet. The provider handles much of the underlying infrastructure, maintenance, and software updates. A SaaS product might be accessed through a web browser or mobile app, depending on the product experience.
SaaS pricing frequently uses a recurring subscription, but subscription and SaaS are not synonyms. AWS notes that SaaS is commonly priced through subscriptions or pay-as-you-use models. A subscription is a revenue model that can also apply to physical products, media, professional services, and many other businesses. Conversely, SaaS companies can use usage-based pricing or other structures rather than a simple monthly subscription.
This is why calling any subscription business a SaaS business is inaccurate. A monthly coffee subscription is still an e-commerce business selling physical goods. A paid membership community is a subscription business, but that alone doesn't make it software as a service.
What are B2B and B2C?
B2B (business-to-business) describes a company that sells products or services to other businesses. Shopify defines B2B as a business model or commercial transaction between businesses rather than between a business and individual consumers.
The product does not have to be software. A manufacturer selling components to another manufacturer, a consulting firm working with companies, a wholesaler supplying retailers, and a SaaS company selling a CRM to sales teams can all be B2B companies.
B2C (business-to-consumer) describes a business selling to individual consumers. An ecommerce store selling shoes, a streaming service used for personal entertainment, and a consumer productivity app can all operate under a B2C model. Shopify similarly distinguishes B2C from B2B mainly by whether the transaction is with an individual consumer or another business.
That difference can have major consequences for how a startup operates. B2B sales often involve multiple stakeholders and longer sales cycles, particularly as companies move toward larger customers. B2C purchases are more commonly made by the individual who will use the product, although the exact buying process varies widely by market and price point.
Why SaaS and B2B or B2C are different types of classification
The easiest way to classify any startup is to imagine several labels rather than looking for one category that defines the entire company.
Suppose a founder builds an online accounting application and charges customers every month. Calling the startup “SaaS” tells us that it provides software as an ongoing service. It does not tell us who buys that software.
If the accounting application is designed for finance teams at companies, it can be classified as a B2B SaaS startup. If it is designed to help individual consumers manage personal finances, it can be classified as B2C SaaS. If the company offers separate products or plans for both groups, it may operate in both B2B and B2C markets.
The same logic applies outside SaaS. A marketplace can be B2B or B2C. A consulting company can primarily be a B2B business. An ecommerce company can sell directly to individual consumers while simultaneously operating a wholesale B2B channel. Businesses can therefore have multiple or hybrid business models rather than fitting permanently into one category.
Is SaaS B2B or B2C?
SaaS can be B2B, B2C, or both. A SaaS company isn't required to sell exclusively to businesses.
The confusion partly comes from how strongly SaaS is associated with business software. CRMs, analytics platforms, project management systems, HR software, sales tools, and customer support platforms are prominent SaaS categories, so “SaaS” is sometimes casually used as if it meant “B2B software.” But consumer applications can use the same SaaS model.
The deciding factor is the customer. If businesses purchase the software for business use, it is B2B SaaS. If individual consumers purchase it for personal use, it is B2C SaaS. If both groups are meaningful customer segments, the SaaS company may operate across both models.
What is a B2B SaaS company?
A B2B SaaS company provides software as a service to business customers. The customer might be a solo business owner, a small startup, a mid-market company, or a large enterprise.
For example, imagine a SaaS product that helps sales teams manage leads. Employees may use the application every day, but the company pays for the software. That makes it primarily a B2B SaaS product rather than B2C SaaS.
B2B SaaS can cover a very broad range of sales motions. A self-service product for small businesses might cost $20 per month and require no interaction with a sales team. Enterprise sales can involve demos, security reviews, procurement, multiple stakeholders, negotiated contracts, and an annual contract value worth tens or hundreds of thousands of dollars.
As a result, no single B2B SaaS model fits pricing or customer acquisition. Product-led growth may work well for one B2B SaaS startup, while another depends heavily on outbound B2B sales and customer success teams. The customer type tells you the company is B2B; it does not, by itself, tell you how the company acquires or serves those customers.
What is a B2C SaaS company?
A B2C SaaS company provides software services directly to individual consumers, usually for personal rather than organizational use. The individual consumer generally chooses the product, pays for access, and uses the application themselves.
Consumer SaaS can include personal productivity tools, creative applications, language-learning software, personal finance applications, fitness software, and many other categories. These products may use a recurring subscription, freemium model, or another pricing structure.
B2C SaaS often has different economics from B2B SaaS because the revenue per customer tends to be lower and the potential audience can be much larger. This can put greater emphasis on scalable customer acquisition, self-service onboarding, product experience, retention, and low marginal cost of serving an additional customer.
That does not mean every B2C SaaS company needs massive scale to work, or that every B2B company has high revenue per customer. These are tendencies, not classification rules. Actual unit economics depend on pricing, churn, acquisition costs, engagement, and market characteristics.
Can SaaS companies be both B2B and B2C?
Yes. A SaaS product can serve both businesses and individual consumers, and some companies deliberately build different plans, features, or go-to-market motions for each audience.
Consider a design application that anyone can purchase for personal projects. Those individual subscriptions represent B2C SaaS. The same company might sell team plans with centralized billing, collaboration features, administrative controls, and enterprise support. Those customers represent B2B SaaS.
The distinction can become even more nuanced with prosumer SaaS, where an individual buys a product personally but uses it for professional work. A freelance designer, independent developer, creator, or consultant may behave more like a consumer during the buying process even though the product helps them earn money.
For startup classification, the goal is therefore not to force every company into a single box. It is to identify the relevant dimensions separately. Once you know what the startup provides, who pays for it, and how the product is delivered, deciding whether it is SaaS, B2B, B2C, or some combination becomes much more straightforward.
How to classify a startup correctly
Once you understand that SaaS, B2B, and B2C describe different dimensions of a company, startup classification becomes much easier. Instead of asking, “Is my startup SaaS, B2B, or B2C?” you can break the question into several smaller ones: What does the company sell? Who pays for it? How is the product delivered?
This approach also works beyond software businesses. You can use the same framework to classify a marketplace, ecommerce startup, service business, or a company combining several business models.
Step 1: Identify what your startup sells
Start with the product or service itself. Is the startup selling software, physical products, professional services, access to a marketplace, digital content, or some combination of these?
For a SaaS business, software is the core product. Customers access functionality provided and maintained by the company rather than simply purchasing a physical product or hiring someone to perform a service manually.
This distinction becomes particularly useful when a startup idea includes software but the software is not necessarily the product. A marketplace, for example, may have sophisticated software behind it, but its primary function is to connect buyers and sellers. An online consulting company may build its own client portal, but if customers are primarily paying for human expertise, it is still fundamentally a service business.
A useful first-pass classification looks like this:
What customers primarily pay for | Likely classification |
|---|---|
Ongoing access to software | SaaS |
Physical products | Ecommerce, retail, or manufacturing |
Human expertise or labor | Service business |
Access to buyers and sellers | Marketplace |
Digital content | Media or content business |
Combination of several elements | Hybrid business model |
These categories can overlap. A marketplace might charge businesses a recurring subscription for software tools in addition to transaction fees. An ecommerce company might later launch a SaaS product for its suppliers. The goal is not to find a perfect label immediately, but to identify what creates the core customer value and revenue.
Step 2: Identify whether your customers are B2B or B2C
Next, determine who actually pays the company. This is generally more useful for classification than asking who ultimately interacts with the product.
If another business purchases your product or service, you are operating in B2B. If you sell directly to individual consumers for personal use, you are operating in B2C. If both are meaningful customer groups, your startup may have both B2B and B2C business models.
The distinction matters most when the buyer and end user are different people. Imagine an employee using project management software every day. The employee is an individual person, but that does not make the product B2C. If their employer selects the platform and pays the bill, the transaction is B2B.
The reverse can happen as well. Someone may use a design, writing, or productivity tool as part of their work while paying for it personally. Depending on how the company positions and sells the product, that customer may behave more like a consumer or prosumer than a traditional B2B account.
When the classification is unclear, ask three questions:
Who makes the purchase decision?
Who pays the company?
Is the product primarily purchased for organizational or personal use?
These questions usually reveal whether the startup is primarily B2B, B2C, or serves both markets.
Step 3: Determine whether you have a SaaS product or another business model
The next step is to determine whether software as a service accurately describes how the product works. A SaaS product is generally an application delivered as an ongoing service, with the provider maintaining the software and infrastructure rather than selling each customer a static copy of the software.
A recurring subscription alone is not enough. Subscription boxes, memberships, newsletters, and streaming content can all generate recurring revenue without being SaaS. Likewise, a marketplace does not automatically become SaaS simply because its website or mobile app contains substantial software.
Consider a platform connecting freelance designers with businesses. If the primary value is connecting buyers and sellers and the company earns transaction fees, the marketplace is likely the more useful primary classification. If the company instead sells project-management software to design agencies for a monthly fee, it is much more clearly a SaaS business.
Some startups legitimately combine both. A B2B marketplace might also offer sellers a recurring subscription to a SaaS platform containing inventory, analytics, or workflow tools. In that case, describing the company as having both marketplace and SaaS models is more accurate than forcing it into one category.
Step 4: Combine the categories for accurate startup classification
Once you have identified the product, customer, and delivery model, you can combine those labels into a more useful description.
For example:
Software sold to companies → B2B SaaS
Software sold directly to individual consumers → B2C SaaS
Software sold to both → B2B and B2C SaaS
Marketplace connecting businesses → B2B marketplace
Marketplace connecting businesses with consumers → B2C marketplace or a two-sided marketplace, depending on the context
Consulting services sold to companies → B2B service business
Physical products sold directly to consumers → B2C ecommerce
This way of classifying a startup provides more information than choosing one broad label. For example, saying “we are a B2B SaaS startup for independent ecommerce brands” communicates the product model, customer type, and target market in a single sentence.
The classification can also change as the company evolves. A B2C startup may introduce team accounts and become partially B2B. A marketplace may add a SaaS platform for sellers. A B2B SaaS company serving small businesses through self-service customer acquisition may later move upmarket and develop an enterprise sales motion.
B2B SaaS vs B2C SaaS: key differences
B2B SaaS and B2C SaaS share the same fundamental software-as-a-service model, but they can look very different as businesses. Their customers, pricing, sales cycles, acquisition channels, product requirements, and SaaS metrics often differ substantially.
These are not absolute rules. A low-cost B2B SaaS product can behave more like a consumer product, while an expensive consumer application can require more consideration before purchase. Still, understanding the typical differences between B2B and B2C SaaS helps founders choose appropriate benchmarks and go-to-market strategies.
Area | B2B SaaS | B2C SaaS |
|---|---|---|
Customer | Business or organization | Individual consumer |
Typical buyer | Founder, manager, team lead, procurement | Individual user |
Sales cycle | Can range from instant to several months | Usually shorter |
Pricing | Often per user, usage, tier, or contract | Often individual subscription or freemium |
Decision process | May involve multiple stakeholders | Usually one person |
Acquisition | Content, outbound, sales, partnerships, PLG | Paid acquisition, organic, referrals, app stores, PLG |
Retention | Often tied to business workflows and ROI | Often tied to engagement and personal value |
Common focus | ACV, expansion, NRR, sales efficiency | Conversion, engagement, churn, CAC |
Target customers and users
One key difference between B2B and B2C is the relationship between the customer and the user. In B2C SaaS, they are often the same person. Someone finds an application, decides whether it is valuable, enters a payment method, and uses the product.
In B2B SaaS, those roles can be separated. A sales representative might use a CRM, a sales manager may champion the purchase, a VP might approve the budget, IT may evaluate security, and procurement may negotiate the contract. Larger deals can therefore involve multiple stakeholders even when the underlying SaaS product is relatively simple.
This difference also affects product development. B2B SaaS often needs permissions, administrative controls, team management, integrations, security features, and reporting that an individual consumer would never need. B2C SaaS can place comparatively greater emphasis on immediate user experience, simple onboarding, and individual engagement.
SaaS pricing and subscription models
Both B2B SaaS and B2C SaaS commonly generate recurring subscription revenue, but the structure of that revenue can differ significantly.
B2C SaaS pricing is often designed to make the purchasing decision simple. A company might offer a free tier, a monthly plan, and a discounted annual subscription. Because the customer is usually spending personal money, pricing needs to make sense relative to the individual's perceived value.
B2B SaaS pricing can be more complex. Companies may charge per user, per workspace, by usage, by feature tier, or through negotiated annual contracts. Enterprise customers may also receive custom pricing based on scale, support requirements, security needs, and implementation complexity.
These differences affect revenue per customer and annual contract value. A consumer SaaS company may need thousands or millions of paying users to reach significant scale, while an enterprise SaaS company might generate comparable revenue from a much smaller number of high-value accounts.
Sales cycles and go-to-market strategy
The sales cycle is one area where B2B vs. B2C SaaS can diverge most dramatically.
Many B2C products are self-service. A consumer discovers the product, evaluates it, and subscribes without ever speaking to an employee. This makes scalable channels such as search, social media, referrals, app stores, and product-led growth particularly important.
B2B SaaS spans a much wider range. A $15-per-month tool for freelancers may also be entirely self-service, while enterprise software can require months of evaluation, demos, security reviews, procurement, contract negotiation, and implementation. As annual contract value increases, a dedicated sales team and customer success teams often become more economically viable.
That is why simply knowing a startup is SaaS isn't enough to determine its go-to-market strategy. A founder also needs to understand who the customer is, how much they are willing to pay, how complicated the buying decision is, and what sales motion can support the company's unit economics.
SaaS metrics that matter
Many SaaS metrics matter across both B2B and B2C, including customer acquisition cost, churn, lifetime value, recurring revenue, conversion, and retention. However, the relative importance of individual metrics changes with the business model.
For a B2C SaaS product with inexpensive monthly plans, a founder might focus on trial-to-paid conversion, activation, customer acquisition cost, engagement, and customer churn. Even relatively small changes in retention can have a large impact when the company depends on a high volume of individual subscriptions.
For B2B SaaS, especially companies selling larger contracts, metrics such as annual contract value, sales cycle length, expansion revenue, and net revenue retention (NRR) become particularly useful. NRR measures how recurring revenue from an existing customer cohort changes after accounting for expansion, contraction, and churn.
The appropriate benchmark also depends heavily on the customer segment. Comparing the churn of a $10 consumer application with a SaaS platform sold through six-figure enterprise contracts would tell a founder very little. Before comparing SaaS metrics with industry benchmarks, it's important to classify the business and customer segment correctly.
Ultimately, B2B SaaS vs B2C SaaS is not a question of which model is better. Each can produce a scalable software business, but the mechanics of reaching product-market fit, acquiring customers, retaining them, and growing revenue can differ significantly.
Examples of B2B SaaS and B2C SaaS companies
Real-world examples make the classification framework easier to apply. The important question is not simply whether a company develops software, but what customers are paying for and whether those customers are businesses or individual consumers.
Some SaaS companies also serve several customer segments at once. A product may begin with individual users, expand into team accounts, and eventually develop an enterprise offering. In that case, the company can have both B2C SaaS and B2B SaaS characteristics rather than fitting neatly into one category.
B2B SaaS startup examples
B2B SaaS companies provide software to businesses and organizations. Their products can serve almost any business function, including sales, marketing, accounting, HR, analytics, communication, security, and project management.
A few familiar examples illustrate how broad B2B SaaS can be:
Company | What the SaaS product does | Primary customer |
|---|---|---|
Slack | Workplace communication and collaboration | Businesses and teams |
HubSpot | CRM, marketing, sales, and customer service software | Businesses |
Shopify | Commerce software and infrastructure | Merchants and businesses |
Zoom | Video communication and collaboration | Businesses, organizations, and individuals |
These examples also demonstrate why startup classification is rarely perfect. Zoom, for instance, can serve individual consumers as well as enterprises. Shopify primarily sells its software to merchants, making its core SaaS relationship B2B, even though those merchants may use the platform to sell products directly to consumers.
For an early-stage founder, it is usually more useful to describe the primary customer and business model than to search for a label covering every possible use case. If most revenue comes from companies paying for access to software, “B2B SaaS company” is generally an informative classification.
B2C SaaS startup examples
B2C SaaS companies sell access to software directly to individual consumers. Common categories include personal productivity, education, creative tools, personal finance, health and fitness, and other applications designed primarily for personal use.
For example, a language-learning application that sells premium subscriptions directly to learners can operate as B2C SaaS. The same applies to a personal budgeting application or an editing tool purchased by individuals for their own use.
Some B2C SaaS companies later develop business offerings. A productivity app might add collaborative workspaces, centralized billing, administrative permissions, and enterprise security. At that point, the SaaS product can serve both B2B and B2C customers through different plans.
This is one reason the distinction should be based on the actual customer relationship rather than the product category alone. Two nearly identical software products can have very different business models if one sells primarily to companies and the other directly to individual consumers.
B2B and B2C companies that are not SaaS
B2B and B2C existed long before SaaS, and neither term implies that software is involved.
A management consulting firm is a straightforward example of a B2B company that is not SaaS. Its customers are businesses, but they are primarily purchasing expertise and professional services rather than access to a SaaS platform. A manufacturer supplying components to other manufacturers is also B2B without being a software business.
Similarly, a direct-to-consumer clothing brand is B2C because it sells products directly to individual consumers. It may operate a sophisticated ecommerce website and use recurring subscriptions for certain products, but neither characteristic makes it SaaS.
A marketplace provides another useful distinction. The core value of a marketplace is generally connecting buyers and sellers and facilitating transactions between them. Software enables that interaction, but software alone does not make the marketplace a SaaS business.
These distinctions are particularly useful when evaluating a startup idea. Asking whether a company uses technology is usually not enough. The more useful question is what customers are actually paying the company to provide.
Other ways to classify any startup
SaaS, B2B, and B2C are only three of many labels that can describe a startup. Investors, founders, employees, and analysts often classify companies across several dimensions simultaneously.
A startup might therefore be described as an “early-stage vertical B2B SaaS company selling accounting software to dental practices.” Each part of that description communicates something different about the business.
Business model and revenue model
The business model describes how a company creates, delivers, and captures value. SaaS, marketplaces, ecommerce, advertising-supported businesses, and professional services are examples of broad business model categories.
The revenue model focuses more specifically on how money reaches the company. Revenue can come from recurring subscriptions, transaction fees, usage-based charges, advertising, commissions, licensing, one-time purchases, or combinations of these methods.
The two concepts overlap but should not be treated as identical. A SaaS business can charge a recurring subscription, use usage-based pricing, or combine a base subscription with additional consumption charges. Two SaaS companies can therefore share the same broad business model while having significantly different pricing and revenue structures.
For founders, this distinction becomes important when testing unit economics. Customer acquisition cost, revenue per customer, gross margin, churn, and the marginal cost of serving an additional customer can all influence whether a particular revenue model is sustainable.
Marketplace vs SaaS business
Marketplace and SaaS are frequently confused because both are usually technology businesses operating through websites or applications. The difference lies primarily in the value being provided.
A SaaS company provides software functionality to its customers. A marketplace primarily creates value by bringing two or more sides of a market together. Its platform connects buyers and sellers, employers and workers, hosts and guests, or other participant groups.
Their economics can therefore be quite different. A marketplace may focus heavily on transaction volume, take rate, liquidity, supply and demand, while a SaaS company tends to focus more heavily on recurring revenue, retention, churn, and expansion.
Hybrid models are possible. A B2B marketplace might charge transaction fees while also selling sellers a SaaS product for managing inventory, analytics, payments, or customer relationships. In such cases, identifying multiple business models is more accurate than choosing between marketplace vs SaaS as though only one can apply.
Target market and industry
Another dimension is who within the broader B2B or B2C market the startup serves. “B2B SaaS” alone still covers an enormous range of companies. A product built for independent restaurants has a very different market from enterprise cybersecurity software, even though both may technically be B2B SaaS.
Founders can classify a target market by company size, industry, geography, role, use case, or other characteristics. A B2B SaaS startup might target small businesses, mid-market companies, or enterprises. A B2C startup might focus on students, parents, creators, travelers, or another consumer segment.
Market size can also be considered through concepts such as TAM, or total addressable market. TAM estimates the overall revenue opportunity available if a product could capture its entire relevant market. It does not determine whether a startup is B2B, B2C, or SaaS, but it adds another useful dimension when evaluating the opportunity.
Startup stage
“Startup” itself does not describe a business model. It usually refers to a company's stage and its pursuit of a repeatable, scalable business, although definitions vary.
An early-stage founder may still be trying to validate the problem, target customer, and willingness to pay. Later, the focus may shift toward establishing product-market fit, building repeatable customer acquisition, improving retention, and scaling the business.
This distinction matters because the same company can retain its B2B SaaS classification while changing dramatically over time. A founder testing a SaaS product with ten customers and a mature SaaS company generating hundreds of millions in recurring revenue can share the same basic business model, even though their operational priorities have little in common.
Startup classification should therefore answer a specific question. If you want to understand who buys the product, use B2B or B2C. If you want to understand how software is delivered, SaaS may be the relevant label. To understand maturity, look at the startup stage.
Common startup classification mistakes
Most classification mistakes come from trying to reduce a multidimensional business to a single label. The terminology becomes much clearer once each label is connected to the question it is supposed to answer.
Treating SaaS vs B2B vs B2C as mutually exclusive
The most common mistake is asking whether a startup is “SaaS or B2B” as though the two labels compete.
A company can be both. SaaS describes the software model; B2B and B2C describe the customer relationship. A SaaS company selling software to businesses is B2B SaaS, while one selling software directly to consumers can be B2C SaaS.
The same principle applies to other combinations. A company can operate a marketplace and sell to businesses, making it a B2B marketplace. Another can combine marketplace and SaaS products while serving both businesses and consumers.
Calling every subscription business a SaaS company
Recurring revenue is strongly associated with SaaS, but a recurring subscription does not automatically make a company SaaS.
A meal-delivery subscription sells food. A paid newsletter sells content. A membership community sells access to a community or service. Each can charge customers every month without providing software as a service.
When deciding whether something follows a SaaS model, ask what the customer would say they are paying for. If the answer is ongoing access to software functionality provided and maintained by the company, SaaS is likely appropriate. If software merely facilitates another product or service, another classification may be more accurate.
Confusing the customer with the end user
Another common mistake is classifying a product based entirely on who uses it.
In B2B SaaS, the person using the application may be an employee, while the actual customer is their employer. The buying process might involve a manager, finance department, IT team, procurement, and other stakeholders. The presence of individual users does not make the product B2C.
Similarly, an individual may buy software for professional purposes without going through an employer. This is common in prosumer SaaS, where freelancers, creators, consultants, and other independent professionals purchase their own tools.
Identifying the buyer, payer, end user, and use case separately can prevent this confusion.
How should a founder describe their startup?
A founder rarely needs to choose one label. A useful startup description combines several dimensions while remaining understandable.
A simple formula is:
[Stage or category] + [customer type] + [business model] + [target market/problem]
For example, instead of saying:
“We are a SaaS startup.”
a founder could say:
“We are a B2B SaaS startup that helps independent ecommerce brands manage inventory.”
The second description immediately communicates who the company serves, what type of product it provides, and the problem area it operates in.
You don't need to include every possible classification in every conversation. A potential customer may care primarily about the problem you solve. An investor may also want to understand the market, business model, growth, unit economics, and product-market fit. A prospective employee may care more about the industry and startup stage.
The purpose of startup classification is therefore not to find the one permanent label for a company. It is to build a clear description from several useful dimensions.
Frequently asked questions about SaaS, B2B, and B2C
Is SaaS the same as B2B?
No. SaaS and B2B describe different characteristics of a business. SaaS refers to software delivered as a service, while B2B means that a company sells to other businesses. A company that combines both is typically described as B2B SaaS.
Is SaaS the same as B2C?
No. SaaS describes a software delivery and business model, while B2C describes a company selling to individual consumers. A SaaS application sold directly to consumers can therefore be classified as B2C SaaS.
Can a startup be both B2B and B2C?
Yes. A startup can serve both businesses and individual consumers. It may offer separate plans for each group or provide essentially the same product through different sales motions. In this case, describing the company as having both B2B and B2C customers is more accurate than forcing it into one category.
Is every software startup a SaaS startup?
No. Software businesses can use many models besides SaaS. Companies can sell software licenses, run custom software-as-a-service businesses, operate marketplaces or platforms, sell downloadable applications, or combine several models.
To qualify as SaaS, the core offering generally needs to involve software delivered and maintained as an ongoing service rather than software simply being used somewhere inside the business.
What is the easiest way to classify a startup?
The easiest way to classify a startup is to answer three questions: What does the company sell? Who pays for it? How is the product delivered?
If the company provides software as an ongoing service, it can be classified as SaaS. If businesses pay for that software, it is B2B SaaS. If individual consumers pay for it for personal use, it is B2C SaaS. If both groups are customers, the startup can operate across B2B and B2C SaaS.
From there, you can add other dimensions such as marketplace vs SaaS, target industry, company size, pricing model, go-to-market strategy, and startup stage. This produces a much more accurate classification than trying to decide whether a company is simply “SaaS vs B2B vs B2C.”
