We took a thorough analysis of 500 startup businesses both online and offline to better understand how the industry works. The research was also taken with the aim of understanding the general market outlook and opportunities for growth and future trends to watch out for.
In taking out my research, I focused on the following:
- Trends in the industry
- Popular ideas
- Leading industries
- Startups growing at an amazing rate
- Fund raising outlook
- Venture capital investments
- Fastest growing industries
- Opportunities for growth
- Future trends in the industry
2020 was a very significant year for startup businesses globally. It is also a well-known fact that the pandemic outbreak has impact on most industries in 2020. However, 2021 looks unpredictable at this point since the year is just beginning. Due to the COVID-19, many startup businesses find it difficult to get investors. In countries like the United Kingdom and the United States, startup investments are expected to double more than what was seen in 2020.
This growth is predicted to be due to the internet and the growth of ecommerce businesses. Not only does it serve as a platform for innovative new applications and services, but it’s a vital medium for getting news of innovations out to potential customers and investors.
Key Statistics About Small Businesses
- My finding shows that 50% of startup businesses with employees will survive the first five years.
- In 2020, there are about 10 million small businesses in the United Kingdom while the United States homed over 30.9 million small businesses in 2020.
- 53% of startup business has at least one woman in an executive position.
- 30% of startup businesses expand after year 2.
- 69% of startup businesses started at home.
- 35% of startup businesses are LLC
- 35% are S-corporation
- 19% sole proprietorships
- 2% are partnership
Trends in the industry
Most startup businesses start small, however, the advantage they have over bigger companies are innovation and inclusion in changing market conditions. In 2020, 92% of startup businesses uses online marketing strategies and had digital business plans in place. 68% of startup businesses adopts digital business model while 32% uses traditional business model.
- 63% of startup businesses use artificial intelligence
- Another trend in the startup industry is remote work from home. In 2020, due to the COVID-19, 65% of startup businesses worked from home
- 38% of startups are embracing voice recognition technology
- 43% of startup businesses said they obtained little benefit from their data.
- 77% of marketers use personalization in their email marketing campaigns in the form of transactional information, purchase histories, and other data.
- The IoT market will be worth $581 billion by 2020 and it provides startups with some of the best opportunities to make an impact in the marketplace.
Startup Business Ideas in 2020
Running a successful business is not an easy task. It demands commitment and lots of hard work. According to a report, about 80% of new businesses close down in the first year. This is a huge failure rate. This should make you even more watchful about the steps you take to establish your startup. The main reason for this failure is the wrong business idea.
However, having passion without the idea of the business you plan to establish is not enough.
Below are the top business ideas of 2021:
- Print On-Demand (POD) Online Business
- Coffee Shop
- Food truck business
- Cooking Classes
- Product / Business Reviewer
- Home Food Delivery
- Bookkeeping Services
- Website Design
- Digital Marketing
- Currency Trading: Currency trading can be one of the most lucrative and fascinating small business ideas. If you are someone who is good with numbers, willing to work long hours, ready to take high risk, then this is the ideal business for you.
- Event Planning
- Yoga Studio
- Pet Business
- Content Creation Agency
Growth in the Small Business Market
Growth in the small business market depends largely on the industry, location and developmental stages. It is a common belief in the business world that small companies will find it easier to grow their revenues at a high percentage rate compared to larger companies. This is due to the fact that a smaller number is easier to grow compared to a large one.
On average, based on my analysis startup companies are expected to grow at the rate of 178% in revenues for their first year, 100% for the second, and 71% for the third.
By implication, it shows that a startup company with a gross of £50.000 Year to Date (YTD) will forecast £139.000 for the next year £278.000 for the following and £475,380 for the third one.
- In the small companies subset the country leading for projected growth is by far India with 970% on the first year and followed by Australia with 400%.
- The last year seems to be uniform among all the countries except for Canadian companies which are projecting to grow slower than their peers.
- The leading industry in the first year is Banking and Investments Services with 161%, followed by Consumer Products with 151%.
- 50% of startup businesses reach profitability in the first six months
Fund raising outlook
The outlook for fundraising is turning more negative due to the COVID-19 crisis. The analysis conducted from 500 companies show the following:
- The 90-day outlook also ticked back up to 53% from 48% predicting high negative impact.
- According to the research up to 42 percent of startup founders look at IPO as a viable exit option.
- 58% of entrepreneurs expect a challenging funding environment in 2021.
- 75% of founders having had a favourable funding experience last year.
- 59% of startup companies seek fund with private equity and hedge funds as a part of their next fund-raise.
- Over 60 percent of ecommerce and consumer brand startups view mergers and acquisitions as the preferred exit option.
- 53 percent of fintech companies are more inclined towards IPO
From the research, it was discovered that 91% of growth-stage startups aim to become profitable in the next four years. 60% of startup businesses target to reach profitability in the next two years of their operation.
Some of the process of rising funds are:
- Getting fund through loans from bank
- Getting fund by startup pitch competitions
- Venture capital for startups
Venture capital investments
This is a common fact that new startup companies spring out every day. However, as startup companies increase, so is the number of investors. Venture capitals generally come from well-off investors, investment banks, and any other financial institutions, and help finance startup companies to have long-term growth. It can also provide other resources that can contribute to the success of the company, such as technical, managerial expertise with a mentorship program.
However, a venture capital investment tends to seek a bigger business that is already generating revenues after passing the startup phase. They also want to make their investment back, as soon as possible, within three to five years, which can be hard for smaller businesses to reach within such a time frame.
According to the research conducted, most venture capital are interested in software and technology sectors, rather than telecommunication or consumer products.
Obtaining Venture Capital Financing
The criteria to watch out for are:
- The sector mostly preferred are software, digital media, mobile, SaaS, biotech, mobile devices, etc.
- Stage of company: startups and already existing companies. Although an existing company is preferrable.
The key factors to consider for valuation are:
- Years of experience and the success of the business owner
- The opportunity in the industry
- Availability of technology
- Company revenue and advertising strategies
- Progress towards a minimally viable product
- Business model and revenue
The 20 Fastest Growing Industries for 2021
Home Healthcare Services
- Sector: Healthcare and Social Assistance
- Employment in 2020: 1,472,700
- Employment in 2028: 2,186,400
- Employment Change: 713,700
- Compound Annual Rate of Change: 4.0%
Also, by 2028, the industry’s output is projected to be nearly $115 billion, compared to just $56.8 billion in 2008.
Outpatient Care Centers
- Sector: Healthcare and Social Assistance
- Employment in 2020: 934,400
- Employment in 2028: 1,265,400
- Employment Change: 331,000
- Compound Annual Rate of Change: 3.1%
Other Information Services
- Employment in 2020: 307,800
- Employment in 2028: 393,500
- Employment Change: 85,700
- Compound Annual Rate of Change: 2.5%
Offices of Health Practitioners
- Employment in 2020: 930,200
- Employment in 2028: 1,184,800
- Employment Change: 254,600
- Compound Annual Rate of Change: 2.4%
This industry grew by 303,200 jobs over the last 10 years and is projected to add another 250,000-plus jobs by 2028. In 2018, it became a $100-billion industry with total output worth $101.9 billion.
Medical and Diagnostic Laboratories
- Employment in 2020: 277,900
- Employment in 2028: 350,300
- Employment Change: 72,400
- Compound Annual Rate of Change: 2.3%
Computer Systems Design and Related Services
- Employment in 2020: 2,121,600
- Employment in 2028: 2,642,300
- Employment Change: 520,700
- Compound Annual Rate of Change: 2.2%
- Employment in 2020: 407,900
- Employment in 2028: 489,100
- Employment Change: 81,200
- Compound Annual Rate of Change: 1.8%
Reasons for Starting Startups
- 26% want to be their own boss
- 23% in pursue of passion
- The opportunity presented itself: 19%
- 12% dissatisfied with current work
- 6% laid off
- 6% not ready to retire
- 3% circumstances
Opportunity for Growth in the Startups Industry
As tech continues to integrate into our everyday lives, there are increasing opportunities to “gamify” fitness. Making fitness fun through gamification provides enormous benefits to the public while producing new monetization methods in competitive industries.
Also, the healthcare industry provides an opportunity for startups as the industry has continued to grow over the years.
Fastest growing small business industries
The industries with the top number of small business startups in 2020 were:
- Business services: 11%
- Food/Restaurant: 11%
- Health/Beauty/Fitness: 10%
- General retail: 7%
- Home services: 6%
Future trends in the industry
Industries with the best startup statistics which makes us the future trend in the industry are:
- 18.4% Accounting, Tax Preparation, Bookkeeping, and Payroll Services
- 17.9% Lessors of Real Estate
- 17.4% Legal Services
- 16% Management of Companies and Enterprises
- 14.9% Real Estate
- 14.8% Dentistry
- 14.3% Brokers
- 13.2% Nonmetallic Mineral Mining and Quarrying
- 13% Health Practitioners
- 12.1% Medical and Diagnostic Laboratories
It is important not the let the statistic border you if you plan to open a startup business. All you need is a solid idea of the industry you plan going into. The success rate for most startup businesses is high especially in the United Kingdom and other parts of Europe. Success rate is 80% while only 20% failed.