Successful startups: 5 segments preferred by investors
Even though venture capital has suffered a boom in the last decade, both nationally and internationally, those who hold the capital know that 90% Some startups fail. So if you want to be the founder of one of the successful startups, it is necessary to understand what is the best way to attract investors and be financed by them.
In this article, we will share five segments that have excelled in attracting investments, with good opportunities for growth and return:
- Fintech;
- Healthtech and Life Science;
- Edtech;
- Agtech;
- Cleantech.
As stats show that, in almost every sector, the average failure rate in the first year of a startup's life is 10%. Already from two to five years it is 70%. In other words, setting up an MVP (minimum viable product) is not enough.
So, at the end of the day, It's less about who you know and more about what you have. That said, it is important to note that each stage of a startup requires a different type of funding to show that your idea, in fact, deserves certain resources, always fulfilling different goals and challenges.
FFF ➡️ Angel Investment ➡️Seed Capital➡️Venture Capital➡️Private EquiteStartup Investment Journey
Initially, most companies start with personal capital or funds from friends and family, the so-called FFF (Family, Friends and Fools or Fans) to raise the first resources at the ideation stage.
After that moment, they are usually candidates for capital from angel investors. Individuals or legal entities looking for companies that have already validated their MVP and that need support to grow. More than capital, we seek Smart Money, that is, the financial contribution combined with market knowledge and know-how.
O Seed Capital or seed capital is the initial round of funding that a company receives to get started. Generally, there are four rounds or series of investments that a company can receive in total: seeds, Series A funding, Series B funding, and Series C funding.
As for the VC's (Venture Capitalists) generally don't consider supporting a startup until it can demonstrate exponential revenue growth or traction in an untapped market.
And finally, the companies of Private Equity they tend to invest only in mature organizations. They generally buy 100% of the ownership of the companies they invest in. As a result, the investing company now has full control of the startup after the acquisition.
Even if this structure is not plastered and there is no prerequisite for certain investments, establish and make the Management of a startup it is always a risk when it comes to raising funds.
Focus on right investors, find the Right words For your Pitch and present a proof of concept created by Adequate staff will help you go through different funding rounds and become a Example of a Brazilian startup that not only survived but succeeded in a sea of competition.
5 segments preferred by investors
Investors are eyeing startups with enormous potential and scalability. Your experience and guidance can drive small, growing initiatives. However, especially VC's plan to get their money back within 3 to 5 years. Therefore, they are not interested in startups that need more time to consolidate in the market.
In addition, they are looking for companies with a good plan and a dedicated team. And, although the mega-investment rounds, which had tripled from 2016 to 2018, have decreased since COVID-19, the fundamentals of large investors have not changed and they remain firm in the following five segments:
1. Fintechs
As Fintechs remain extremely attractive to investors. According to the Pulse of Fintech — a study published by KPMG highlighting global investment trends in Fintechs — the global funding of these companies reached US$ 210 billion in a record of 5,684 transactions in 2021.
In addition, about 3 out of 4 consumers around the world have used a money transfer or payment service Fintech at least once, according to Bank Rate's analysis.
“The fintech sector is forecast to grow to $698.48 billion by 2030, an increase of $587.91 billion from 2020, with digital payment services being the most prominent, accounting for more than 80% of that global revenue.”
“Investing in FinTech in 2022" Report - Bank Rate
Second surveying According to Statista, America is the region that is attracting the most investments in the sector, representing almost 80% of the total.
Despite this, although attracting capital is a challenge in all technology verticals, the regulatory complexities of finance emerge as the main problem that these startups must face.
2. Healthtech and Life Science
Finding new drug targets, designing new therapies, and supporting their trials have increasingly attracted investors. New technologies, such as artificial intelligence, are changing the way drugs are discovered and developed, and more biotechnology startups have adopted an engineering mindset, making sciences that were viewed as very risky in the past now sound like great opportunities.
Growth and the evolution of the healthtech market in Brazil and Latam reflect that movement.
As a result, funding rounds for early-stage health services reaching their highest figures - surpassed only by Fintechs.
3. Edtechs
With the COVID-19 pandemic and the need for social isolation, thousands of schools around the closed world and the sector of Edtech was propelled to the forefront of the educational scene.
After all, during this time, global education systems had to find creative solutions to address the challenges of remote learning.
Thus, VC-backed startups in the educational space raised over $20 billion last year, up from around $14.6 billion in 2020, according to Crunchbase. Among the top 10 investors in EdTech startups, it is worth mentioning:
Investor Amount of Edtechs ImpactedLearn Capital78Reach Capital73Rethink Education67GSV Ventures64University Ventures48NewSchools Venture Fund43Kapor Capital41Owl Ventures39Fresco Capital341776 Ventures33November 2022 Data by Shizune
4. Agtetch
AgTech, or Agricultural Technology, is the application of digital technologies and data analysis to agriculture and food production. AgTech startups are working on a wide range of solutions, from sensors that help farmers optimize irrigation to software that helps grocery stores track food spoilage in real time.
The statistics released by Crunchbase showed 5 billion dollars in over 440 funding agreements for VC-backed startups in the AgTech space in 2021. That's a sizable increase considering the $3.3 billion in 422 deals in 2020.
5. Cleantech
As we deal with the climate emergency, we're seeing more and more scientists, technologists, and entrepreneurs investing in Cleantechs - innovative companies with technologies that have the potential to provide a positive environmental impact, such as reductions in greenhouse gas emissions, conservation of water and natural resources, waste prevention through recycling and reuse, among others.
According to the report”The 2022 Global Cleantech 100“, the construction of a sustainable future involves revolutionary digital innovations, robotic agricultural equipment and solutions from electric charging to carbon capture. Among the financial impacts of investments made in leading companies in this sector, we have:
The future of investments in startups
According to Verve Ventures, 42% of investors say that attractive financial returns are the main reason to invest in startups.
People who invest in startups are curious to learn more about new things and, therefore, among other important motivations, we have the impact on society and the support for entrepreneurs.
While many investors are entering this territory now, there's still room for more. According to Dawn Dickson, CEO of POPcom:
Initial funding is evolving and overcoming its reliance on venture capital. The founders are finding alternatives and taking control of their businesses with the help of what I call “micro-angel” investors... people who make small investments of $100 — $4,999.
Thus, there is now an alternative to venture capital funds, making it possible to reduce dilution and scale at your own pace, especially in a scenario of geopolitical instability, in which the appetite of investors is lower.
Be that as it may, there are different paths that lead to success, so we hope that the information shared here will provide the insights necessary for your company to achieve the results you want.
Finally, if you also want to digitize your processes, as the leading companies in the market already do, Clicksign is the ideal solution to accelerate the growth of your business!
Learn more about how Online Document Signing can revolutionize your processes, Take a Free Test and see how it is possible to make a subscription, with legal validity, in less than 1 minute. Try it, no credit card required!
.jpg)
