2023 Tech Startup Trends: Top Industries

2023 Tech Startup Trends: Top Industries

Jan 17, 2023

The 2020 COVID pandemic and subsequent global lockdowns changed the world and our society in many ways. Not only did they keep students home from school and parents home from work and result in small businesses across the country going out of business, but they also changed the way many companies operate and where people around the world turned for entertainment and cultural insights. 

The largest number of unicorn tech startups – companies valued at over $1 billion while still privately owned – were born during recessions and times of economic hardship, with over 50 of the current cohort of unicorn tech startups (out of a total 540 around the world) having been started during the 2008 housing crisis. Together those unicorns born during the ‘08 crisis have a total value of around $150 billion because they seized on an opportunity and never stopped pushing forward.

The pandemic, lockdowns, supply chain crisis, and current economic troubles that are being seen around the globe have seen their own resultant changes to the startup landscape. Educational Technology (EdTech) and gaming were declining in terms of new startups in the industries and funding they received, but each has started seeing a rise in both since 2019. 

FinTech has more tech unicorns globally than any other startup industry (139 out of 540), making up 19.5% of the total value of all tech unicorns that currently exist. SaaS companies are the next highest on the representation of the total tech unicorn valuation, making up 20% of all tech unicorn startups and 16% of the total value.

While there are an amazing array of metrics for startups over the past several years (including that the number of unicorn startups around the world jumped from 150 in 2020 to 540 in 2021), there are several sectors that seem to be having the greatest success and fastest growth.

According to Startup Genome’s 2021 Global Startup Subsector Analysis Report, the fastest-growing sectors for startups were:

  • AgTech and New Food (+128%)
  • Blockchain (+121%)
  • Advanced Manufacturing and Robotics (+109%)
  • AI and Big Data (+98%)

Let’s dig into each of these sectors to learn more about what types of startups are fueling their rise and what some of them are focusing on.

AgTech and New Food

In its 2022 Global Startup Ecosystem Report, AgTech & New Food edition, Startup Genome defines the AgTech and New Food sector as “services and technologies with a focus on improving agricultural efficiency and sustainability, including field sensors, drones, farm management software, robotics, vertical farming, and more.” 

While worries about population growth leading to future food supply problems, a global food insecurity issue for multiple regions presently, soil degradation, and potential famines forecasted by climate change scientists have been driving advances in the sector for many years, there are more recent changes that came about during the pandemic that led to more new innovation and, of course, funding within the sector. Spiraling fertilizer and fuel costs (even propane, which is a key driver of a substantial amount of farm machinery), water scarcity in certain farming communities in places like California, and supply chain instability have brought a resurgence of attention to this sector.

According to the GSER report linked above, the top 5 ecosystems on the planet for the AgTech and New Food sector are Silicon Valley, New York City, London, Tel-Aviv/Jerusalem, and Denver/Boulder. Colorado may be the last on the list but outperforms all of the others due to its high concentration of AgTech talent and startups.

In 2017 the Series B and greater funding rounds for AgTech and New Food totaled $3.8 million, but that number rose to $11.5 million in 2021. Non-cultivated meat also overtook cultivated meat in terms of seed-stage funding for the first time in 2021, suggesting that the field is rapidly picking up steam. Overall the sector grew by 128% in 2021, making it one of the fastest-growing sectors for startups overall.

AgTech Startup Company Example

It may not have the highest funding rounds in the sector, but EarthSense.co is a great example of innovation and pushes to help use data and technology to improve the agricultural space and outcomes. This startup builds rugged, autonomous, and ultra-compact robots that are user-integrated and have a tightly integrated data collection system. These robots are used to compile data throughout the season to help farmers better understand the genetics of their crops, with the goal of increasing plant development and performance.

Blockchain

While the financial performance of bitcoin has not been stellar since the pandemic, showing that it was more highly correlated to the stock market than early innovators and promoters had posited, there is a technology that the emergence of bitcoin brought to the startup culture and greater innovative landscape that has been invaluable: blockchain.

There was a rather humorous study done that showed a not small number of morally-deficient companies who put the name “bit” or “block” in their name or stock ticker to make investors think that their company had something to do with or was working on innovations with the bitcoin or blockchain space. Despite zero actual bit or blockchain technology within the company or their products, these morally-deficient firms saw massive increases in investments or stock purchases nearly overnight, led by investors who didn’t understand either technology but wanted to be in on the newest hot investment. 

There are plenty of companies who are legitimately working with and driving innovation through blockchain technology, however, leading the sector to see a 121% growth in 2021 and having 10% of the total global startup cohort. Gartner predicts that blockchain-based value addition will rise to $176 billion by 2025, and $3.1 trillion by 2030.

Statista reports that blockchain startups received $2.6 billion in funding globally in the first quarter of 2021 alone, which is a pretty hefty sum for any startup sector. With the emergence of NFTs and so many subsequent technologies that stand to benefit from blockchain technology, there are no signs that the technology or startups using it will diminish anytime soon.

Blockchain Startup Company Example

One of the original selling points that made so many tech visionaries fall in love with and instantly recognize the value of blockchain was the ability to guarantee data integrity, traceability, governance, and collaborations to drive trusted data insights. Fluree is a company that is working on exactly that, and they are building a blockchain that is specific to enterprise-level data integrity. Their systems are being built so that large companies with enterprise-level data can use Fluree as the solution rather than in a single silo, which is how most companies currently using blockchain for data solutions are (mis)utilizing the technology.

Fluree already counts the Department of Defense and the US Department of Education among its clients, and while they won’t disclose its total valuation, we do know they raised $4.7 million in a 2019 seed round.  

Advanced Manufacturing and Robotics

Competent robots have been thought of as an extremely coveted goal for engineers and science fiction fans since the days of Issac Asimov or the cartoon The Jetsons. While the videos of the shooting robots and killer attack dog robots raised a substantial amount of alarm for those who saw a potential dystopian future a la the movie The Terminator on the horizon, in reality, most robots are used for things that are either boring, dangerous, or require too much minute finesse (like microscopic heart surgery) for humans.

Because robots can complete many of these tasks that humans can’t or won’t, there is a massive market and widespread commercial applications for their usage. The sector saw a 109% increase in 2021, and according to a report by CB Insights the top 50 advanced manufacturing companies raised a total of $3.7 billion across 46 deals in 2021 alone. The same cohort includes 12 unicorn startups, each valued at over $1 billion while still in private ownership.

Advanced Manufacturing and Robotics Startup Company Example

One of the often used functions for robots is in situations that are extremely repetitive and/or dangerous for humans. One such activity is welding, which can be extremely tedious and dangerous as it exposes the welder to extreme heat, potentially blinding light, radiation exposure, and gas emissions. 

Gizelis Robotics works on products for industrial welding, and their Roboweld product is suitable for both metal active gas and metal inert gas welding. While this may not seem quite as sexy as an autonomous robot that can serve your drinks or clean up your house for you, it has extremely lucrative implications in the commercial sector, namely that it doesn’t need lunch breaks nor run the risk of a life-altering injury. As such, it also doesn’t require the same type of insurance policy that a human welder does, from the company’s perspective.

The company is located in Greece, and while it has been through several funding rounds, neither its total valuation nor the size of the funding rounds has been disclosed, as per Crunchbase.

AI and Big Data

This sector can bring on differing emotions based on where you sit and what your view of it is. Some entrepreneurs believe that AI will lead to positive and radical changes within our society, while others believe it will lead to changes that are radically dystopian and detrimental. Elon Musk has famously demanded on multiple occasions that lawmakers begin working on stiff regulations for the industry due to the dangers it can pose if gone awry, but it seems that most of his calls have so far fallen on deaf ears.

You would hope that lawmakers would be wise enough to heed the call of an entrepreneur who stands to be one of those greatly impacted by said regulations when he is the one demanding them, but as they say, we don’t often send our best to Washington, DC.

Big Data, on the other hand, runs the risk of offering the same fate in a very different way. Much of the world, especially our marketing and advertising, is run by data and has made data a big business. Many of the largest companies in the world that you’ve never heard of are data companies, and the massive cyber attacks and intrusions that we seem to hear about on a monthly basis are targeting that coveted data.

When the two are put together (AI and Big Data), there is a significant amount of value that can be found. AI can parse data in ways that humans just cannot do, with the ability to find trends and insights in ways that our brains can’t comprehend, and must faster than any team of humans, no matter the size, could. Despite that fact, many worry that too much data in the wrong hands could easily lead to a police state scenario a la China or North Korea. But there is so much money in compiling massive amounts of data & information on everything that those cries, too, are falling on deaf ears.

AI and Big Data Startup Company Example

While it’s not exactly a newbie startup, Palantir Technologies, from veteran tech entrepreneur Peter Thiel is an excellent example of an AI and Big Data company that has done quite well for itself. Although the firm has IPO’d, the company reached unicorn status while still in private hands, overtaking the $1 billion valuation due to extremely lucrative government and law enforcement contracts. The company is currently estimated at a value of around $17.75 billion, with over $1.5 billion in annual revenue, despite recent stock price plummets.

Palantir specializes in Big Data analytics and has several different services that cater to different large government or law enforcement needs, such as counter-terrorism. Palantir also has applications that are used by private industries such as finance (Morgan Stanley), commercial auto (Fiat Chrysler), pharmaceuticals (Merck), and air transportation (Airbus).

Final Thoughts

Some analysts believe that the massive influx of cash that central banks around the globe inserted into their economies in their Quantitative Easing policies after the 2008 housing crisis has led to the high valuations of both the stock market and startup companies. Others believe that it is the increasing pace of technological advances and the massive leaps forward that some companies, especially in the tech sector, are making that led to the increases. 

Whatever the reasoning, the fact that the number of unicorn tech startups jumped from 150 in 2020 to 540 in 2021 shows that the past two years have been a great time to be a startup if you have the right elements for success. The startup sectors that have seen the greatest increases since 2021 that we covered in the post above are:

  • AgTech and New Food (+128%)
  • Blockchain (+121%)
  • Advanced Manufacturing and Robotics (+109%)
  • AI and Big Data (+98%)

Whether you are an investor hoping to strike it rich by picking the next unicorn tech startup to be, or an entrepreneur looking to make your mark on the world, those industries have seen massive growth, advancements, and of course, investments over the past two years.

article by Kellie Clark

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