The number of startups in the United States has increased by roughly 8% over the past year, with roughly 6,200 businesses reporting data for investors.
And the number of investors looking to invest in them is at an all-time high.
The trend comes as investors are trying to diversify their investments into a variety of industries, from start-ups to technology to media.
“I think the idea of an individual investor looking at a company and looking for opportunities to buy equity is really growing,” says Michael Smith, president of the startup capital group, a research and advisory firm.
“There’s a lot more equity investing going on.
Investors are looking for a more diversified portfolio of companies that have a proven track record, that have proven revenue and are doing well.””
We are seeing an increase in capital investment from investors, particularly large institutional investors,” says David Foskett, founder and CEO of Citi, a credit-rating agency.
“We’ve seen the rise in the number and quality of venture capital, and it’s really just the number that’s been climbing.”
Fosketts points to the growth of start-up companies that are building products that are able to serve a broader market.
“You have people who are building a mobile app, for example,” he says.
“The number of companies building mobile apps is a lot bigger than the number creating hardware devices, and that’s why they are going to see an uptick in investment.
We’re seeing a lot of companies, especially with more diverse product offerings, that are going into the consumer space.”
The rise in start-UPs, in part, is driven by the fact that the overall financial services industry has been booming in recent years, as well as a desire to diversified portfolios and start- up businesses in a variety to suit different needs.
“We think it’s a really good time to be an investor, and I think investors are going for the company that has proven itself over time,” Foschetts says.
In a few of the top-performing categories, the companies that made the list include start- ups that provide a more differentiated product, or that are focused on helping their employees or clients navigate the complex financial world.
In a category of financial services companies, the category that received the most funding in 2017, it’s hard to beat that category.
“In a lot or many of the categories, we see the largest jump in venture capital funding comes from technology companies,” Fiskett says.
Technology companies tend to have a more flexible business model, and tend to focus on offering an entirely new product or service.
“If you’re a tech company, you don’t have to focus very much on what your product is,” Foscetts says, “and you don-t have to be as focused on what customers want.
Technology companies tend not to have the same focus on having a very robust product, but are really focused on offering a very flexible product.”
Foscetts points out that technology companies are also starting to make inroads in other areas of the economy, like healthcare and consumer services, which are areas that have historically seen more investment.
“As tech companies grow and their products are able and willing to innovate, they’re going to be able to offer more value to their customers, and they’re able to attract more investment,” he adds.
The data that investors are getting is also changing the way companies are valued.
“It’s a little bit like looking at the stock market,” Fose says.
Companies are now valuing them based on their long-term growth potential, rather than how they compare to their competitors.
“You look at the companies in the technology space, like Google, and you’re probably not going to find a company that is going to go to market with a product that is more than five years old, but a product is five years in the future,” Foches says.
That’s where it becomes a little harder to differentiate a company.
Foschett says that companies are focusing on their product, not their competitors, and have become more focused on the future, not on how well the company can do right now.
That means companies can make a stronger argument for why they should be valued in the first place.
“I think that’s what’s happening, as technology and healthcare companies go into more of a focused, strategic position on their products,” he explains.
Fisketts believes that the next 10 years are going a long way toward rethinking the way that investors value startups.
“In the past 10 years, I think the industry has gone through a really important transition,” he notes.
“What’s happened is that there’s a huge amount of innovation in the tech space, but there’s also a lot less innovation in healthcare.
There’s a lack of innovation that drives innovation.
And so the technology industry has had to make a lot smarter decisions.”
That’s why, in the coming decade, the