2015 was a big year for innovation and angel investing. More and more ideas are being turned to reality with the help of incubators, accelerator programs, and the heavy expansion of web-based collaborative platforms. Angel List, for example, helped raise over $100 million for over 240 startups in 2014. We can expect the numbers for 2015 to have grown substantially from that as the site has over 700,000 companies listed, including investors and venture capital firms. Start ups seem to be sprouting up by the hour, so with the influx of ideas, what are the unique trends are investors looking for? What can entrepreneurs know to help themselves stand out in a sea of ideas? Here are the top 3 trends we can anticipate for 2016...
As millennials begin to take over the work force we can note these facts about the generation according to Sarah Sladek, author of Knowing Y: Engage the Next Generation Now:
- 92-percent believe that businesses should be measured more by social impact than by profit.
- 61-percent feel personally responsible to make a positive difference in the world.
We see this reflected in the types of startups sprouting and getting investment. Kelly Hoey, Angel Investor and writer at Inc.com wrote this about the growing trend of social impact for businesses:
"Investors are really beginning to understand the importance of double bottom lines... so not just money, but positive social returns as well. It seems more and more unique business models are challenging what has been previously been the business-as-usual norm."
Creating businesses suited for a market that responds to social investment is on the rise and investors are looking for companies that have become experts in understanding how to create both monetary and social sustainability and growth.
Just a couple months ago an article was written on Forbes titled: "The Lack of Diversity in Tech is a Cultural Issue" which points out the growth in diversity the tech and startup world will see in the coming years. In August of this year the White House held its first ever Demo Day to showcase women and minority founders in technology, an industry which is predominately white, asian, and male.
Pinterest made waves this year by creating some bold goals for diversifying 2016 by increasing their hiring goals of underrepresented ethnicities and women and announcing programs to support the achievement of those objectives listed here:
- Increase hiring rates for full-time engineering roles to 30% female.
- Increase hiring rates for full-time engineers to 8% underrepresented ethnic backgrounds.
- Increase hiring rates for non-engineering roles to 12% underrepresented ethnic backgrounds.
- Implement a Rooney Rule-type requirement where at least one person from an underrepresented background and one female candidate is interviewed for every open leadership position.
In a 10-year study of early stage start up performance First Round Capital found that female founders performed a whopping 63-percent better. But, don't worry if you're not a minority in this world, there are still plenty of diversifying industry trends you can use to your advantage.
The same study out of First Round Capital found that team founders perform higher than solo founders... a whopping 163-percent higher. Most experienced investors and entrepreneurs know that brilliant ideas grown into a profitable reality is the outcome of multiple minds. Founders who can let go of their ego and know how to share the pieces of the pie will be successful. Furthermore, companies with a technical co-founder are reported to have performed 230-percent better.
One of our favorite sources for start up trends Gust.com explains "verticalization" this way:
"A vertical market is one in which all of your customers are in one particular industry, regardless of where in the food chain they are. For example, the site Noodle.org is a vertical search engine for the education industry. It doesn't matter if you're looking for a kindergarten class, an Ivy League college, or an adult education polka dancing course, it covers its industry top to bottom.A horizontal market is one in which all of your customers use your product to do the same thing, regardless of what industry they are in. For example, Google.com is a search engine that can be used to find polka classes...as well as ball bearings and hippopotami."
Angel Investing reporter Marianne Hudson wrote this about the selective industry trend that we believe will continue to expand into 2016...
"Industry sectors will matter a lot, with some seeing tremendous growth and others not so much. Allan May, founder of Life Science Angels, provides a few examples. "Biotech investing is on fire," May says. "And digital health and mobile will see 100 percent plus growth as the system continues to experiment on how to use this technology to lower health care costs, promote behavior change and improve patient compliance. On the other hand, more of the US medical device sector will move offshore, as they find better environments for funding, clinical trials and commercialization.
"Sector "verticalization,"is coming into its own. Some angels are seeing situations where accelerators, angel groups, and platforms are specializing in specific sectors such as hardware, education technology or green technologies. As Christopher Mirabile, vice chair of the Angel Capital Association notes, "For a long time we have seen groups devoted to life sciences or clean tech, but we are now seeing groups focused on specialty areas like the marijuana industry."
At my operating incubator One Planet Ops, these current trends are what we, among others in the industry, keep an eye out for. Each company that we fund signs a social impact commitment acknowledging our innovation + intention philosophy. One Planet dedicates its efforts to the entrepreneurial philosophy of "Universal Philanthropy," which means that most companies from our entire extended network, whether operating businesses or companies we invest in, actively support social programs for the betterment of the world.
I strongly believe that work performed in the spirit of service towards others creates the highest and best expression of our personal and professional lives. We are happy to see social impact on the rise in new businesses and welcome any ideas whose mission serves our similar purpose.
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