startups

Want to Attract Funding? Focus Your Startup in One of These 7 Niches

  • Founders have to begin thinking about strategies to boost their early-stage fundraising performance as soon as they can. They can’t afford not to.

    Most entrepreneurs don’t give much thought to the choices that might indirectly affect their fundraising performance, though. Some have blessedly little to do with the mechanics of asking people for money.

    One such choice — the niche you’ll play in — is as fundamental as it gets. Your choice of niche won’t necessarily affect your solution or business model, remember: The same formula can pay off in multiple arenas.

    So, if you’ve correctly waited to launch your business until you’re as sure as can be that you’ve developed a sturdy solution to a problem that actually needs to be solved, you can follow the money.

    Chances are good you’ll wind up in one of these seven niches.

    1. Healthcare and Insurance Solutions

    The healthcare industry is changing rapidly, and not always for the better. Ditto for the historically hidebound insurance industry, which is finally getting a belated dose of disruption.

    In 2014, healthcare startups raised some $6.5 billion, an astounding 125% increase over the previous year. Companies like Oscar, a New York-based insurance solution that has established players nervous, could deliver long-promised cost reductions and value enhancements that patients so desperately need. There’s still plenty of time to join the fray.

    2. Innovative Sale Sites

    Be on the lookout for innovative online ecommerce ideas. The flash sale niche, for example is very competitive, with dozens of legitimate players testing new models on a clamorous shopping public. This makes for a lively fundraising environment where established companies like Montreal-based flash sale startup Beyond the Rack raise tens of millions of dollars in successive rounds. As the pace of disruption accelerates up and down the retail chain, expect more opportunities for ambitious flash sale entrepreneurs.

    3. Retailer Solutions

    Speaking of retail disruption: Retail tech, driven by digital-first behemoths like Amazon and traditional giants like Best Buy, is hot right now. And not just on the front end — some of the space’s most exciting developments are happening behind the scenes, thanks to B2B services and solutions that make shoppers’ lives easier (and safer) without ever announcing their presence.

    4. Fintech

    Automated budgeting, saving, and investing apps grow more sophisticated by the month. Like healthcare tech, financial technology is rather heavily regulated — a consequence of its sensitivity. But, if you’re willing to jump through regulatory hoops and boast the requisite technical skills, the sky’s the limit.

    5. Craft Beverages

    Craft beer and spirits aren’t as scalable as your typical software solution, but rosy growth projections and low barriers to entry make them easy pickings for hardworking bon vivants. Put together a decent business plan and demonstrate proof of concept (e.g., tasty beverages on local shelves or taps) and you’ll find plenty of investors willing to put up for your first expansion.

    6. Subscription Delivery Services

    Subscription delivery services aren’t quite a dime a dozen, but they’re getting there. The reason they’re still attractive for founders seeking outside funding is their versatility: From beauty subscriptions like Birchbox to meal-in-a-box subscriptions like Blue Apron, there’s endless opportunity in this space. And the concept predates the Internet, boosting its appeal to risk-averse funders.

    7. Diet-Friendly Foods

    Americans’ diets are more varied and personalized than ever. As dietary movement proliferate, so too do opportunities for culinary entrepreneurs seeking to capitalize on our ever healthier, more sophisticated tastes. Follow your passion here and the money will (hopefully) follow you.

    Time to Ditch the Funding Rat Race?

    For many startups, chasing angel funding and venture capital is nearly a full-time job in itself. Every hour founders devote to glad-handing potential investors or running through their pitch decks is an hour they’re not devoting to solving problems, iterating solutions, and addressing the needs of those who matter most: their clients.

    Founders without deep-pocketed backers all need some source of funding. But it doesn’t have to be a rat race. If you have a great idea that doesn’t fit neatly into one of these hot niches, don’t let funding woes stop you from pursuing it. Instead of cultivating relationships with anonymous angels and VCs, prime potential funders closer to home: friends and family members with the resources and wherewithal to lend more than verbal encouragement to your venture.

    The friends-and-family funding tap eventually runs dry for everyone. At that point, you’ll have to start chasing more robust sources of dough — not just VCs and angels, but alternative funding sources too. In the meantime, you can get to work without worrying where your next paycheck will come from.