Learn about the state of tech startups in 2023
Monday October 17, 2022
Book a tour of 42workspace Join our community
The first half of the 21st century has so far seen a digital revolution, mainly driven by the rise of tech startups, with new startups seemingly popping up every week. The purpose of this report is to give you a complete insight into the world of tech startups with essential information and statistics.
DISCOVER MORE OF WHAT MATTERS TO YOU
To understand tech startup trends, we first need to define startups in general. Startups are differentiated from other companies through their goals and aims. Simply put, startups have three distinguishing characteristics that make them stand out from other businesses:
Startups usually exploit a market or industry niche that has space for innovation and change. They try to find a niche in which a unique problem is present, or where there is considerable space for innovation.
After they find their niche, startups come up with novel, innovative solutions to existing problems. For example, Google found the opportunity to help people navigate the newly created web in an efficient way that was unseen in the early days of the internet.
Once they have their idea, they try to build it quickly. They iteratively test for new solutions, and continuously work on improving their product or service. They align this mindset with their business model as well by expanding their customer base and market share just as quickly as their ideas.
Tech startups in particular seem to be the most prominent. Technology allows companies to disrupt faster and thus iterate their ideas at a faster pace than that of other industries.
In fact, out of the most successful unicorn startups listed on CB Insights, 18 out of 20 unicorns are in tech, when we include all tech categories. A unicorn startup is defined as a startup valued at over $1 Billion.
Tech startups lead innovation and influence the everyday lives of millions of people worldwide. Some of the world’s largest companies, such as Google, Uber, and Facebook, started as tech startups. These are the companies that have a direct impact on how the world around us works.
Tech startups can be broken up into four categories:
Consumer software startups focus on creating applications and platforms tailored for individual users or end consumers. These companies often prioritize user-friendly interfaces and experiences, and their products range from mobile apps, gaming platforms, social networks, to personal productivity tools, catering directly to the needs and wants of the general public.
Business software startups develop solutions tailored for organizations, enterprises, and small businesses. Their products aim to streamline operations, enhance productivity, or solve specific business challenges. Examples include Customer Relationship Management (CRM) tools, Enterprise Resource Planning (ERP) systems, and collaboration platforms.
Consumer hardware startups design and produce tangible products intended for individual consumers. These might include wearable tech, smart home devices, personal fitness trackers, or innovative electronics. The focus here is on creating products that integrate seamlessly into consumers’ everyday lives, enhancing convenience, or offering new functionalities.
Business hardware startups create physical products designed specifically for business and industrial use. This could encompass anything from specialized servers, workstations, and networking equipment to industry-specific machinery and tools. These startups aim to enhance business operations, boost efficiency, or provide new capabilities to enterprises.
In other words, tech startups provide either digital or physical technology solutions to customers or businesses.
Out of the top 150 unicorns, only 7% – or 11 – of the top 150 unicorns are not tech-focused. In addition to these, 9 additional companies in travel, supply chain & delivery focus on building a digital platform as part of their business model. The rest of the top startups focus on a wide range of industries, from Artificial Intelligence to Biotechnology and Edtech.
To understand what makes a startup excel, we need to take a look at unicorn startups. The top tech startups include a more limited range of industries than the top 150 mentioned above. For tech startups, top industries include Video games, Artificial intelligence, Data management, Internet Software & Services, Consumer & Retail, Edtech, E-commerce, Fintech, and High/Deep tech companies.
By far the biggest share of companies in the top 20 tech startups belongs to the fintech industry, followed by E-Commerce and Edtech. The only two Edtech companies in the top 150 best unicorns are also in the top 20.
By evaluating the number of companies in the top 20 we simply cannot see the whole story. Instead, let’s take a look at the valuation of the biggest tech startups in each industry of the top 20:
This chart tells a very different story, one which highlights some interesting tech startup trends. The three industries with the highest-valued unicorns are Artificial intelligence, high-tech engineering, and e-commerce. Within these industries, the highest-valued startups are ByteDance in Artificial intelligence, followed by SpaceX in high-tech engineering, and SHEIN in e-commerce.
Fintech, despite having the biggest share of companies in both the top 20 and top 150 biggest startup companies, only comes fourth with its most valued startup, Stripe.
The Netherlands in general, and Rotterdam and the Randstad specifically, are excellent places for startups. The Netherlands startup enjoys many advantages over other ecosystems. The Dutch startup ecosystem is ranked 3rd in Europe in both Talent & Experience as well as Ecosystem performance, while it also ranked 4th in Funding. Overall, the ecosystem ranked 14th in the world in 2022. So, why exactly does the Netherlands rank so highly in these areas?
The Netherlands has a population of highly motivated, educated professionals. 44% of the population of the country has higher education degrees and 90% speak two or more languages, for most of whom this is English (80%).
But the advantages don’t stop there for Dutch startups. The Netherlands ranked 41 on the World Bank’s Ease of Doing Business ranking. Besides this, the Netherlands is part of the EU providing new businesses the opportunity to branch into 27 member countries. The Netherlands is also physically situated close to all of Europe’s economic, cultural and political hubs. Rotterdam, for example, is only 3 hours away from Paris by train, 1.5 hours from Brussels, and five hours from Frankfurt. The Netherlands has the fourth-largest number of startups in the EU and the second-highest share of Unicorns in the EU.
Furthermore, a Dutch startup is placed in an advantageous position to hire a diverse team of employees from all over the world. First, the country has the so-called 30% ruling, which gives foreign nationals a tax advantage for moving to the Netherlands. Second, the country has access to the employment market of the EU’s highly educated 27-member states with no additional visa or bureaucratic costs. Diversity breeds innovation and the Netherlands is positioned as the perfect environment for both.
Different business models and industries follow different strategies. However, as a general rule of thumb, a good growth rate for a startup is considered to be around 20-30% per year. Tech startups can generally grow considerably quicker at around 50-100% per year.
It’s important to remember, however, that startups are different from traditional business models in that they aim for a fast growth rate in their early stages. On average, according to one survey, founders aim for a 120% growth rate in their first year, with that diminishing to ~80% and ~60% by the third year. But, what is a realistic growth rate for startups? Overall, a 15-25% annual growth rate is still considered healthy and sustainable. The ambitious and high-risk nature of startups means that up to 90% fail. 42% of these fail because their product just wasn’t needed in the market.
In this report, we’ve outlined a handful of startup industry statistics, focusing on tech startup trends. Just by taking a look at the startup industry, it’s clear that the tech sector dominates the startup ecosystem. Tech industries with the highest valued unicorns include artificial intelligence, high tech, and edtech. Growth rates for startups vary considerably between 25%-100%, but a healthy rate is considered to be around 25%.
We’ve also outlined the reasons that make the Netherlands uniquely suited to the startup industry. The country is centrally located, with access to a 27-member state market, a highly educated population, and a high ranking on Startup Genome’s annual startup ecosystem report.
Schiedamse Vest 154
3011BH Rotterdam
Join our newsletter!
