By itself, a startup’s company bio doesn’t make for great reading.
But in aggregate, company descriptions reveal important trends shaping innovation in Silicon Valley and beyond. Are founders still trying to build the next Snapchat? Is virtual reality finally poised to come into its own?
At CB Insights, we aggregate and analyze enormous amounts of data to help answer strategic questions about the future of investing. Our data includes the descriptions of thousands of companies that have received a first round of venture capital investment since 2010.
We decided to examine the descriptions of VC-backed companies that have received their first round of funding since 2010 to get a better look into the ever-changing startup landscape. We used natural language processing to identify which words have seen the most use in the descriptions of companies receiving their first funding round, and how those keywords have risen and fallen over the last six years. Through this lens, we can see how the challenges startups aim to solve and the solutions they aim to bring to market are changing.
Based on our analysis, we find that social media, mobile apps, and email startups are on their way out, while messaging, healthcare, and artificial intelligence are gaining momentum. By and large, not surprisingly, startup descriptions are tech-heavy, featuring words like “app,” “cloud,” and “network.” Our data also shows that no word has seen a bigger jump in usage than “virtual reality” and no word a bigger decline than “electronics.”
The decline of social, mobile, email
We began our analysis by looking for the most popular words used in company descriptions, among companies that have received a first round of VC funding since 2010. The following table shows the 25 most common words and the share of company descriptions that contain that word. (We ignored nonspecific words like “the,” “are,” and “extremely.”)
User experience-centric words like “app,” “platform,” “users,” and “mobile” dominate the list, followed by words that tend to highlight a startup’s broad tech, such as “system,” “software,” and “device.” Healthcare words (“health” and “provider”) can also be seen at the bottom of the list, as a substantial portion of VC-backed companies focus on healthcare.
But the popularity of these words — and the types of businesses they reflect — have not been stable over time. So which words are becoming more or less common?
What’s out? Social, apps, email.
When we identified keywords whose use is declining in companies seeing their first funding round, the first trend we noted was a significant decline in the appearance of social media-related keywords. This includes Facebook, Twitter, and terms like “share” and “friends.”
The use of the word “social” dropped from 12% of company descriptions to about 4% over the past six years. It may be that the space is too dominated by incumbents such as Facebook, Snapchat, Instagram, Twitter, and others to thrive.
Similarly, while the mobile revolution made it imperative that companies be app-first or app-focused, our analysis suggests that at this point, startups are less focused on touting how app-centric they are. While many startups may offer an app to access their service, the fact that they’ve built such an app is increasingly beside the point. A mobile dimension to any successful service or software is taken for granted. Instead, the focus is on what else their service can do, beyond how users might access it, that gets billing in the company write-up.
In 2012 and 2013, the “app craze” resulted in nearly 30% of startup descriptions referring to an app. Between 2010 and 2012, the number of apps in the Apple Store jumped from 120,000 to 500,000 apps. In the Google Play Store, that number rocketed from 30,000 to 400,000 apps. From its peak in 2013, the use of the word “app” fell to being mentioned in less than 25% of descriptions for startups receiving their first funding in 2016.
Along with social media and apps, we found that fewer startups focus on email.
In 2013, over 3% of the companies in our dataset had the word “email” in their description. By 2016, it was less than 2%.
What’s replacing email? “Messaging” and “Slack.” Both of those words saw a large increase since 2010. (Slack was not a company in 2010, so it’s one mention in that year was unrelated to the software.)
While the concept of an instant message isn’t new, its application in the workplace is. And in many ways, American startups are chasing the example of Chinese companies like WeChat, which turned messaging into an e-commerce juggernaut.
What’s In? Biotech & AI
By 2029, 20% of the US population will be over the age of 65. So it’s no surprise that investors are increasingly backing early venture-funded healthcare startups.
The appearance of certain health-related words like “cancer” and “patients” has grown, alongside “biotechnology” and “therapy.”
Along with health, words related to advanced data mining and AI are also on the rise.
Prior to 2012, startups rarely described themselves as tackling “artificial intelligence,” “deep learning,” or “machine learning.” But today, over 2% of venture-backed companies do. That may not seem significant, but at the scale of thousands of companies, it represents a big jump in activity in the category. The appearance of the term “artificial intelligence” has seen a particularly large recent increase—almost tripling from 2015 to 2016.
VR sees largest gains
So far we have looked at trends in the appearance of notable words related to certain topics. But which words—and the types of companies they represent—saw the largest increases and declines?
In 2010, the term “virtual reality” mainly appeared in science fiction—not the bios of companies receiving significant venture funding. But by 2016, “virtual reality” could be found in 1% of company descriptions in our dataset.
Other fast-growing terms include “machine learning” and “natural language” — terms most commonly used in the data science ad AI communities. “Ingredients” is the fourth fastest-growing term — a result of the increase in food-related startups that we have tracked.
The following table shows the forty words that saw the largest relative increase in usage from 2010 to 2016.
Electronics, solar, Microsoft see large declines
This next table shows the words that saw the largest decrease.
The word “electronics” went from appearing in more than 2% of all company descriptions in 2010 to almost none in 2016. It seems that with an increasing focus on data mining, health, and software services, fewer companies describe themselves as working on hardware.
“Twitter” (6th), “Facebook” (21st), and the term “social media” (34th) all appear on this list. The usage of each in company descriptions fell by more than 65%. This signals the shift away from startups trying to develop the next Instagram or Snapchat or the next app that plugs into the APIs of Facebook or Twitter. That landscape may already be saturated.
Solar is also down, which is not surprising given the collapse of Solyndra and the relative lack of investor interest in solar since that failure. Microsoft is also dropping, perhaps a result of its reduced importance as a platform for third-party consumer and enterprise apps.
If growth areas in the startup industry depict the future, what does that future look like?
It looks like social media, email, and mobile apps are ceding the stage to startups that focus primarily on healthcare, messaging, and artificial intelligence. Bring on our chatty, robot doctors!
NOTE CREDIT: https://www.cbinsights.com/blog/top-startup-tech-trends/?utm_source=CB+Insights+Newsletter&utm_campaign=429585ff3f-WedNL_10_12_2016&utm_medium=email&utm_term=0_9dc0513989-429585ff3f-88054241