In the scramble for investment dollars, technology startups that market their services to other companies are “crushing” those that deal directly with consumers, according to a new report.
The CB Insights analysis looked at the 472 startups with valuations of $100 million or more, and it found that 389 of them offer services tailored to other businesses.
“They’re going to have an easier time financing, because they have very clear metrics, like revenue, sales, customers and profits,” said Anand Sanwal, co-founder of CB Insights.
“Business-to-consumer companies are often betting more on potential, saying, ‘Hey, we have millions of users, and we think we can monetize and make X dollars per user.’”
In other words, venture capital and private equity aren’t as interested in companies selling ads affixed to photos of your aunt’s cat as they are in those selling services to your aunt’s doctor or banker.
Indeed, e-commerce companies lead a diverse pack of startups in the “initial-public-offering pipeline,” representing 34 of the 472; only nine are involved with social media. Business-to-business telecom devices and equipment makers also take up a sizeable share of the pie, but Internet companies make up half.
Sequoia Capital and Intel Capital are neck-and-neck for first place in such investments, with money in 35 startups. Goldman Sachs and other private-equity firms also made it into the Top 10.
Overall deal volume since the dot-com boom has exploded, from just $65 million in 1998 to more than $7 billion this year. Last year saw the peaks in cash volume (more than $9 billion) and the number of deals inked (302, compared with this year’s 274).
The report also found that while California is home to half the companies on the list, New York beats out Massachusetts, with 41 ventures to the Bay State’s 40.