TLDR:
– Venture-capital backed startups are heavily concentrated in the software industry, leaving other sectors with little investment.
– Large industries lacking venture-capital funds must rely on existing firms or slow-growing startups for innovation and growth.
Venture capital-backed startups tend to focus on industries that are seen as having the most growth potential, such as various types of software. This concentration of investment leaves many other sectors, which are equally important to the economy, with limited access to funding and new ideas. Without venture capital support, these industries often have to depend on existing firms for growth, which are less likely to embrace disruptive innovation. Alternatively, they may rely on slow-growing startups that bootstrap or finance with debt.
A venture capital firm named Fifty Years has analyzed the industries that receive the most and least investment relative to their size. Their findings show a clear concentration of investment in software-related industries. While Fifty Years calls these industries with low investment “Top Underfunded Opportunities,” it is important to note that some of these sectors face challenges such as shrinking demand or excessive regulation, which may make them less attractive to investors.
However, there is value in investing in industries that may not seem as sexy or high-growth as software. Industries like the paper industry, for example, often face decline and closure. Nevertheless, there may be opportunities in related technologies like mass timber or biochar that can leverage the abundant supply of trees in states like Maine. By investing in unsexy industries, investors can potentially find new and untapped markets.
In conclusion, the concentration of venture-capital funding in software-related industries creates a gap in investment for other sectors of the economy. While there may be valid reasons why certain industries receive less funding, there is also potential for finding opportunities in underfunded sectors that may not have received as much attention from investors. By exploring these industries, investors may be able to discover untapped markets and drive growth in traditionally overlooked sectors.
