Since mid-April 2014, Cintrifuse’s membership has grown from 28 to 171 startups. That’s over 500% growth in 12 months!
In this blog, the second in a four-part series on “#StartupCincy by the Numbers”, I focus on the makeup of Cintrifuse’s current membership which can be viewed as a baseline for #StartupCincy (we understand this is not a complete picture but a great starting point!).
In case you missed my first post, Cintrifuse went through a month long exercise to profile our startups. We began by creating a custom taxonomy to use in our programs. We settled on eight categories.
- Industry – Broad classification of a business’ product or service
- Innovation Category – Describes the benefit and ultimate business reason for working with a startup
- Solution Category/Sub-category – Describes the type of technology and/or use case a startup provides in specific categories and related sub-categories
- Buyer Type – The purchaser and/or beneficiary of a business’ product or service
- End User Type – The consumer of a business’ product or service
- Functional Category – The specific line of business that would implement a solution, if applicable.
- Tech Deployment Method – How a startup closes a transaction and/or distributes a solution to its customers.
- Investment Stage – The most recent funding round received
Once startups were “tagged” with data from each category, we finally had a thorough profile that could be used to execute our programs. Take a look at General Nano’s profile as an example:
- Industry – Advanced Materials/Manufacturing
- Innovation Category – Cost Savings & Process Efficiency
- Solution Category/Sub-category – Industrial Goods; Nanomaterials
- Buyer Type – B2B
- End User Type – Business
- Functional Category – Procurement/Supply Chain
- Tech Deployment Method – Website
- Investment Stage – A
Pretty good picture of a company in 15 seconds, I’d say. Each of these data points can be mixed and matched as building blocks for our Mentor and Advisor Network programs as well as Customer Connections and Funding Connections.
We’ll explain more about the practical implementation of this exercise in blog 4 but for now let’s focus on aggregate stats for Cintrifuse’s 171 startups. Only the top 3 – 5 statistical data sets are revealed in the body of the blog. For your reference, all aggregate data can be viewed in this Google Spreadsheet. Considering this is only our second swing at this taxonomy, we know it can be improved. If you have any ideas, we’re open to your feedback!
Here’s a breakdown of each category.
- Information Technology/Software: 58.48% (100)
- Consumer Products & Services: 17.54% (30)
- Business Products & Services: 6.43% (11)
#StartupCincy’s top ranking industry isn’t surprising. IT/Software dominates our member base as it does with most startup ecosystems in the modern world (the Startup Genome project offers some comparisons although our taxonomy is different than theirs). The runner-up, Consumer Products/Services, also isn’t shocking given Cincinnati is home to the world’s leading consumer product company, Procter & Gamble.
- Customer and Brand Experience: 33.33% (57)
- Cost Savings & Process Efficiency: 28.07% (48)
- Decision Making & Business Intelligence: 15.79% (27)
We created the “Innovation Category” field specifically for Customer Connections. It answers a basic question: “Why would a corporation do business with a startup?” This information gives Katie Austing, Jeff Carr, and Wendy Lea a mechanism to understand a corporation’s objective for working with a startup.
From an outsider’s perspective, Innovation Category could be mislabeled because none of these options are describing innovative or disruptive technologies. That said, the data is still practical and an important piece of every Customer Connections narrative.
- Collaboration/Productivity Tool: 18.71% (32)
- Curated Web: 12.87% (22)
- Consumer Products: 10.53% (18)
- Marketing Automation/CMS: 9.94% (17)
- Big Data Analytics: 7.6% (13)
In total, Cintrifuse identified 26 Solution Categories with 87 sub-categories under them. I won’t list them all because there are so many but you can view all solution categories/sub-categories here.
The purpose of the Solution Category/Sub-category is to quickly answer the question, “What does it do?” Obviously this is a critical component of any startup’s profile. But rather than relying on longer descriptions provided by startups (which often contain “marketing speak”) our solution categories cut right to the chase.
Now that you have the big picture, let’s drill down to see what’s in each Solution Category.
- Messaging & Communication: 37.5% (12)
- Cross-functional Project Management: 31.25% (10)
- Document Management: 9.375% (3)
- Employee Engagement: 6.25% (2)
- Logistics & Supply Chain Management: 6.25% (2)
- Task Management: 6.25% (2)
- Wiki: 3.125% (1)
A Collaboration/Productivity Tool is any platform that makes communicating and/or working more efficient through digital transmission. As you’ll see, there are several flavors.
- Content Aggregator: 86.36% (19)
- Streaming Content: 13.64% (3)
Curated Web platforms or websites are those that display content from multiple authors, videographers, artists, etc. for general consumption. Most content aggregators attempt to derive revenue through advertising dollars. Streaming Content companies skew toward subscriptions.
Right now we only have two sub-categories for Curated Web. There could be more but, based on the startups in #StartupCincy, there isn’t a need to add others.
- Food/Beverage: 38.8% (7)
- Electronics & Accessories: 16.7% (3)
- Other Consumer Products: 16.7% (3)
- Apparel: 11.1% (2)
- Household Items: 11.1% (2)
- Toys: 5.55% (1)
Consumer products, also referred to as Consumer Packaged Goods, are items purchased for personal consumption. While not all Consumer Products companies fit Cintrifuse’s model of high-growth, highly scalable, venture backable companies, there are some that do.
For example, Tom + Chee fits our model because they’re looking to grow nationally. After they appeared on Shark Tank two years ago they had over 18,000 franchise requests! Their growth has been measured but they’re certainly on pace to become a national brand.
- Campaign Management: 53% (9)
- Geo-targeting: 23.4% (4)
- Social Commerce: 11.8% (2)
- Social Media Marketing: 11.8% (2)
Software that helps manage, publish, and promote content and other marketing campaigns falls into our Marketing Automation/CMS category. Like Collaboration/Productivity Tool, this is a broad classification so it has several diverse sub-categories.
Big Data Analytics
- Business Intelligence: 77% (10)
- Data Integration: 15.4% (2)
- Data Optimization: 7.6% (1)
The term “big data” is everywhere. We classified Big Data Analytics companies as those with tools or a platform to help companies corral and make sense of their data.
As we reviewed our taxonomy with Joan Lewis, she mentioned some people may view “business intelligence” as generic. She thought trying to classify all kinds of business intelligence platforms wouldn’t produce much additional value so we should keep it high level and move on. As a result there are a high concentration of BI platforms in our portfolio. Examples include Market 6, Strap, and Zipscene.
- B2B: 49.12% (84)
- B2C: 32.16% (55)
- Hybrid: 18.71% (32)
The number of Cintrifuse’s startups selling to businesses trumped those selling direct to consumer. That said, we’re seeing a growing number of “hybrid” companies – those whose end-user is a consumer but they also find a revenue streams selling data or affiliate deals to businesses.
Clearly data is now viewed as an asset that has value to businesses. It’s not a stretch to think many consumer-facing companies can turn into “hybrids” by monetizing their audience. With the proliferation of analytic SaaS products available, we see this as a trend that will only get stronger moving forward.
- Business: 52.63% (90)
- Individual Consumer: 47.37% (81)
Differentiating “Buyer Type” and “End-user Type” helps Cintrifuse set the right sales expectation between startups and customers. Consider this scenario: a startup sells a business an application that plugs into their website. The end-user would be the business’ customer, not necessarily the business itself.
It’s important for Cintrifuse to make this distinction for our Customer Connections program. The reason being trust. Startups trust that we’re going to position them correctly to potential customers and those customers, the corporations in town, trust that our introductions will fulfill their innovation needs. So, in short, we need to understand a startup’s customer lifecycle to satisfy both parties.
- N/A – Individual Consumer: 42.11% (72)
- Marketing: 14.62% (25)
- Procurement/Supply Chain: 9.94% (17)
- IT: 9.36% (16)
- Management: 7.60% (13)
Functional Category, much like, Buyer Type and End-user Type, help us set the right sales expectation between startups and Customers.
For Cintrifuse to open doors for startups, we have to know which doors to open. So we created “Functional Category” to outline which line of business a startup should meet.
You’re probably starting to see a correlation between several of these categories. Most B2C and Consumer “End-user” companies are direct to consumer (DTC). That, along with a relatively even distribution across B2B functions, caused our “N/A – Individual” field to be much higher than others.
Tech Deployment Method
- Website Only: 31.58% (54)
- Cloud Only: 25.15% (43)
- Cloud and Mobile: 20.47% (35)
- E-Commerce: 11.70% (20)
- Mobile Only: 8.19% (14)
I struggled creating the “Tech Deployment Method” category the most. People tend to view “Mobile” and “SaaS” (one element of Cloud Computing) as distinct industries. I don’t see it that way.
To me, Mobile and SaaS Cloud Computing are distribution mechanisms on which applications and other programs are accessed. So, I went against the grain and kept them out of the “top level” categories.
I also struggled with how to classify companies that don’t have a product that can be distributed via technology (no cloud, mobile, or e-commerce platform). I referenced General Nano earlier. Along with other non e-commerce Consumer Product startups, they fall into the Website classification.
Not to say these companies don’t have technology – couldn’t be further from the truth with General Nano – but as we stress tested our taxonomy, Website Only as a Tech Deployment Method stuck.
- Bootstrap: 45.61% (78)
- Seed: 39.77% (68)
- A: 9.94% (17)
- B: 2.92% (5)
- C+: 1.75% (3)
The results of the Investment Category were the most revealing to me. As you can see, a whopping 45% of Cintrifuse’s startups are bootstrapping! The best comparable statistic I could find came from the Wall Street Journal which cited 25% of small “firms” received no financing from outside sources (July 2014). Our ecosystem exceeds the national average by quite a bit. That’s not a good thing. I’ll ponder about the cause in blog #4.
Combine bootstraping startups and seed funed startups (this includes low dollar investments from accelerators*) and 85.38% of our startups are Seed stage or lower. I find that astounding! That means the overwhelming majority of Cincinnati’s startups are fighting as hard for five and six-digit investments as startups in other ecosystems are competing for seven and eight-figure funding rounds. That’s a gap in #StartupCincy that I’ll cover in blogs 3 and 4 (hint: it’s why Cintrifuse’s Fund of Fund exists).
*I was liberal with my use of “Seed”, especially from a VC perspective. We struggle to collect aggregate information across the ecosystem regarding documentation of outside funding received. As such, dollar volumes lower than a traditional Seed round in the VC world were considered in this analysis.
Are you “statted” out yet?
Take some time to digest what’s in this blog because in the third and fourth installments I’ll talk about gaps in the region and what Cintrifuse is doing to solve them. Specifically, I’ll round out the #StartupCincy by the Numbers” blog series by summarizing how we’re leveraging this analysis to improve our programs and make #StartupCincy a community where talented entrepreneurs want to be!
We’re open to your feedback! If you have thoughts, please get in touch with me via email, Twitter or LinkedIn. Also, in case you missed it up top, all aggregate data can be viewed in this Google Spreadsheet.