The Hottest Sectors for Launching a Business in 2018
Starting a business is always a risk, but focusing on one of these promising sectors will improve your odds tremendously.
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If only a good idea and a bit of luck were all you needed to launch a successful startup. The reality is that it takes a whole lot more than that. Timing, competition, and future market conditions can make or break a business. So if you want yours to still be around in a year--or 10 years--it's vital to know which industries are ripe for innovation and new entrants.
Here's Inc.'s annual breakdown of the best industries for starting a business. The list is based on data on the fast-growing sectors and interviews with industry experts, investors, and entrepreneurs. Read on to find learn which industries could give rise to the next billion-dollar companies.
Popping open a can of wine might not sound as satisfying as pulling the cork out of a bottle, but the popularity of canned wine has grown rapidly in the last several years. The industry comprises both established brands that have begun packaging their wine in cans and startups that exclusively sell canned varietals.
Why it's hot: While the product inside hasn't changed, the new packaging is attracting young consumers to the wine scene. The convenience of canned wine particularly appeals to Millennial buyers who want a single-serve beverage they can take on the go. Cans are lighter than bottles and easier to disguise when drinking in public settings. What's more, outdoor spaces like music festivals tend to prohibit glass bottles for safety reasons.
Skills needed: Entrepreneurs entering this business would be wise to fully understand the alcoholic beverage industry, including how to navigate regulations and the intricacies of distribution, says Danny Brager, senior vice president of the beverage alcohol practice at Nielsen, a provider of market-research information based in New York City.
Barriers to entry: Getting shelf space at retail outlets could be a large obstacle for startups. Because the industry is new, canned wine companies have a formidable challenge making their products stand out and gaining acceptance from wine enthusiasts who are used to buying bottles.
The downside: With so much attention on canned wine, Brager expects an increasing number of legacy brands will begin selling their wine in cans to capitalize on the trend.
Competition: Nielsen estimates there are currently more than 60 brands in the U.S. that sell canned wine. About 90 percent are exclusively canned wine companies, with the remaining 10 percent preexisting brands that offer a canned option.
Major players: Francis Ford Coppola Winery began selling its blanc de blanc in mini cans, dubbed Sofia, in 2004 and added canned Chardonnay, pinot grigio, and sauvignon blanc to its collection last year. Union Wine Co.'s Underwood wine is another prominent label, with seven varietals ranging from a sparkling rosé to a pinot noir.
Growth: Total U.S. sales for canned wine jumped to $32.3 million last year from $3.3 million in 2014, according to Nielsen.
Look inside the Canned Wine industry: Why This Millennial Founder Says Wine in a Can Is the Next Big Thing
Startups are finding innovative ways to bring food, shelter, and transportation to victims of the hurricanes, wildfires, and tornados that ravaged parts of the U.S. last year, as well as improve safety for those caught in many other types of disasters and emergency situations. From bulletproofing technology that can be applied to backpacks or desks, to connecting survivors and organizing transportation, these startups are trying to solve some of the nation's most urgent problems.
Why it's hot: Natural disasters have increased the demand for industry services and boosted funding, according to IBISWorld, which provides industry market research reports. What's more, the rise in manmade emergency situations, like school shootings and terrorist attacks, has also created a need for innovative solutions.
Skills needed: Entrepreneurs in this area should have technical skills if they are building mobile-based solutions. Additionally, it is useful to have an understanding of the regulatory systems in place.
Barriers to entry: Establishing a reputation in the field is difficult, but crucial for developing partnerships with agencies that handle disaster situations, and for getting funding. Additionally, founders must understand the regulatory environment and obtain any legally mandated licensing.
The downside: Every crisis is different, creating a wide range of challenges that startups in the industry will have to face in real time. The stakes are extremely high since these companies are often dealing with people's lives and property.
Competition: Younger startups will be competing against long-established and government-funded agencies that have operated in the sector for decades. These giants will scoop up millions in funding.
Major players: The American Red Cross is the largest nonprofit emergency response organization in the U.S. and generated $2.7 billion in revenue in 2015, according to IBISWorld. In the for-profit space, large companies such as Walmart, Home Depot, and Starbucks have pledged sizable monetary donations in the wake of disasters or tragedies, but few are dedicated to developing disaster-relief solutions. Meanwhile, there is no one startup that dominates the industry, as most startups focus on narrower areas within it such as transportation, housing, and communications.
Growth: U.S. revenue for the disaster relief industry is expected jump to $11.2 billion in 2022 from $10.1 billion in 2017, according to IBISWorld.
Look inside the Disaster Relief industry: This App Helps Teachers at 14,000 Schools Stay Connected During Emergencies
The integration of technology and the beauty business is creating an opportunity for startups to innovate both the products consumers buy and how they buy them. The industry is getting a makeover with new offerings like "camera-ready" cosmetics that look great in photos and items that are highly customized--based on machine learning algorithms--for individual consumers.
Why it's hot: Advancements in technology make it easier for companies to create products specifically tailored to consumers' preferences, from foundation that perfectly matches a client's skin to shampoo that will treat her specific hair needs. Additionally, the growth of niche markets within the beauty industry gives startups an edge over mass beauty brands.
Skills needed: Strong marketing skills and an expertise in social media are essential in the beauty industry. Most cosmetics companies advertise their products on social media, through beauty tutorials or modeled on brand reps. That knowledge will help rein in advertising costs, which is crucial for entrepreneurs competing with beauty giants.
Barriers to entry: Startups that rely on traditional advertising channels will need to pay steep costs to compete with the beauty behemoths in the industry, according to IBISWorld. On a similar note, companies will have to spend big to develop a large amount of inventory.
The downside: Many startups are launching in this industry and using the same social media tactics to reach audiences. Capital costs can make staying in the business difficult over the long term.
Competition: With beauty giants like Sephora and Ulta capturing a large share of the market, smaller companies that aren't selling their own products--but offering skin consultancy services or product recommendations--could struggle to attract customers. However, niche markets like organics afford some opportunities for smaller retailers, according to IBISWorld.
Major players: L.A.-based Seed Beauty has incubated two wildly popular and trendy cosmetic companies that primarily sell online: Colourpop and Kylie Cosmetics, launched by the youngest member of the Kardashian-Jenner family. Meanwhile, Glossier has made a name for itself selling items that promote a "barely there" makeup look.
Growth: While IBIS doesn't track the tech-specific side of the beauty market, the firm expects the U.S. industry as a whole to jump to $27.8 billion in 2022 from $22.1 billion in 2017.
Look inside the Beauty Tech industry: How This Shampoo Company Is Using Algorithms to Give You Perfect Hair
If watching people compete in videogame tournaments sounds a bit odd to you, you're not the only one. But that's the premise of eSports, an industry that's growing rapidly and creating many opportunities for startups, especially those focused on in-game analytics, player data, and scouting.
Why it's hot: The popularity of competitive online gaming has grown astronomically in the last several years. Nearly three years ago, Amazon paid $970 million for Twitch, a network that broadcasts live videogame events. Since then, the NCAA has announced it would formally analyze the collegiate eSports landscape to determine if it should have a supporting role in the space, and major professional sports leagues have planned eSports tie-ins.
Skills needed: Entrepreneurs must have a strong understanding of international markets because China and Europe will make up 68 percent of the estimated total revenue for the eSports industry in 2018, according to SuperData Research, a market researcher in New York City. Startups also will need to react and adapt to audiences' demands for quality content and community engagement.
Barriers to entry: New companies will have to find opportunities to partner with the large incumbent eSports leagues and provide ancillary services for players, before other startups do.
The downside: eSports startups can't afford to blink when it comes to the popularity of games. If companies aren't nimble and don't react when audience taste changes, it could be game over.
Competition: The industry is already crowded with new startups that include new platforms, teams, event hosts, and organizers, according to SuperData Research. Additionally, the start of franchised leagues will make it difficult for new organizers and platforms to enter the market.
Major players: Riot Games, which was Inc.'s company of the year in 2016, is one of the biggest names in eSports. It released the widely popular game League of Legends nearly a decade ago, but more than 100 million gamers still play it every month. Interactive entertainment company Activation Blizzard, which makes the beloved Overwatch game, is also a heavyweight in the industry.
Growth: SuperData Research forecasts the U.S. eSports industry to grow to $1.7 billion in 2020 from $1.1 billion in 2018. The U.S. eSports audience also is expected to increase by 41 million between 2017 and 2018.
Look inside the eSports industry: This Founder Studied Fighter Pilots and Navy SEALs to Help Gamers Perform Better
Think of Jerry Maguire, if, instead of athletes, he represented Instagram stars. Influencer agents negotiate deals for prominent individuals seeking to turn their loyal followings on social media into cash.
Why it's hot: The popularity of social media platforms continues to be a powerful source of revenue for influencers--and for agents in search of a cut.
Skills needed: A powerful network of contacts, the first step toward signing clients and finding endorsement opportunities, is essential to the industry.Being able to spot rising stars is also a necessity, along with developing the celebrity's brand identity and reaching new audiences.
Barriers to entry: While an agent's license is required by a state's labor commissioner, the amount of capital needed to launch a startup in the space is low.
The downside: Larger agencies with established reputations can make it difficult for newcomers to the industry to nab A-listers. What's more, the revelation that some companies pay for bots to spread their social media content has heightened the scrutiny around these businesses. Startups in this space also must educate their clients on disclosing ties with brands and adhering to Federal Trade Commission guidelines.
Competition: The field is extremely competitive, with larger agencies poaching clients from smaller companies or each other, according to IBISWorld.
Major players: Talent agency WME IMG is one of the big players in the industry, representing actors, musicians, and directors. Creative Artists Agency LLC also works with high-profile entertainers, as well as athletes.
Growth: U.S. revenue for this industry is expected to jump to $10.8 billion in 2022, an increase of 2.2 percent from 2017, according to IBISWorld.
Look inside the Influencer Agents industry: When Apple and Microsoft Want to Advertise on Social Media, They Turn to These 2 Guys From Canada
Women's reproductive health care
There are more opportunities for women's reproductive health startups as women are waiting longer to have children and want more consumer-facing health solutions, according to First Round Capital. New businesses are now offering services such as at-home fertility testing, birth control tracking, and smart menstruation tracking devices.
Why it's hot: More and more women are taking their reproductive health care into their own hands by using apps to track their fertility and shop from companies that sell organic feminine products. The increased number of reproductive-focused startups, and their acceptance by female users, is boosting the industry's profile.
Skills needed: Founders should have a robust knowledge of the medical industry. They must also have a strong understanding of customers' needs and empathy for patients.
Barriers to entry: As with most medical fields, regulatory issues can be a challenge for young companies. Startups also have to build trust and credibility with users and providers.
The downside: New companies will have to answer questions about their efficacy and change consumer behavior, especially if they are introducing new methods of health care that take consumers away from in-person treatment, according to First Round Capital partner Phineas Barnes.
Competition: Startups in this industry must compete against all the existing reproductive health care options available, such as primary care physicians and alternative telemedicine solutions. Competition in this space ranges depending on the type of reproductive health women are seeking. For example, telemedicine solutions will have to contend with Maven, which offers quick diagnoses and prescriptions. Meanwhile, Lola and Cora are some of the top organic feminine hygiene producers in the industry.
Major players: At-home fertility testing company Modern Fertility and digital clinic Maven Health are the two major players in this industry, according to First Round Capital.
Growth: The U.S. fertility market, which includes medications and reproductive technology, was estimated to be between $3 and $4 billion, according to the 2015 Harris Williams study. It is expected to grow at a compound annual growth rate of 4 percent through 2020, according to a 2016 report from market research firm Technavio.
Look inside the Women's Reproductive Health Care industry: This Startup's First-of-Its-Kind Test Helps Women Understand Why They Can't Get Pregnant
As the Baby Boomers age into their golden years, there's a growing need to care for them. Between adult day care facilities and products and services for at-home providers, the industry is seeing a rise in options.
Why it's hot: The Pew Research Center estimates there are about 74 million Baby Boomers that will require some level of elderly care soon, and companies are trying new--and in many cases high-tech--ways to provide it. For example, a startup called ElliQ is developing a robot that can carry on conversations with elderly patients and play them videos, while E-VONE makes shoes packed with sensors that alert loved ones if the patient falls.
Skills needed: An understanding of the medical field and at-home care are a must for entrepreneurs in this sector. Founders and their employees must be compassionate and able to build trust with patients and families.
Barriers to entry: New companies must demonstrate they are doing things differently to separate themselves from the major players in the field. They also need to get required approval from regional oversight organizations.
The downside: No matter the size of the population, startups will have to contend with family caregivers who may be reluctant to pass off responsibility for their loved ones to a stranger. Additionally, the generation after the Baby Boomers is smaller and could eventually result in a downturn for businesses.
Competition: Older nonprofit agencies focused on at-home care have a competitive edge over new companies as their brands have more name recognition and trust. New solutions like Honor Technology and Hometeam connect seniors and their families with caregivers.
Major players: Home Instead Senior Care, which employs about 65,000 staffers and provides nonmedical home care, is one of the biggest businesses in the market. Comfort Keepers, which provides nonmedical care and light housework, also has a large presence.
Growth: The industry generated more than $50.7 billion in U.S. revenue in 2017. That figure is expected to increase more than 42 percent by 2022, according to IBISWorld.
Look inside the Eldery Care industry: Why the Next Big Opportunity in Health Care Isn't Caring for Sick People. It's Caring for Caregivers
Alternative-protein food products
Does the idea of biting into a juicy hamburger make your mouth water? Now you can get one without any meat in it. Thanks to improving technology, alternative protein foods have been making a splash in the food world. Whether it's a vegan milk substitute made from peas, cricket protein, or meat-like products made from plants, customers have more options for their nutritional needs.
Why it's hot: Consumers are looking to introduce more proteins into their meals thanks to dietary trends like the paleo and ketogenic diets. Additionally, technology has caught up to allow for great-tasting and visually pleasing products that appeal to a wider consumer base.
Skills needed: Founders need the technical know-how to develop the foods, or must collaborate with others who do. Alternative protein entrepreneurs also must be able break through the noise of better-known brands to get a clear message and good product to consumers.
Barriers to entry: Consumers need to become more open to trying alternative protein products for startups in this sector to thrive, says Dries Zender, the principal of brand growth solutions for the consumer insights firm SPINS. Additionally, an availability of supply could be a difficult hurdle for startups in the alternative protein space. Relatively little U.S. cropland is dedicated to new and emerging protein sources and companies could experience shortages as a result of drought or insect infestation.
The downside: Entrepreneurs must be able to break through the market with an innovative product and, just as importantly, keep up with technology so they're not surpassed by other companies, says Zender.
Competition: There is a large amount of competition in the field with more brands launching into the space, according to SPINS. The category also is expanding to include more than just milk and meat--for example, California-based startup Ripple Foods, which makes products out of pea protein, recently launched a Greek yogurt and half-and-half.
Major players: Impossible Foods, known for its bleeding meatless burger, is one of the popular brands in the industry, according to SPINS. Beyond Meat, which makes plant-based sausages, burgers, and chicken dishes, has also gotten traction with consumers.
Growth: Alternative protein startups have raised hundreds of millions of dollars in funding as entrepreneurs try to find a healthier and more environmentally friendly way to provide protein-rich foods. The global market for alternative proteins was valued at $4.2 billion in 2016, and is expected to grow 6.8 percent between 2017 and 2022, according to Research and Markets.
Look inside the Alternative Proteins industry: The Dairy Industry Has a New, Trendy Competitor: Pea Milk