Fastest-Growing Industries for Startups

By Adriaan Brits | Friday, 21 May 2021 | Feature, Startup

Startups in the US are launching at a record pace, with the number of people starting their own businesses (particularly limited liability companies and particularly in certain states) recently hitting a 13-year high. One indication of this trend: Applications for an Employee Identification Number (EIN) by the end of September 2020 exceeded the 2019 volume by 18%.

A number of factors are driving all of these startups. In particular:

• The COVID-19 pandemic has forced thousands of businesses to close, which has presented opportunities for new ones.
• Many Americans have lost their jobs during the pandemic, prompting some to start businesses because they have time or out of economic necessity.
• Government stimulus payments and unemployment benefits have put more cash in people’s pockets.

Although the US economy is improving overall and presents many opportunities for startups, certain industries are more promising than others. Some of those with the highest potential include:

• Ecommerce
• Healthcare IT
• Education Technology
• Artificial Intelligence

We discuss each of these in more detail below.

Ecommerce

Ecommerce has exploded in recent years, and the COVID-19 pandemic only fueled that growth as more people than ever were forced to shop online. For example, market research company eMarketer reports that, according to a survey, 41% of respondents started making more purchases online between March and April of 2020.

In addition, many businesses either began or ramped up their ecommerce efforts in order to stay in business during the pandemic. Even after COVID vaccines become widely available worldwide, the Organization for Economic Cooperation and Development predicts that the trend toward online shopping will continue.

Current Value and Projected Growth

According to Grand View Research, the global ecommerce industry was valued at $9.09 trillion in 2019. It’s expected to grow at a compound annual growth rate (CAGR) of 14.7% from 2020 to 2027, with a projected value in 2027 of $27.15 trillion.

Key Factors Driving Growth

Several factors are contributing to this massive growth. One significant factor is the ever-increasing number of people worldwide who have internet access and use smartphones with online shopping apps.

“Digital content, travel and leisure, financial services, e-tailing among others constitute a variety of e-commerce options available to the internet accessing customer base that are gaining momentum with increased internet usage,” Grand View Research says in a report. “Hence, technological awareness among customers is expected to have a positive impact on market growth.

The report also says that faster internet access, powered in part by 4G and 5G technology, has further bolstered the adoption of ecommerce.

Examples of Ecommerce Startups

Some examples of ecommerce startups include:

• 1stDibs: an ecommerce platform where people can buy and sell rare clothing, jewelry, furniture, and fine art
• Bellroy: sells wallets, handbags, and related items
• HelloFresh: a food subscription service that delivers packages of pre-measured ingredients so you can make your own healthy meals
• Jungle Scout: an online platform for finding, launching, and selling products on Amazon
• Boxed: provides a big-box wholesale shopping experience online

Healthcare IT

Healthcare is one of the most profitable areas to start a business, and health care information technology (IT) is a particularly fast-growing part of the larger healthcare industry.

It has so much promise, in fact, that Microsoft plans to launch a cloud offering specifically aimed at the healthcare market. Other technology companies that plan to enter or expand their foothold in the health IT market include Infosys, analytics healthcare startup Truveta, and other virtual reality and telehealth companies.

Current Value and Projected Growth

Grand View Research reports that the global healthcare IT market was valued at $74.2 billion in 2020 and is expected to grow at a CAGR of 10.7% until 2028. At that time, the industry’s forecasted revenue will be about $166 billion.

Key Factors Driving Growth

Several factors are contributing to this growth, including high demand for preventive care, increased funding for mobile health startups, and improvements in communications networks and other parts of the country’s IT infrastructure. Grand View Research also pointed to growing consumer demand for better medical treatments and greater consumer awareness of medical technology advances.

Other growth factors in the healthcare IT space include an increasingly elderly US population
higher costs of hospital equipment, and rising demand for home healthcare services. Finally, the report says, more and more healthcare providers are realizing that properly implemented healthcare IT solutions can improve health outcomes while reducing medical errors and operational costs.

Examples of Healthcare IT Startups

Some examples of healthcare IT startups include:

• Truveta: provides data analytics to healthcare providers
• CareRev: created an app and online platform that connects professionals with hospitals in need for on-demand, day-by-day work
• Seqster: another data analytics company
• Tytocare: an artificial intelligence (AI) remote healthcare startup
• Infinitus: a startup that automates tasks like confirmation questions that need to be asked before payments can go through

Education Technology

Technology in various forms is being integrated into classrooms, from kindergarten through graduate school. As a result, this field presents significant opportunities for education technology (edtech) startups, even though the industry does present some challenges.

Current Value and Projected Growth

Globally, the edtech market was worth $89.49 billion in 2020 and is expected to grow at a CAGR of 19.9% from 2021 to 2028. In 2028, Grand View Research says the market will be worth $377.85 billion.

Key Factors Driving Growth

A key factor driving the growth of edtech is that educators increasingly realize it can improve digital access to education. Students can read ebooks from anywhere they have an internet connection, and the production costs for digital content are much lower than for physical books and other media. Ebooks can also be translated into other languages faster and more easily. Audiobooks have improved access to education as well, particularly for people with physical disabilities.

Edtech is also benefiting from technological advances driving other fields, such as the internet of things, artificial intelligence, and virtual reality — all of which could enhance how students learn.

Examples of Education Technology Startups

Some examples of edtech startups include:

• LEAD School: provides an integrated learning management system for K-12 schools
• Honorlock: an on-demand online proctoring service
• Wize: provides online learning materials for students at a variety of grade levels
• Nearpod: offers teachers a variety of tools to increase participation in their classes, like interactive quizzes, games, and polls
• Nerdy: a direct-to-consumer, gig economy platform for online learning

Artificial Intelligence

Artificial intelligence (AI) is a type of technology that can learn human actions and perform routine tasks so that people don’t have to, which is safer and prevents errors. AI also can easily adapt to new information.

AI has applications in areas as diverse as healthcare, retail, edtech, social media, commercial airlines, ridesharing, and even something as mundane as the recommendations in your Netflix feed. Because AI has the potential to transform so many different fields, it’s rife with opportunities for startups.

Current Value and Projected Growth

The global AI market had an estimated value of $39.9 billion in 2019 and is expected to grow at a CAGR of 42.4% from 2020 to 2027, at which time it will be worth a projected $733.7 billion

Key Factors Driving Growth

According to Grand View Research, research and development performed by tech giants like Apple, Google, and Microsoft are prompting the development of advanced technologies in a wide variety of fields. These include, for example, automotive, healthcare, retail, finance, and manufacturing. While these industries have always been technology-driven, AI is accelerating the pace at which new (and potentially transformative) technologies are being adopted.

Moreover, AI is being incorporated virtually into the hardware and software of everything from self-driving cars to life-support equipment. Other drivers of growth include advancements in data storage and recovery, as well as progress in developing artificial neural networks that mimic how the human brain learns.

Examples of AI Startups

Some examples of AI startups include:

• Tempus: uses AI to help physicians deliver personalized patient care
• Shield AI: develops AI software for a variety of applications
• Kinta AI: optimizes manufacturing processes
• ASAPP: improves enterprise performance with AI
• Immunai: develops and optimizes immunotherapies for cancer treatments

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