Securing investment is a significant aspect of launching a new business.
However, getting investment is often the biggest challenge that entrepreneurs will face. Investors are selective about who they work with, with their primary objective to identify only those companies who they believe will generate a healthy return.
Due to the market trends and past success stories, specific sectors tend to attract more investment or be more preferential for shareholders. If your business fits into one of these sectors, it might mean you stand a better chance of getting the funding you need.
We explore the sectors that receive the most investment and what it may mean for entrepreneurs.
- What sectors receive the most investment?
- How does it impact me?
- Can I get investment in other sectors?
What sectors receive the most investment?
There are varying answers to the question of which sectors get the most investment. Database company Statista has compiled a list of the industries that get the most venture capital, a form of investment targeted at early-stage companies. In their findings, these areas secure to most funding:
- Software (including apps)
- Biotechnology
- Media/entertainment
- Medical devices/equipment
- IT services
- Industrial energy
- Consumer products/services
- Financial services
- Networking and equipment
- Telecommunications
There are others that are frequently cited as being among the most viable to invest in, including:
- Healthcare (especially after the coronavirus pandemic)
- Food sector
- Fast-moving consumer goods (FMCG)
- Renewable energy
- Ed-tech
- Med-tech
- Cybersecurity
- Finance
This shows a wide variety of sectors seen as ‘good for investment’, though those in the technology, healthcare and consumer goods spheres tend to be the most popular at present.
How does it impact me?
Understanding the sectors that typically attract the highest levels of investment can be incredibly helpful if you are seeking inspiration for a new business. It might make sense to base it on one of the sectors listed above.
The reason that these types of companies are currently popular will be because they tend to generate a better return on investment. This suggests that businesses based in the sectors are able to scale faster as well as create multiple exit points for investors and with proven success stories in the market that can be used as supporting evidence for their value. In this sense, the idea you come up with in a sector may also have a higher potential beyond its appeal to investors due to this scalability or filling gaps in the market.
It’s worth noting that the sectors deemed ‘best’ for investment are constantly subject to change as both demand and behaviour changes or as the market becomes saturated. Due to this, it’s critical to focus on fresh, innovative ideas that add value rather than simply following investment patterns.
It’s also essential to align any vision you come up with to your passions and skills, allowing you to lead the venture to success and generate the profit that investors want to see.
Can I get investment in other sectors?
While certain sectors may be ‘trending’ in the market, it doesn’t mean that other sectors won’t receive any funding. Having a business based in a specific industry does not guarantee success, so it continues to be imperative that you find the right idea and create the environment you need to excel. This means bringing together your passions as a business owner while ensuring you are meeting demand and operating efficiently to deliver great entrepreneurial ideas.
Regardless of the sector, you will also need to convince any investors you approach that your idea has value and will deliver their expected return on investment. By persuading them of your ability to succeed and the validity of your value proposition, you should eventually be able to identify an investor who is willing to support your venture.
Conclusion
When starting a business, the dream is to quickly secure investment grow and scale your business. This means creating that killer idea and fulfilling the criteria investors are looking for.
Understanding the sectors that typically receive the most investment is a great way to determine where the opportunities for your business may lie.
That being said, any idea you come up with must have value and be capable of scaling, and you must be able to lead it effectively. This will create a business that is capable of securing finance for years to come, even as market trends shift.