Global Startup Sub-Sector Analysis

Key Findings

• Deep Tech (Advanced Manufacturing & Robotics, Blockchain, Agtech & New Food, AI & Big Data) remains the fastest growing group globally. Fintech also has experienced substantial growth in the last five years.

• Startup Sub-Sectors in the Growth Phase are increasing Series A funding deals at the impressive rate of 107% over five years. Mature Phase sub-sectors have grown 33% over the same period. Decline Phase sub-sectors have declined by 28%.

• Fintech, which was in the Mature Phase in 2019, is demonstrating a resurgence in Series A funding that is more characteristic of the Growth Phase, indicating new investments and innovation in this sub-sector.

• Similarly, Edtech and Gaming, both on the edge of the Decline Phase in 2019, have experienced an increase in Series A funding that returned them to the Mature Phase.

• Series A growth rates are higher than in 2019. Exit growth rates slowed in the five-year period ending in 2020.

Figure 1. Global Sub-Sector Lifecycle By Count Of Series A Deals And Exits

Global Trends In Startup Sub-Sectors

The Covid-19 pandemic created shifts in some sub-sectors. It revived several that were previously in decline, like Gaming and Edtech. And it caused deviations from typical lifecycle patterns, as seen in the growth of the Life Sciences sub-sector and—in Fintech—of insurance and lending. Figure 1 illustrates the current view of sub-sector Phases based on our 2019 methodology. It provides a summary of global exit and funding event counts and shows the relative share of each sub-sector as a percentage of the global startup population. Figure 2 offers an alternate perspective on the impact of sub-sectors globally: it measures their growth based on the amount of investment and exit value in each sub-sector. This second graph largely reflects the growth of sub-sectors in ecosystems with higher amounts of dollar investment and the impact of large exit events on growth. The bubble size in Figure 2 represents the Ecosystem Value added by a given sub-sector and indicates how attractive it is for global investors.

Interestingly, measured by both number of events and amount of funding, certain sub-sectors continue to stand out. AI & Big Data, for example, and Advanced Manufacturing & Robotics are experiencing high growth by both metrics. These two lifecycle views also reveal which sub-sectors are generating outsized Ecosystem Value compared to their peers. For example, Life Sciences—which comprises just 8% of global startups—added $183 billion in Ecosystem Value in 2020. That is the second highest amount after AI & Big Data.

Figure 2. Global Sub-Sector Lifecycle By Amount Of Series A Deals And Exits

Top 4 Fastest Growing Sub-Sectors

Early-Stage Funding Deals Over Five years

• Agtech & New Food (128%)
• Blockchain (121%)
• Advanced Manufacturing & Robotics (109%)
• AI & Big Data (98%)

Declining Sub-Sectors

• Adtech (-35%)
• Digital Media (-21%)

Sub-Sectors In Growth Phase

The five Growth sub-sectors are increasing in size at an astounding pace, with an average 107% rise in early-stage funding deals over just five years and an average 43% growth in exits. Fintech is a new entrant to this group thanks to increased Series A investment atypical of its peer Mature sub-sectors.

Among Growth-Phase sub-sectors, AI, Big Data & Analytics is the largest, comprising 27% of all global startups. Agtech & New Food is the smallest, accounting for 2%. AI is the standout. On its own—separate from Big Data & Analytics—it is growing about twice as fast as the sub-sector as a whole.

Sub-Sectors in Mature Phase

The composition of Mature sub-sectors has shifted since our last analysis in 2019. Cybersecurity, Cleantech, and Life Sciences remain in the Mature Phase. Edtech and Gaming are new entrants, returning from Decline in 2019. Collectively, these sub-sectors saw growth of 33% in Series A funding and 3% in exits over the past five years.