Investing money in a startup is always considered a risky task but not all startups are the same. Companies that have stable monthly income, avoid unnecessary expenses, have a strong business model and have a clear path to earning profits in the future are considered to be much safer than other companies. Talking about statistics, it is true that almost 90 percent of startups are not able to survive in the market for a long time.
About 10 percent of these startups close within the first year of their operation and about 70 percent of the startups fail completely within 5 to 10 years of their launch. According to a report by CB Insights, 38 percent of startups close down simply because they run out of cash to run their operations. Whereas 35 percent companies fail because there is no need for their product in the market. Apart from this, 20 percent of startups close down due to tough market competition, 19 percent due to choosing the wrong business model and 18 percent due to not being able to price their product correctly. But despite this huge risk, there are some strong sectors where the risk of losing money is the least.
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Startups from these sectors are considered the strongest.
Despite working in this risky environment, business reports from the world’s biggest companies like McKinsey, KPMG, NASSCOM, Gartner and Deloitte show that some different types of startups are considered very reliable due to their strong business model, consistent demand in the market and good earning potential.
B2B SaaS Startup: These are considered the strongest in terms of security. Here B2B means ‘Business to Business’ i.e. those who sell their goods or services not to common customers but to other companies. SaaS stands for ‘Software as a Service’. This simply means that these companies do not create any software and sell it directly but instead provide their software services for use through the Internet. It works on a subscription model, meaning customers have to pay a fixed fee every month or year to use it. With this, companies continue to get a fixed and regular income every month. They have very little extra expenditure and through the internet they have access to markets all over the world.
Fintech Startup: Fintech means finance and technology. These companies provide services like digital payments, giving loans and investing money. Since this entire sector works under the strict rules of the Reserve Bank of India i.e. RBI, due to government rules, the way of working in these companies remains much better and cleaner. However, the risk is slightly higher in those startups in this sector which run the model of distributing loans to people without any guarantee.
Healthtech Startup: These are startups providing health and treatment related services with the help of technology. The demand for things related to illness and health always remains in the market in every situation, even if there is a recession. This is the reason why startups providing online doctor consultation, testing services and keeping digital health records safe are continuously seeing good growth.
Enterprise AI Startup: These startups sell Artificial Intelligence i.e. AI solutions directly to big companies called enterprises to make their work easier. Since big clients enter into long-term contracts with them, their earnings are predictable and their income always remains stable.
Logistics and Supply Chain Startups: Logistics means the business of safely transporting goods from one place to another and maintaining it. Due to the continuous growth of e-commerce and manufacturing sector, the demand for this sector always remains in the market. Because of this, these startups continuously get big and permanent business clients to work with.
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5 easiest ways to identify a safe startup
If you want to identify a strong and safe startup, experts recommend looking at some very simple things. First of all, the total earnings of the company should increase continuously every month or every year. The second thing is that the company should directly benefit from the sale of any of its goods or services, and not suffer losses from its own pocket.
The third important thing is that the company should not be wasting money unnecessarily to run its daily work. Apart from this, it is very important for the people starting and running the company to have old and good experience in that business. The last thing is that the company should have a very clear and straightforward plan to earn profits in the future. Only by understanding these simple things can a safe startup be identified.
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