The data and 5,807 companies analyzed in this newsletter comes directly from Keyplay. You can now filter your own list in 90 seconds with hundreds of sales signals using Keyplay Lists.
We hear a lot about VC funding slowing down.
We can all feel a difference. Tech layoffs are commonplace. Nearly every sector has struggled. Headcount growth reflects this narrative.
Only 46% of companies with $50M+ in funding grew headcount in the past six months. This is a big departure from 2021, when the average VC backed company was "hiring like crazy," fully expecting another funding round to materialize. Now, operations are tighter. We’re more than a year into a return to rigor in tech.
That sounds grim, but when we unbundled generic categories to better research the 46% with positive headcount, we uncovered hidden success stories and opportunities.
Using Keyplay data, we studied 5,807 tech companies with $50M+ funding. To eliminate outliers, we limited to those between 10 to 5K employees. This newsletter breaks down funding and growth trends by category to understand which sectors are still thriving. I highlighted key growth insights on LinkedIn.
Which venture categories are still growing?
None of the market categories we track have 50% of companies showing positive headcount growth in the last six months.
That said, the distribution is telling. Despite the SaaS multiple compression and the biotech funding slowdown post-COVID, SaaS and Health Technology (both B2C and B2B) show more positive headcount growth compared to other categories, especially when compared to consumer software and commerce.
While it’s unrealistic to expect health tech funding to return to federally-boosted '20 and '21 levels, average deal sizes in Q1 were larger than 2019 and on par with 2022. We’ll dive into the many subcategories responsible for SaaS growth next week.
Where is the health tech growth?
Biotech still represents the majority of growing health tech startups in our index. Wearables & Monitoring is a distant subcategory to watch. Notably, three of the four high-growth startups in health tech that raised this year were biotechs:
- Pliant Therapeutics: Biotech, fibrotic disease; $694.9M total funding
- Metagenomi: Biotech, genetic disease; $457M total funding
- Asimov: Biotech, genetic design; $205M total funding
DTC & Ecomm
The 2020 lockdown may have given subscription services false hope of a new normal. Now that the novelty’s gone and the economy rocky, buyers are feeling “box fatigue.” Recurring revenue is harder to come by amidst The Great Unsubscribe, leaving ecomm over-reliant on new customers, which accounts for 40% of Stitch Fix’s revenue.
Stitch Fix, Chewy, Blue Apron and it’s competitor Hello Fresh have all been trending in the wrong direction since last year. They’re not alone. Many consumer products are valued considerably lower than at initial IPO. ThredUp is down 80% while Allbirds is down 91.5%.
Where is the DTC growth?
Cannabis. Just one DTC startup in our index that raised this year has positive 6-month headcount growth. It’s “the most globally recognized cannabis brand in the world,” according to Cookie, founded by rapper-turned-CEO Berner, which closed its series A funding round last month. Meanwhile, its cannabis competitor to the north, Fire & Flower, is among the highest recently funded DTC companies still growing.
Home & Lifestyle is another recurring theme in DTC and includes a broad range of products. Instead, we’ll highlight interesting outliers. Camp.com is retail meets experiences. You can book Disney camp experiences and shop top-rated toys by age online. Meanwhile, home office furniture company Branch tells us #WFH is far from over. What’s most impressive is there efficiency at just 58 employees, given their duel GTM funnel and B2B logos – Google, Shopify, Casper.
- Cookies.co: Cannabis; $108.8M total funding
- Camp.com: Toys & Games; $54.4M total funding
- Branch: Home & Lifestyle; $13.9M total funding
Fintech as a category has been legitimized through search demand, multiple unicorns, and sizable acquisitions.
Of course, fintech is not immune to the turbulence in US banking and crypto crash. Three banks with tech ties closed their doors this year, in part because of crypto exposure. Yahoo predicts 190 more banks could be at risk.
Robinhood (-77%) has struggled since crypto cool off cut day trading. Buy-now-pay-later platform Affirm, down 75.4% despite a positive quarter, is directly affected by the ecomm and retail dip.
Where is the fintech growth?
Other fintechs have thrived during the banking crisis, as the recent tech-focused bank closures forced founders to reassess their tech stacks.
Financing and Spend Management surfaced as fintech subcategories filling the void. On the personal lending side, Tabby, a B2C Affirm competitor (which makes us nervous) and Avant are benefiting. B2B lenders saw more instant demand. The day after the SVB announcement, AEs from a non-dilutive SaaS financing company shared their daily agenda of demos held. 10 to 16 calls per rep (not counting reschedules and cancellations).
Additionally, spend management companies like Airwallex, Navan (formerly TripActions), and Airbase which rose in our Fintech Index in March, are holding strong.
- Stenn Technologies: Non-equity financing; $1B
- Navan: Travel expense management; $2.2B
- Avant: Personal loans and credit cards; $2.1B
Consumer Apps, Marketplaces & Media
Remember when we all praised Airbnb for slashing ad budget during the pandemic? It’s since gone downhill for consumer marketplace giants. Food delivery apps like Doordash are down. Lyft announced it’s open to acquisitions. Interestingly, Uber itself is slowing climbing from a rock-bottom 2022 and ride share competitors are doing surprisingly well (read on).
Then there’s talent marketplaces like Fiverr and Upwork. All fell last week. AI is both the villain and (potential) hero in the story. (BTW - You can explore how other marketplaces are already leveraging AI – or find open AI jobs – in our free AI Index).
Where is the marketplace growth?
The vast majority is in consumer apps. Specifically, Travel & Transportation (TrovaTrip, WeTravel, Travelport, Turo, InDrive) and, more recently, betting apps (Prize Picks and Jackpocket both raised ‘23 rounds).
ZipRecruiter, SeatGeek, Kickstarter also surfaced to the top during our growth search. While household names, all have fewer than 2K full-time employees (Kickstarter has just 272) – emphasizing the efficiency of the marketplace model. While other car sharing giants struggle, Turo’s niche in vacation car borrowing seems to be working. Turo is set to go public this year. InDrive’s flatter model – small cut and ability to pick your driver – could also give the incumbents trouble.
Standouts from '22-'23 funded marketplaces:
- Mill.com: Food recycling; $100M
- Whatnot: Live stream shopping (think modern QVC); $484.7M
- Collectors: Collectables marketplace; $100M
Media & Entertainment
Traditional media companies are still struggling to find profit margin in a post-cable world. Cable and the recent merger with Discovery is hurting Warner Bros Discovery (Maybe’s HBO’s rebrand will help?). Meanwhile, Disney+ is still figuring out how to be profitable.
Can media giants learn from 2020 mega deals? Business newsletter Morning Brew was acquired by Business Insider and sports media hub The Ringer was acquired by Spotify. Both zagged from traditional and built from lower production cost models – email, blogs, and podcasts.
Where is the media growth?
There are now media companies and media platforms. Platforms like Patreon, a $4B unicorn, and Substack, already halfway to unicorn status as a series B startup, represent the creator-led media model. We’re watching to see how creator-led media changes M&A in 2023.
As for media companies themselves, Gaming and Streaming are surging in popularity. Recent funding rounds reflect this.
Growing media companies that raised in '22-'23:
- The Arena Group: Publishing (Sports Illustrated, Parade); $140.7M
- Thatgamecompany: Gaming; $188.8M
- Spotter: Media & Streaming (media platform for YouTube creators); $230.M
Next week, we’ll dive deeper into venture-backed SaaS – dissecting more granular SaaS categories to see who’s thriving. Any guesses?
Here are the subcategories within SaaS that’s we’ll be studying. Which would you bet on in 2023?
- Artificial Intelligence (AI)
- Generative AI
- Collaboration & Productivity
- Cloud Infrastructure
- Marketing Tech
- Sales Tech
- Developer Tools
- Design Tools
- Accounting & Finance Tools
- HR Tech
- Customer Support
- Workflow Automation
- Security & Compliance
- Vertical SaaS
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Adam & Camille
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