Over the past few years, there’s been a dramatic increase in the number of startups.
And while there are many different types of startups, not all of them are profitable. In fact, a recent study found that only 36% of startups are profitable.
So, which type of startup is most likely to be profitable?
In this guide, we will dive deep and reveal startups that have a higher chance of becoming profitable faster.
Truth is, there are many different types of startups, each with their own set of risks and rewards.
Some startups are more likely to be profitable than others, depending on the business model, the target market, and the management team.
And according to Techcrunch, the following startups reach profitability faster:
#1. E-commerce
#2. Chrome extensions
#3. Mobile apps
#4. Enterprise SaaS
#5. Small-to-medium business SaaS
But before we discuss each, here is one more thing.
Why does profitability matter in startups?
Profitability is important for startups because it is a key metric for success.
In fact, startups that are not profitable are at risk of failing, and those that are profitable are more likely to grow and scale.
a). Attract more investors
Investors are more likely to invest in a startup that is already profitable, as it is a lower-risk investment.
b). Create more jobs
Profitable startups are more likely to create new jobs, as they can afford to hire more staff.
c). Improve the economy
Profitable startups contribute to the economy by creating new products and services, and by generating tax revenue.
d). Have resources to invest in getting more clients
Profitability gives startups the resources they need to invest in getting more customers or clients. This is important because customer acquisition is one of the biggest challenges for startups.
Without profitability, startups may not have the resources to invest in customer acquisition, which can limit their growth.
e). Attracts Talent
Profitability also attracts talent. Startups that are profitable are more attractive to employees, who are often attracted to the stability and growth potential of profitable companies. This is important because talent is essential for startups to grow and scale.
f). Valuation
Another reason why profitability matters in startups is because it affects valuation.
Startups that are profitable are typically valued higher than those that are not. This is because investors are willing to pay more for a company that is already generating revenue and profits.
That said, let us look at some of the types of startups that attain profitability faster.
#1. E-commerce
A recent study published by CB Insights shows that eCommerce startups are reaching profitability faster than any other type of startup.
The report analyzed over 2,000 companies and found that those in the eCommerce space reached profitability in an average of 2.5 years, while all other startups took an average of 5.5 years to turn a profit.
The study’s authors note that this may be due, in part, to the lower overhead costs associated with eCommerce businesses.
In addition, they suggest that retailers may be more likely to succeed in the eCommerce space because customers are more comfortable making purchases online than they are with traditional brick-and-mortar stores.
Whatever the reasons may be, it’s clear that eCommerce is a hotbed for successful startups.
#2. Chrome extensions
Chrome extension startups are profitable because they offer a unique and convenient feature to users.
If you have no idea what I am talking about, Chrome extensions are small software programs that add features or improve the functionality of the Chrome web browser. They can be installed from the Chrome web store, and most are free.
Some of the most popular Chrome extensions include Adblock Plus, LastPass, and Google Translate. There are tens of thousands of extensions available, and new ones are added every day.
Chrome extensions can be used for a variety of purposes, such as blocking ads, saving passwords, translating websites, or checking to spell. They are small and easy to use, so they can be installed and used quickly without taking up a lot of space on your computer.
They also offer a number of advantages over traditional software programs.
- Low cost of entry – Extensions require very little investment to get started and can be created for free.
- Easy to use – Extensions are easy to install and use, so you don’t need any technical expertise to get started.
- Flexible – You can create extensions for any purpose, so you’re not limited by what’s possible with other platforms . . .
- Scalable – Extensions can be used by millions of people, so you have the potential to reach a very large audience.
How to get started
If you are interested in starting a Chrome extension business, the first step is to create your extension.
You can do this by using the Chrome Extension Developer Toolkit. This toolkit will walk you through the process of creating an extension, from start to finish.
Once you’ve created your extension, the next step is to promote it. You can do this by submitting it to directories and review sites, as well as promoting it on social media.
If you are looking for more advice on how to get started with your own Chrome extension business, check out this comprehensive guide.
#3. Mobile apps
What is a mobile app startup?
Mobile app startups are companies that design and develop mobile apps.
They can be small, independent operations, or they can be part of a larger technology company.
What you may not know is that mobile app startups are often profitable because they offer value to their customers before they even install the app. This makes them easier to install and more likely to be used on a regular basis.
Why are mobile apps so popular?
Mobile apps are popular because they are easy for customers to install and offer tremendous value beforehand. The apps are designed with the customer in mind, and this makes them more likely to be used on a regular basis.
In addition, mobile app startups are often part of a larger technology company, which means that they have access to resources that smaller operations may not have. This gives them an edge in the competitive market for mobile apps.
Why do finance mobile apps do well?
When it comes to our finances, we want to be able to keep track of every penny. This is why finance mobile apps have become so popular. People can use these apps to track their expenses, budget for the future, and even invest their money.
One of the reasons that finance mobile apps do so well is that they are convenient.
We can access them from anywhere, which means we can keep track of our finances no matter where we are.
Additionally, many of these apps offer features that allow us to manage our money more effectively.
For example, some apps will allow us to create budgets and track our spending over time. This can help us stay on top of our finances and make sure that we are not overspending.
Another reason that finance mobile apps are so popular is that they are helpful in managing investments.
How to get started
There are now over 1.5 million mobile apps in the app stores, and that number is only going to continue to grow.
If you are thinking of starting a mobile app startup, it’s important to understand the competitive landscape and what it takes to get your app noticed.
Here are a few tips on how to get started:
- Do your research. Before you start coding or designing your app, make sure you understand what is already out there and what people are looking for. This will help you determine whether there’s even a market for your app.
- Build a great product. This may seem obvious, but if you want people to download your app, it needs to be good. Spend time designing a user-friendly interface and developing features that people will actually use.
- Promote your app wisely. Once your app is live, you need to let people know about it. Use social media, paid advertising, and PR to get the word out.
- Analyze and optimize regularly. Keep track of how people are using your app and make changes accordingly. Regular updates will keep users engaged and coming back for more.
#4. Enterprise SaaS
Enterprise SaaS is software that is used by businesses to manage their operations. The software can be used to manage customer data, finances, or other important business functions.
It is often touted as a more cost-effective and scalable alternative to traditional software licenses.
Why does Enterprise SaaS reach profitability faster?
There are a few reasons for this.
First, because Enterprise SaaS is a subscription service, businesses can typically more quickly and easily gauge their return on investment (ROI).
Second, because Enterprise SaaS is hosted in the cloud, they are often more scalable than traditional software licenses – meaning businesses can add or remove users as needed without having to purchase new licenses or make other significant changes.
How to get started
Enterprise SaaS startups are on the rise as businesses shift their spending to cloud-based software.
If you are looking to start an Enterprise SaaS startup, there are a few key things you need to know.
The first step is to identify a problem that your software can solve.
Once you’ve identified a problem, you need to create a solution that meets the needs of your target market.
The final step is to build a sales and marketing strategy that will help you reach your target market.
#5. Edtech Startups
Edtech startups are on the rise, and for good reason. They’re profitable!
What is an edtech startup? Edtech startups are companies that specialize in technology-based education products and services. They can be found in all different industries, but they commonly focus on early childhood education, K-12 education, and higher education.
Why are they so profitable?
There are a few reasons.
First, there is a lot of demand for their products and services. Parents want the best for their children, and educators are always looking for ways to improve instruction.
Secondly, these startups are able to keep costs low by using technology to streamline their operations.
And finally, they are often able to scale quickly, which allows them to reach more customers and generate more revenue.
Examples of successful EdTech startups
Knewton is an online learning platform that uses adaptive algorithms to personalize each student’s learning experience. The company has raised over $100 million in funding and is used by millions of students worldwide.
Then there is ClassDojo, which is a classroom communication app that allows teachers to share photos, videos, and messages with parents and students. The company has raised over $120 million in funding and is used in over 90% of American schools.
And finally, Course Hero is an online learning platform that connects students with educators and peers who can help them learn any subject. The company has raised over $60 million in funding and has more than 20 million users worldwide.
How to start a successful edtech startup
So you want to start an edtech startup? Well, it is not as easy as it sounds, but with careful planning and execution, it can be a very successful venture. Here are a few tips to help get you started:
First, make sure you have a clear vision for your company and what you want to achieve. This will help guide your decisions down the road and keep you focused on your goals.
Next, do your research and figure out what needs aren’t being met by the current edtech market. There’s a lot of competition out there, so you’ll need to find a niche that you can fill.
Once you have identified your target market, develop products or services that cater to their needs.
What determines how fast a startup reaches profitability?
There are many factors that can affect how fast a startup reaches profitability.
Some of these include the amount of initial funding, the size of the market opportunity, the company’s business model, and execution by management.
Let’s look at each in detail:
a). Initial Funding
The amount of initial funding can play a big role in how quickly a startup reaches profitability. If the company has more money to invest in its business, it can grow faster and reach profitability sooner.
b). Market Size
The size of the market opportunity is also important. If there is a large potential market for the company’s product or service, it will be easier to reach profitability.
c). Business Model
Another key factor is the company’s business model. Some businesses are more efficient than others and require less investment to become profitable.
For example, companies that have a subscription-based revenue model tend to be more capital efficient than those that rely on advertising revenues.
d). Execution by Management
Finally, it is important to note that even the best-funded and positioned startups will fail if they are not well-managed.
A startup’s management team must be able to execute its business plan in order to achieve profitability.
Conclusion
In conclusion, it would seem that tech startups are more profitable than those that do not.
However, it is important to note that this is not always the case, and it is important to do your research before starting a business. If you are thinking of starting a startup, be sure to consult with an experienced attorney to make sure you are doing everything correctly.