Tomasz Tunguz, a partner at venture capital firm Redpoint, has written a post titled “The Fastest Growing Areas of Startup Investment in 2015” on his personal blog.
“Which lesser known startup sectors are starting to raise venture dollars?” asks Tunguz. “Where are founders finding unique opportunities to innovate?”
The answer: Bitcoin is the fastest growing sector.
Tunguz focuses on software investments. Prior to joining Redpoint, he was a project manager at Google working on AdSense. Before Google, Tunguz worked as a Java engineer at Appian Corporation, building tools for the Department of Homeland Security and co-founded a SaaS startup building software for law firms.
In the list of fastest-growing sectors, Bitcoin is followed by photo-sharing and physical storage (which includes moving and self-storage companies). Each year, starting in mid-2012 through mid-2015, these three sectors have grown their total investment dollars by more than 145 percent, according to data from Mattermark.
These fastest-growing sectors are relatively underfunded at the moment. While Bitcoin startups receive less than 0.2 percent of the startup funding pie, and physical storage startups less then 0.1 percent, transportation and hospitality startups – fueled by the spectacular success of Uber and AirBNB – each receive more than 6 percent of the total amount of startup funding. Other well-funded sectors are travel, banking, and space.
But the fact that Bitcoin is, at the same time, a relatively underfunded sector and the fastest growing sector means that there are huge opportunities for innovative Bitcoin startups.
Besides the fast-growing sectors, Tunguz lists less successful ones with negative growth. Semiconductor investment fell 31 percent per year, email startups raised 22 percent less, and dating contracted by 9 percent annually.
The worst performing sector is deal sites, where the funding raised fell by 48 percent per year. That can be explained by noting that the sector of deal sites is dominated by one very successful player – Groupon – and, therefore, investors don’t think there is enough room for new players. Similarly, semiconductor startups must compete with giants such as Intel, which can afford burning lots of money in pursuit of innovation, which may scare investors off.
Tunguz concludes that startup founders will move to areas with less competition, and investors will seek under-explored areas to finance, looking for great returns. That seems to be the case for the relatively underfunded, fast growing sector of Bitcoin and other digital currencies, which is beginning to see a lot of investments from venture capitalists and institutional players alike.
In fact, major financial players such as Citi, UBS and Barclays all have recently confirmed that they are exploring the blockchain, while a BNP Paribas analyst speculated that the distributed ledger has the potential to completely upend post-trade infrastructure. Financial blockchain applications will be measured in the trillions, said top financial star Blythe Masters at Exponential Finance 2015.
Santander InnoVentures and other financial firms launched “a call to action to banks, financial institutions and financial technology (fintech) businesses to work together to undertake a fundamental ‘reboot’ of the core processes, systems and infrastructure of the banking industry.”
According to their report “The Fintech 2.0 Paper: Rebooting financial services,” blockchain-based technology could save banks $15 billion-$20 billion per year by 2022.