While the past decade has seen a progressive migration of traditional services online, sectors such as social gaming and even online shoe sales are still fragmented markets in the United States and therefore still present attractive opportunities for entrepreneurs.
Fragmented industries with low levels of capital intensity frequently provide excellent opportunities for startups, as evidenced by the service industry, which has been migrating progressively on to the Internet over the last ten years. US industry research publisher IBISWorld has now listed the eight sectors which it judges to be the most promising for startups in the United States during 2013. These sectors are characterised by low entry barriers, a high level of technological transformation and strong revenue growth. Social network games, data storage and IT security are three of the sectors in the spotlight.
Social network games industry leads the pack
The online social network games development industry takes the IBISWorld top spot, having achieved annual growth of more than 180% on average over the past five years. Given the burgeoning use of mobile devices and the massive popularity of social networks, revenues from this sector are estimated at $6 billion by the end of 2013. Meanwhile, the proliferation of access-limited document sharing infrastructure has put the Virtual Data Rooms (VDR) industry fourth in the rankings. VDRs are basically used to support the due diligence process during various types of transaction. The IT Security Consulting industry is also listed among the ‘8 Hot Industries for Startups’, with forecast growth of 8.8% for 2013.
Other promising sectors for startups
Against all expectations, online shoe sales come in at number two. Although new industry entrants face stiff competition from the well-established giants, they are able to take advantage of a fragmented landscape in which Amazon and Foot Locker have together amassed a market share of less than 16%. IBISWorld lists TV and home theatre (video projection) installation services in third place. The report points out that this industry has a very low level of capital intensity, affording smaller firms with transportation and the proper tools a clear opportunity to enter the market. Completing the top 8, the report also includes online travel agencies, the translation services industry, and digital forensic services, although growth prospects in 2013 for the first two of these sectors, which are fairly mature industries, are estimated at just 6.1% and 3.4% respectively.