Startup Opportunity Areas in 2024
Where are the future opportunities to build great startups? (#54)
Highline Beta will build 4-5 startups next year. Maybe more. Looking ahead, I want to share a few opportunity areas we’ve been digging into and will continue to explore.
Quick Ask: We’re always looking for great founders
If you’re thinking about starting a company in any of the spaces below, get in touch. The key criteria for us:
You’re pre-incorporation or you’ve just incorporated but the cap table is clean. Typically we work with founders before they start the company. In rare cases we work with founders that have already incorporated but are still very early stage.
You’re interested in what a venture studio provides beyond capital. Yes, we invest dollars, but studios are meant to do more than that. In addition, you need to think of us as co-founders, not service providers.
You’re a repeat founder or a first-time founder with industry experience. You can read more about how we (and other venture studios) think about founders and founder recruitment.
Six Opportunity Areas for New Startups
Here are a few of the interesting areas / problem spaces / verticals we’re exploring:
Vertical SaaS (I know, this is different from the others, but bear with me)
We’ve been looking at this space for awhile. In July I wrote, “Exploring the Elder Care & AgeTech Space”. It goes through an extensive summary of the work we did, what we learned, roadblocks, opportunities, etc.
In August, I connected with entrepreneur, Sameer Dhar (sold his startup focused on incontinence). He looked at 15+ ideas in the eldercare space and invalidated them all. He allowed me to publish a great deal of his research for others to learn from.
Finally, I used one of the concepts we built (and invalidated), CareClarity, to break down an early stage startup pitch deck. This has less to do with eldercare specifically, but focuses on the key things we look for before incorporating a company, including: genuine insights into the problem/solution, competitive advantage, path to traction. We didn’t have any of these, at least not to the extent that would give me enough conviction, so we paused it.
All of this work and sharing has led to quite a few founders and others reaching out. Eldercare is a big space, and there are tons of serious problems to address. We’ll spend more time in this vertical and perhaps one of the companies emerging from our studio will be born out of this work.
I don’t want to be a downer but everyone dies. There are people working to extend life and perhaps death will be optional at some point. But right now, and for the foreseeable future, we’re all dying.
Death is a tough subject. A lot of people aren’t comfortable talking about it, although younger generations seem more open. Past taboos are breaking down. Still, a low percentage (~21%) of people plan their funeral in advance.1
Approximately 46% of Americans have a will.2
In some studies it’s even less. And these numbers haven’t drastically changed since 1990. Please, get a will.
Not surprisingly, upper-income Americans are much more likely to have a will compared to lower-income people.
There are also significant differences based on education and race.
These numbers are a couple years old and may be improving. A 2023 Caring.com study found that 63% more young adults (18-34) now have estate planning documents compared to 2020.3 But, LegalZoom’s numbers don’t show a ton of promise.
OK, enough stats.
Death matters a lot. People’s funeral arrangement interests are changing (cremation is up), and there’s a whole host of other things that happen when someone passes away.
Wealth transfer is going to be insane. In 2019, Cerulli Associates estimated that as much as $68 trillion dollars will move between generations within 25 years.4 Read that number again. SIXTY EIGHT TRILLION DOLLARS. Holy shit.
Bereavement and grief are real. Losing people is part of our collective experience, but it doesn’t make it any less painful. This is especially true if it’s sudden or unexpected.5 Losing a child is excruciating (it hasn’t happened to me, but I lost a brother at a young age).
Unwinding someone’s life. The managing of a loved one’s estate sucks. Sell their house. Sell their car. Pay off debts. Close accounts. Do it all while various bureaucracies slow you down. Send paperwork over here. Then over there. Oh, and you’ll probably have to fax something too. All while grieving.
I know that none of this is pleasant. But it’s a reality. Great founders look for pain and try to solve it—there’s plenty of real pain in the death space.
3. Women’s Health
Women make up half of the world’s population (it varies by ~1% or so across different countries). Yet, women’s health research is sorely underfunded compared to funding for “men’s diseases” (i.e. diseases that typically affect men more often).6
Improving women’s health would have huge benefits, including economic ones. Dr. Chloe Bird, Director at the Center for Health Equity Research at Tufts Medical Center and Senior Sociologist at RAND Corporation said:
“…by underfunding the study of women's health issues, we've left a tremendous amount of money on the table. In fact, in nearly three-quarters of cases where a disease primarily affects one gender, the so-called “men's diseases” are overfunded, while the “women's diseases” are dramatically underfunded. Even a slight increase in capital invested in basic research into women's health would unleash staggering returns that would capture the attention of anyone on Wall Street or in Silicon Valley.
Women, after all, make up more than half the U.S. population and about half the workforce. Women are more likely than men to be caregivers, and make 80 percent of all health care decisions. Yet the medical sciences continue to underfund studies focused on women, even among diseases that affect women most of all. This is, quite simply, inefficient science.”
At Highline Beta, we recently launched Flora with two awesome founders. It’s the first individually-owned fertility insurance provider. Flora is targeting women in their 20s who are worried about future fertility issues, providing an inexpensive, easy to understand insurance product that will help them cover fertility treatment costs. One in six North American women will need some form of fertility treatment. IVF can cost $20,000-$40,000 per round (and women often need 2-3 rounds).
Taboos are being broken around women’s health. FemTech is being defined as an industry/vertical. In 2021, CB Insights did a market map for the industry with 95+ companies listed:
In late 2022, Highline Beta had the opportunity to work with Essity (a global CPG company) and their venture building team, Essity Ventures, to launch a co-creation event, where we brought seven startups to Munich, Germany to spend a few days collaborating with key Essity stakeholders. All of the startups were focused on women’s health, including MUTU (evidence-based digital exercise program for mothers to gain confidence and control in how their bodies work and feel after childbirth), Roura (a wearable device for changing the way women combat period paid), and Egal (pads on a roll to manage menstruation privately in public places).
Healthier people are more productive people. More productive people move everyone collectively forward. We could use a lot more of that.
The housing industry is completely messed up.
In many places, housing prices are still too high, and yet it seems nearly impossible for anyone to build more supply, affordably and quickly.
The bureaucracy & red tape are brutal, and then there are labor shortages with too few people available to build homes.
ADUs (alternative dwelling units) are growing in popularity, but governments can’t adapt regulations quickly enough and a lot of people don’t want more density in their neighborhoods.
Some want housing prices to drop drastically, but if you own a home you want the value going up because it’s likely your biggest investment.
Interest rates are at a point where people can’t afford their homes; many are paying mostly interest every month and earning almost no equity.
It goes on and on. Housing touches everything and makes things easier or harder depending on its availability and affordability. Canada accepted 400,000+ new permanent residents in 2022, and the government wants this number to grow. Where will everyone live? Many move to smaller cities, but then face challenges finding work because the economies in those places aren’t as robust. ‘Round and ‘round we go and I don’t like where things are headed.
Highline Beta has made a few Real Estate / PropTech investments, one of which is Requity Homes, which provides a rent-to-own platform for people in secondary Canadian markets. Their model works, and many of their customers are immigrants. Rent-to-own has scaled in the United States (although a lot of those startups are struggling because they raised too much capital and grew too quickly, especially in a low interest world, which has now fundamentally changed). Innovating the business model of home ownership is definitely one approach. Clearly we need all hands on deck to figure out housing, whether it’s home ownership, renting, or something else. People need a good place to live. Without it they can’t feel safe, start families, and build for their futures.
If the world goes 🧨 nothing else matters. We really need to get our shit together. Like many issues, this one is incredibly complex. The geopolitical aspects alone will make your head spin.
Highline Beta has made a few investments in this space and will continue to do so.
BanQu: Provides visibility and traceability into companies’ supply chains (for supply and ESG data) to financially and operationally optimize. Enables sustainable and compliant sourcing.
Carbonhound: Automated client and regulatory reporting so businesses can take climate action with integrity.
ChargeLab: The operating system for EV chargers, providing back-end software to power North America’s leading EV charger manufacturers, installers and network operators.
These are all software companies (because that’s our focus) but there’s a ton of hardware, deep tech, biotech, etc. that is focused on sustainability. We’ve had the privilege of working with AB InBev for the past 5-6 years on the 100+ Accelerator, which is focused on a wide range of sustainability challenges for big companies. Unilever, Colgate and Coca-Cola are also participating. The program prioritizes executing pilots between startups and big companies, and the results are amazing. This is where you see the impact of combining real science and scale.
We’re also collaborating with others, such as Carbon Zero Capital, to explore building new startups in sustainability. We’re actively recruiting a Founder in Residence for a B2B SaaS startup (targeting compliance / regulatory challenges) in ESG.
6. Vertical SaaS
Vertical SaaS is not an industry, it’s a business model & strategy. Highline Beta is a venture studio focused on software and we see the potential of going deep into a vertical, knowing all the nooks & crannies, and being able to address important, unmet needs.
I recently read this piece by OMERS Ventures, “Drilling into dental.” It’s focused on the dental market (specifically around software), which is huge and in real need of innovation. Funnily enough, it’s a space I know something about, because we worked with Colgate for over a year on researching, validating and building multiple new ventures. (TL;DR: get an electric toothbrush and brush two times daily for two minutes. Trust me.)
It’s possible you enter a vertical that’s too small, but I think too much emphasis is put on market size early on. You can grow a market (if you reach real scale), or identify adjacent markets to explore.
Venture studios are perfect for vertical SaaS. Check out OSS Ventures. They only build & invest in startups for factory operations. As a result they’ve built up the infrastructure, tooling and playbooks to rinse & repeat startup creation in a very specific market. They have real leverage each and every time they build a new startup.
While Highline Beta isn’t a vertically-focused studio, we’ve supported a few vertical SaaS startups, including Moselle, which is an inventory orchestration platform that gives every merchant the ability to streamline and automate their inventory replenishment and allocation. BTW, they built actual AI too. 😀
We’re going to build more vertical SaaS companies leveraging our own knowledge & experience, and that of the founders as well.
The two that I’m most focused on are no-code/low-code and AI.
No-code/low-code tools are maturing. They’re a reasonable choice for not only building initial prototypes or MVPs, but full scale applications. Many of these tools are emerging in vertical industries as well (i.e. the low code tool for insurance), which means you get purpose-built and specialized capabilities. They all have a learning curve, but maintenance/support is easier because you don’t need a tech team (or as significant a tech team) to manage a proprietary code base. Using no-code/low-code may feel like there’s no more tech innovation to be had (everyone’s using the same tools!) but most startups aren’t truly tech innovators. Those that are may have to graduate away from low-code tools or build separate tech and integrate it in.
You can’t go anywhere in tech without talking about AI. And that’s fine. Bring on the AI overlords! Well, maybe not, but AI is going to permeate every industry. For starters it is driving efficiencies and automating a lot of work. This is the “add AI into what you’re doing” strategy. Totally fair, and leverages existing AI tools/capabilities (versus building your own). You should absolutely do this within your solution and as a startup (to increase your execution velocity). Secondly, it’s going to lead to entirely new possibilities and solutions that previously weren’t possible. This is the deep tech AI that many startups won’t be able to execute, and could be a legitimate unfair advantage. Do not pretend you’re “doing AI” if you’re not. Don’t throw AI into your pitch deck or claim you’re a “co-pilot for X” if you’re flying blind. This might work some of the time, but it’s quickly becoming stale. Interesting side note: we’re now seeing discussions around Vertical AI (i.e. AI used in vertical applications / for vertical SaaS), which I find fascinating. Greylock just wrote a piece on this, as did James Murphy from Forum Ventures.
2024 and Beyond
There’s no shortage of big, scary problems to tackle.
It’s important to look beyond mega trends and broad opportunity areas—dig deeper. Find a problem (with actual insights) that matters. Get specific. It might be a boring problem, in a “small” underserved market. The boring problems are often the best; very few people are paying attention!
2024 is going to be an interesting year. I’m no soothsayer, but it’s pretty easy to see more turbulence, globally. That’s scary. It’s not super conducive to focusing. But one thing is 100% certain: great startups will get founded and launched next year (that’s true every year!) Maybe you’ll be the one that starts a kick-ass, super successful startup in 2024. I wish you the best of luck! 🍀 🥳
Quick Sidebar: Many of our startups are fundraising
If you’re interested in connecting with any of the startups mentioned in this post from Highline Beta’s portfolio, please email me at firstname.lastname@example.org. Many of them are in fundraising mode right now.
Now is the time to subscribe! Lots of great content planned for 2024 on startups, product management, venture studios and more! Thank you.
Here are a few relevant resources that I wanted to share:
VC Theses from Sandhill.io: Ali Afridi collects references and insights from 700+ resources (including VCs and others) to share a ton of great content. This is where I found the OMERS Ventures’ piece on dental software
Time to Value Survey: I’m running a survey on the concept of Time to Value. My goal is to review and summarize the results in a future newsletter. Please check it out and complete the survey!
Revisiting The Death of a Venture Fund: A great piece by Kyle Harrison on what’s happening in venture capital. It’s important. And has a direct impact on founders, venture studios, corporate venture capital and everyone else that touches the broader ecosystem. Kyle points to an interesting and in-depth presentation by Frank Rotman that’s worth checking out as well.