How To Uncover Market Insights Using Growth Metrics – FilteredHQ

“A lot can happen in 2 years. During my time at 90 Seconds – a fast growing ‘on demand’ cloud video production startup – I saw first hand how quickly market share can be stolen when large incumbents fail to invest in new technology stacks or business models.

When I started in August 2014 there were less than 20 employees globally including a small team of 3 in Australia tasked with market entry. Runway was short, with almost no marketing budget and brand awareness non-existent. Projects were as small as $2000 but we fought our way through and survived month to month. At the time large advertising agencies held the contracts and relationships for video production. However they were stuck in the old world of large budget TVC productions and failed to quickly recognise the emerging trend of producing lower cost video for online channels and adapt with it. They didn’t want to change, and to their detriment didn’t take emerging players seriously enough. They left the door open.

Just before I left 2 years just later, 90 Seconds had scaled to a team of 12 in Australia, 100 globally, raised a $10m war chest led by Sequoia Capital and were negotiating 7 figure procurement contracts directly with global brands.

Incumbents really have 2 options. Innovate alongside emerging trends or display ignorance and slowly die. Waiting until disrupters reach your shores is no longer an option”.

– Nick Teulon, Co-founder, FilteredHQ

Identifying and tracking emerging business models for strategic insights.

1/ Market Scan

First step to uncovering emerging trends is a deep market scan of global competitors (mainly startups) as well as emerging technologies that could significantly impact your industry, for example Artificial Intelligence.

Traditionally market scans are expensive and time consuming. Where do you start – Google? Thankfully, this process is getting a lot easier with services like FilteredHQ who leverage multiple vetted information sources to discover emerging players. The goal is to identify startups who could be a threat, inspire an ancillary revenue stream through product development or a potential investment opportunity.

2/ Tracking

Once identified, the tracking begins in area’s including;

  • Capital Raises: An important metric for market validation as it demonstrates startup’s financials, team and vision has held up to the intense scrutiny of venture capitalists who typically only invest in 1% of deals.
  • Employee Growth: If a company is hiring it’s growing. The opposite is generally also true unless there is M&A activity behind the scenes.
  • News Alerts: Founders are often visionaries who can see trends and changes in consumer behaviour well in advance of the mainstream. Following their news mentions is a useful way to remain informed on new product iterations, pivots and market entry warnings.

3/ Analysis

The fun part. Armed with this information you can begin to uncover macro trends in new business models and then dive deeper into specific companies who are gaining or losing. Here are some important questions to ask.

  • Trends: Overall is this business model, product or technology showing growth or decline?
  • Funding: What is the average funding round to get product to market and do the investors have a good track record?
  • Winners: What are the characteristics about the companies who are gaining traction?
  • Losers: Have any companies failed to execute? If so why?
  • Growth: Is employee growth driven by funding rounds or revenue from customer acquisition?

4/ Action

When studying emerging business models there are 5 options to consider.

  • No Action
  • Licensing
  • Copy Innovation
  • Emulate Innovation
  • Strategically Invest / Partner

3 examples of studying metrics for company insights.

In June 2015, telematics startup Automatic raised a $25m Series B funding round. Over the next 12 months the team grew to 91 employees. This is no surprise as $25M could finance at least 100 more people for 12 months. However, not long after it hit the apex of 91 team members, Automatic started culling employees dropping from 91 to 50 within months. Why?

  • Finished product development and now focussed on marketing efforts?
  • Hadn’t found product/solution fit and retreating?
  • Preparing for an exit?

In April 2017 all was revealed, Automatic was acquired by SiriusXM for $100m. Interestingly, the reported exit figure of $100m would not have been far off the valuation during the Series B $25m raise in 2015 suggesting Automatic was losing traction and possibly shopping for an exit.

In April 2015 90 Seconds raised a $650k seed round. Over the next 12 months the company grew from 65 – 99 employees. $650k can’t fund the growth of 34 new employees in the western world which suggests the majority of the growth was fuelled by revenue. When a startup is growing well beyond the runway a capital raise provides generally you can assume product-market or even product-solution fit has been found – at this point you can’t afford not to take action.

In April 2016, Sequoia Capital arguably the world’s most famous technology investor led a $10m Series A funding round confirming 90 Seconds had world domination in its sights.

This is the hockey stick growth chart all entrepreneurs dream of. According to crunchbase Health IQ last raised a $5.5M seed round in December 2014 and has grown its team by 411% in the past 2 years. When doing market scans companies like Health IQ are the needles in the haystack you are looking for.

If you are interested in market scan / tracking services for either Fintech or Insurtech please schedule a meeting with one of our analysts here.