2.) Thinking of Starting a Business? Try Your Hand At Artisanal Alcohol or Boutique Beer
BY JANA KASPERKEVIC AND JUDITH OHIKUARE
Bottoms up! Craft brewers and small-scale producers are thriving as image-conscious locavores seek out quality cocktails and brews. They’re breathing fresh flavor into a centuries-old industry, disrupting an established market and triggering a wave of acquisitions.
The tiniest among them, microbrewers and microdistillers, are thriving. That’s because the so-called “premiumization” of the market hugely benefits these businesses, which generate small quantities of product–and can command high market prices.
Of the two subsectors, “right now, the real growth is in the craft beer industry,” says Esther Kwon, a beverage industry analyst for Standard & Poor’s, driven by consumers’ increasing preference for small-label brews. The craft liquor sector, though smaller, is less mature and less clogged with upstarts.
Think you have what it takes to come up with the next big thing in beer or spirits? Here’s what you need to know before getting started.
According to the Brewers Association, craft brewers sold more than 13 million barrels of beer in 2012, a 15 percent increase from 2011. Craft beer retail value for 2012 was $10.2 billion, a 17 percent increase from the year before and a significant chunk of the $99 billion U.S. beer market. During 2012, the craft beer segment comprised 1,132 brewpubs, 1,118 microbreweries and 97 regional craft breweries.
The craft distilling industry is small in comparison, with just 280 craft distillers in production as of mid-2012, according to the American Distilling Institute. However, the industry is growing, with the addition of 42 new producers in the first half of 2012. According to ADI, the craft distillers were responsible for just 0.3 percent of U.S. distilled market in 2011, selling 600,000 cases.
This should come as no surprise, said Daniel Berch, director of Anything Research, since craft beer is now a mature concept, with a variety of choices and increased awareness of the product, while artisanal alcohol is still a fairly new concept.
According to IBISWorld, key external drivers in the distilling and brewing industries include the price of coarse grains, alcohol consumption, consumers’ disposable income, demand from wholesalers, and demand from restaurants, bars, and nightclubs.
As disposable income increases, consumers tend to shift towards premium spirits, especially in bar and restaurant settings. However, consumers are sensitive to drastic changes in price, so brewers try to avoid big hikes. That means when the price of coarse grains increase, the increase in production costs cuts into the profit of both craft distilleries and breweries.
Public perception is another ongoing issue. At points when popular culture tends toward moderation, the industry might see slight decrease in demand.
Supply Chain and Sales
Brewers operate several ways, depending on the market. There is the traditional three-tier system with the product passing from the brewer to wholesaler to retailer to consumer. Brewers can also act as wholesalers selling to retailers and in bulk to consumers, notes the Brewers Association. Or they can sell their beer directly to consumer for consumption on site via their own on-site-taprooms, restaurants, and carry outs.
Brewpubs make up the majority of the craft beer industry. In order to be labeled as a brewpub, the business must sell 25 percent or more of its beer on site.
Since most states still forbid distilleries from selling directly to the public, most distilleries sell through a traditional three-tier system, via licensed distributors.
The End Consumer
Thanks to longer life spans and an uptick in birthrates in the early 1990s, the customer base for spirits has grown significantly. The artisanal alcohol industry specifically stands to gain from the growth in the older segment of the population–baby boomers–who, as they retire, have a tendency to purchase high-end products like premium liquor.
According to Kwon, the spirits market is also driven by increasing numbers of multicultural consumers, particularly of Hispanic and Asian background. Hispanic consumers, like Millennials, prefer stronger flavors.
Millennials’ preference for variety has triggered flavor innovation within the spirits industry, particularly within vodkas and “brown” spirits such as whiskeys, rums and brandies, said Kwon. Large producers have taken note–for instance, Beam Inc. launched two different lines of flavored bourbon whiskey, Jim Beam Honey and The Red Stag collection. The Red Stag collection includes flavors such as honey tea and black cherry. Jack Daniel’s Tennessee Whiskey has also launched a honey infused line to appeal to women, noted Kwon.
Within the beer industry, Millennials are driving demand for hard ciders and malt beverages such as Samuel Adams’ Twisted Tea, shifting away from seasonal beers that have been in demand in the past few years, said Kwon.
The beer and spirits sectors are both beginning to get crowded, and key producers are getting larger. According to ADI, the number of entrants into the craft distillery market is doubling every three years, and more consolidation may be on the way.
Successful start-ups may find that big established players are interested in gaining the cachet that comes from a niche brand. Indeed, larger companies in the space have already begun to snap up smaller competitors. Large domestic brewers have attempted to launch craft-like beers of their own or acquired small craft breweries, creating craft-focused divisions attempting to capitalize on the growing interest in such beers. After acquiring Goose Island Brewing in 2011, Anheuser-Busch has recently signed distribution agreements with Red Hook Ale Brewery and Kona Brewing Company. Anheuser also produces its own craft-like beer, Shock Top. Similarly, MillerCoors produces Blue Moon and Leinenkugel and owns shares in craft breweries such as Terrapin Beer Company.
The largest four players within the spirits industry–Diageo PLC, at 21 percent, Brown-Forman Corporation, at 16 percent, Beam Inc., at 12.8 percent, and Pernod Ricard SA, at 9.6 percent–have also acquired smaller additional brands and expanded their total market share to 63.2 percent over the past five years, according to IBISWorld. Most recently, Beam Inc. acquired 2 Gingers Whiskey, which was distilled at a Beam distillery in Ireland, and Diageo acquired Mey Içki brand in Turkey and Ypioca brand in Brazil.
There are other options for those who aren’t interested in selling. In January, after attracting interest from Anheuser, Tony Magee, founder of Lagunitas Brewing Company tweeted that he isn’t interested in selling, adding that “selling ones brewery is selling all of ones best friend’s careers, their hearts, the portion of their lives they spent working for you.”
Those with a foothold in the market may re-invest profits into growing and diversifying their portfolio. “Mass production reduces average and marginal costs, thereby improving profitability,” notes the IBISWorld report.
Barriers to Entry
Despite popular culture-driven images of a one-man basement brew shop, product development can be arduous, spanning years and draining resources–particularly when it comes to certain spirits, like whiskey. The development process includes multiple trials of distilling and aging a particular product.
Whiskey is the most troublesome, because it takes years to properly age. Since start-up distilleries usually cannot afford to wait for up to two years for their whiskey to be mature enough to sell, many diversify their portfolio and include spirits such as gin and rum. Gin, which requires no aging, and rum, which takes just a few months to age, enable distilleries such as Ballast Point Brews and Spirits to launch and enter market with these products, while their whiskey ages.
Furthermore, the competition for both breweries and distilleries is extremely high, with a handful of well-established, multinational companies, notes IBISWorld. Upstarts must also contend with laws in some states that prohibit distilleries from selling their products directly to consumers (this is more common for liquor than for beer).
Overhead costs, including equipment and rent, can be a major hurdle for a new brewery or distillery. Some start-ups within the industry get around this issue by leasing space at an already established distillery to distill their product, like 2 Gingers Whiskey did at a Beam distillery in Ireland.
According to IBISWorld, craft breweries spend an average of 18 cents on capital for every dollar they spend on wages. This capital includes brewing systems, bottling lines and filtration systems. Investment in equipment when the brewery or distillery is launched is not a one-time thing; the equipment often requires repairs and maintenance. Overhead in the distillery industry runs 3.2 percent.
At the moment, distilleries suffer from the lack of marketing and advertising. While giants in the industry are spending as much as 15 percent of their revenue on marketing, craft distilleries spend 2.1 percent of their revenue on such efforts.
Wages account for about 16.2 percent of the craft brewery industry revenue, while in the craft distillery industry, this number is closer to 10.7 percent.
Dry Fly Distilling, based in Spokane, Washington, gets around this issue by allowing 10 volunteers to come in and bottle its spirits on weekends. In exchange for their work, Dry Fly allows the volunteers to sign the bottles and provides them with lunch.
Beer and spirits operations tend to be bootstrapped or funded by friends, family or small loans.
Soaring popularity of the product has made financing easier to secure in recent years. According to IBISWorld, access to credit for craft brewers to invest in machinery and equipment increased in 2012 and is forecast to rise again in 2013. Additionally, the Small Business Administration has issued 420 loans to 322 small breweries in the past three years, for companies like Highland Brewery in North Carolina, which received an SBA 504 loan of $813,000 to build a new production facility and tasting room.
Financing brewers is an increasingly popular cause: New York Senator Charles Schumerappeared in March with New York-based brewers to appeal to Department of Agriculture and SBA to provide critical financing to local breweries in the form of federal loans and loan guarantees.
Who’s Done It?
Most notable craft breweries include Dogfish Head Craft Brewery, Sixpoint Brewery and Lagunitas Brewing Company.
Craft distilleries include Tuthilltown Spirits Distillery in New York, Mockingbird Distillery in Texas, which produces gluten-free Tito’s Vodka, and Dry Fly Distilling in Washington.
3.) Thinking of Starting a Business? Take to the Seas as a Cruise Specialist
BY JULIE STRICKLAND
Looking to polish your Spanish, hobnob with artists, or learn to edit photos on your Mac? There’s a cruise for that.
Cruises have long appealed to both the cost conscious and the adventurous. Now, a growing demand for off-the-beaten-path travel experiences has given rise to a new breed of cruise, which demands specialized knowledge and high-touch service for would-be adventurers. That’s where you come in–as a cruise specialist.
Demand is soaring
Five years ago, Norwalk, Connecticut, travel company Tauck offered no specialty cruises. This year, it offers seven, including a French culinary cruise on the Rhone River. Overall, in North America 17.2 million passengers cruised in 2012. That number is expected to grow to 17.6 in 2013, according to the Cruise Lines Industry Association.
And there’s (almost) nothing to stop you...
For only a few thousand dollars and a few weeks spent wading through the accreditation process, virtually anyone can become a travel specialist.
…or anyone else, for that matter.
Competition is steep. In 2011, more than 67,000 Americans were employed as travel agents, according to the Bureau of Labor Statistics. A cruise specialist is going to have to distinguish their business from the crowd to be successful.
Don’t expect angels
Or venture capitalists. Travel agencies tend to be bootstrapped, mom-and-pop endeavors.
Watch out for major players
Cruise Planners and CruiseOne are the dominant competitors.
Ideal prior job?
Sales, sales, sales
Luxury set: an expensive, high-end tour, with lavish spa or gourmet dining
4.)Thinking of Starting a Business? Solve the Skills Gap With Online Education
BY APRIL JOYNER
College costs are soaring, and the job market remains tight, creating opportunities for companies that offer low-cost–or free–education and skills training via the Internet. You will face a new wave of start-ups that’s a far cry from the diploma mills that have drawn scorn from accreditors; several boast executives from top universities, like Stanford. But it may take time for new startups to prove their worth to employers and students. Also, universities such as Harvard and MIT are developing their own initiatives.
Online schools aim for prestige
Online education companies once made their names on providing a cut-rate alternative to traditional colleges and universities. But the latest crop of education tech startups aims to open up the halls of elite academic institutions to anyone with an Internet connection. One emerging category in the industry is massive open online courses, or MOOCs, which make the course catalogs of universities like Stanford and Duke available to the public–though typically not for credit. Leading the way in this space are Coursera and Udacity.
Other companies are taking alternative approaches to providing elite educational experiences online. 2U, whose founding team includes former executives of Hooked on Phonics and the Princeton Review, partners with select universities to translate their curricula into an online format while preserving their admissions structures. Another entrant, the Minerva Project, is attempting to build an online-centric university that will surpass the likes of Yale and Oxford in quality and prestige, at a fraction of the cost.
There still remains a healthy market, however, for online education companies geared toward practical skills. In recent years, much attention has been focused on software development, with companies such as Codecademy, General Assembly, and Treehouse offering classes in computer programming. Another company, Skillshare, specializes in project-based classes in creative disciplines, such as photography, graphic design, and culinary arts.
The online education market hit $91 billion last year, according to the investment firm IBIS Capital, and is projected to top $256 billion in 2017.
How to stand out
Lately, many online education companies have turned their attention to supplementing traditional, brick-and-mortar classes rather than replacing them. 2U has established a program called Semester Online, which aims to let college students to pursue non-academic projects, such as internships abroad, while maintaining a full course load. New teaching approaches have brought increased demand for educational technology. For instance, the rise of the “flipped classroom,” in which students receive lectures at home rather than in class, presents opportunities for companies offering educational video.
One goal that remains elusive in the industry is lowering the cost of instruction, which has risen 84 percent since 2000, according to IBIS Capital. Though the Internet has the potential to reduce long-term operating costs, so far, the sticker prices of online degree programs–including those offered by 2U–remain similar to those of traditional campus programs. The yet-to-be-launched Minerva Project is setting its tuition at $10,000 a year, but there remains ample room for other low-cost competitors.
Skills needed to get ahead
Tech savvy, of course, is a requisite for building online platforms, especially ones that can support the needs of thousands–or potentially millions–of students across age ranges. Though ed-tech startups often explicitly seek to dismantle traditional educational structures, it helps to have industry veterans both to design effective course content and to navigate issues such as licensing content from universities. Both Udacity and Coursera boast academics on their executive teams.
Having a talent for social engagement is also important. In order to gain legitimacy, educational platforms must offer proof of their students’ success in applying their newly acquired skills. Skillshare, for instance, regularly contacts former students and posts their success stories on its blog. Additionally, companies whose courses do not allow students to earn formal credits, degrees, or certification must find alternative ways to keep them motivated. Codecademy and Treehouse take a gamification approach: they award virtual badges to students when they learn new skills.
Funding is plentiful
Interest in online education among investors has spiked in recent years. The past year has seen mammoth investments for new startups such as Coursera, which raised about $65 million in its first year of existence, as well as longtime players such as the educational video site Lynda.com, which raised a first-time round of $103 million. According to the venture capital database CB Insights, the educational tech industry attracted $1.1 billion in investment last year.
Online education companies benefit from having a diverse pool of funding sources available to them, including grants. The education field at large has drawn capital from several entrepreneurs, including Bill Gates and Mark Zuckerberg. Traditional schools represent another growing source of funding. The University of Pennsylvania, for instance, recently partnered with a group of companies to launch an incubator and $2.1 million seed fund for educational technology startups.
Today’s online education startups have escaped the negative reputation of for-profit colleges like the University of Phoenix, but they are still waging other battles for legitimacy. MOOCs face a particularly difficult challenge: very few of their courses yield official credits, which limits their value. And recent attempts at offering course credit have produced less-than-stellar results. Udacity opted to put its program with San Jose State University on hiatus after more than half of participating students failed the program’s initial courses.
Another challenge may come from existing colleges and universities, more and more of which are beginning to develop their own online programs. For instance, a consortium of universities, including Harvard, Caltech, and the University of Texas system, has developed edX, a non-profit MOOC. Other universities, such as Carnegie Mellon and Yale, make videos and instructional materials for many of their courses available through their own branded portals.
So far, online education companies have found most success in emphasizing skills-based learning. Udacity, for instance, has worked with companies such as Google and AT&T to train current employees and identify potential job candidates.
The Quick and Dirty on Online Education
It’s about content
The content segment of online education could hit $72.9 billion in 2017, according to researcher MarketsandMarkets.
You won’t be first
Watch out for for-profit big boys Kaplan and Apollo Group, the parent company of the University of Phoenix, as well as educational heavy-hitters such as Harvard and MIT, which are developing their own online courses. Newer entrants include 2U, Coursera, and the Minerva Project, among many others.
VCs are intrigued
Venture capital shops New Enterprise Associates and Accel have made recent investments. So has Apollo Group.
Best prior job
Experience in a tech start-up as well as in a classroom.
MOOC (massive open online course): online class open to all
IMAGE: COURTESY COMPANY
5.) Thinking of Starting a Business? Click On Specialized Online Retail
BY DARREN DAHL AND JUDITH OHIKUARE
E-commerce is nothing new. What is new? As the number of people who have access to broadband Internet connections skyrocketed, online shoppers have expanded their appetites, especially when it comes to landing deals on an ever-widening spectrum of niche items that range from custom-cut button-down shirts to made-to-order eyeglasses and vintage furniture.
Consumers are also increasingly looking online for niche retail services like photo printing, in which consumers upload photos and then receive printed copies in the mail. Helped by the fact that some 73 percent of homes now have access to cheap digital photography technology, according to a consumer study conducted by NDP Group, online photo printing has grown into a nearly $2 billion industry.
Similar forces have helped propel online greeting card sales: Young, tech-savvy consumers are increasingly buying custom and niche cards and stationary online rather than making the trek to the local drugstore or stationary store.
Yes, it’s still growing–a lot.
Online retail sales are forecasted to reach $262 billion in 2013 and $370 billion by 2017 as Web retailers continue to strip sales away from brick-and-mortar competitors, says e-commerce analyst Sucharita Mulpuru of Forrester Research.
Leading the charge? Discounted fashion. Several sites, including Gilt Groupe, Rue La La, and Haute Look established the practice of flash sales, in which items like designer apparel, accessories, and jewelry are offered at deep discounts for a limited amount of time. The popularity of those sales helped the category grow by almost 50 percent from 2007 to 2012. And it’s projected to grow another 12 percent a year through 2017, according to research firm IBISWorld.
Online sales of greeting cards also remained strong through the recession as Internet retailers offered discounted prices compared to brick-and-mortar competitors. Budget-minded consumers, especially in the 25- to 34-year-old age bracket, have also increasingly turned to sending online-only cards. As a result of that combination, IBISWorld expects the online greeting card industry to grow 5.9 percent to $4.7 billion by 2017.
…But forget shoes and eyewear
Though online shoe sales account for 3.6 percent of all online retail sales, it’s a crowded market with some 1,166 online shoe sellers. And it’s expected to get even more competitive: the number of shoe retailers is forecasted to surge to 1,313 by 2017. Plus, the market for shoes is dominated by giant retailers, two of which– Amazon’s Zappos and Foot Locker–already own a combined 16 percent of the market share. New entrants will find it difficult to compete with established reputations, brand names, and the marketing power of those large players, says Nikoleta Panteva, a senior retail analyst with IBISWorld.
Similarly, the rising demand for eyeglasses and contact lenses has led to a flood of new competitors into the online market, especially as former brick-and-mortar retailer establish online shops of their own. That means profits will be hard to come by.
Entrepreneurs would be wise to find less crowded markets. “There are more opportunities around niche specialty products that aren’t searchable from a price-point situation,” says Lauren Freedman, president of the e-tailing group, an e-commerce consultancy in Chicago.
Tech savvy matters
Getting attention can be expensive, so you’ll need to find the best IT talent to develop your retail site. You’ll also need to invest in social media outreach. Not only do you need to keep up with the latest trends in mobile shopping, payments, and analytics, but also protecting your customers’ information from the rising threat of hackers remains an ever-present challenge.
You’ll also need to take advantage of the latest innovations in website technology to stand out from competition, especially technologies that replicate the experience a customer might receive in a brick-and-mortar shop. The development of the virtual “try-on” system in the online eyeglasses market, which allows consumers to upload photos of themselves and try-on glasses online, for example, has been a key factor in driving online sales.
Of course, finding the best IT talent may be a challenge depending on where your business is based. Nearly 50 percent of all online greeting card companies are based either on the West Coast or in southeastern cities like Atlanta, where IT talent is easier to come by. IT talent can also be costly, particularly if you have specialized engineering needs. “The war for eCommerce talent is, and will continue to be, fierce; internship programs and explicit career development support can help a company ensure that it will be a top consideration of leading candidates,” writes Mulpuru of Forrester in her U.S. Online Retail report.
Bootstrapping is common…
…but established retailers are buying. Think Thrillist’s acquisition of trendy men’s fashion site JackThreads.com, Nordstrom’s $180 million purchase of Haute Look, and Shutterfly’s acquisition of stationery company Tiny Prints. Another example was the recent purchase of Justeyewear.com, a website that sells eyeglasses directly to consumers in the United States, by Coastal Contacts, a retailer that holds 9 percent of the market for contact lenses, eyeglasses, and vision care accessories.
The growth in specialized online retail has also led to a number of interesting partnerships between largely online shops and brick-and-mortar traditionalists. For example, Shutterfly struck a deal with Hallmark Cards in June 2012 to sell Hallmark cards through its website. And Vision Direct, an online retailer of contact lenses, reading glasses, and sunglasses has formed a partnership with eyewear maker Luxottica Group to help that company launch its own branded online sites like Lenscraftercontacts.com and Pearlevisioncontacts.com.
Ideal prior job?
Techie with an eye for flair and care. Though having deep knowledge about a particular market is valuable, it may not be enough anymore just to have the best prices or even the best products. Case in point: Zappos’s 365-day return policy and fanatically loyal customers. Successful e-tailers provide great customer service.
6.) Thinking of Starting a Business? Check Out Consumer Health Technology
The Affordable Care Act put a spotlight on the surging cost of health care. That has opened a huge opportunity for companies developing tools to make health care–especially preventive and diagnostic care–more accessible to the masses. Increasingly, such products and services are being delivered online, through mobile apps and Web-connected devices.
The Market Is Big…and Mobile
Apps and devices that encourage consumers’ overall wellness have proliferated over the past few years. Two leading products, Nike+ and Fitbit, include wearable sensors that capture their users’ vital signs and movement and sync that data to apps on which their users can track their fitness status. Another fast-growing category of apps connects consumers with health care providers. For instance, ZocDoc, which has attracted nearly $100 million in funding, enables its users to research and book appointments with local doctors online. Other health apps aim to address the diagnosis, treatment, and ultimately prevention of diseases. WellnessFX, which launched last year, runs a mobile platform that offers recommendations for lifestyle changes based on the results of its users’ urine and blood tests, which the company supplies.
Mobile apps and devices will continue to drive growth in the consumer health technology industry. The segment’s market value will reach $6.6 billion by the end of this year, according to the research firm MarketsandMarkets, and will top $20 billion by 2018.
How to Get Noticed
New companies can stand out by pursuing services that enable consumers to make sense of the large sum of personal health data already in existence. For instance, the New York City-based company Curious is developing an app, currently in private beta testing, that uses data from platforms such as Fitbit to help its users answer questions about their health, such as “Does urine acidity correlate with body pain?” Even Google, which recently announced its launch of Calico, a company focused on solving aging-related health problems, may be entering the fray. Though few details about Calico’s operations have been revealed, industry observers have speculated that the new venture will analyze consumer data to expedite medical research.
Skills You’ll Need
Given that many health apps on the market rely upon the collection and analysis of consumers’ personal information, aspiring entrepreneurs seeking to enter the field should have a strong facility with data. At the same time, developing apps geared toward consumers with minimal medical knowledge requires a nuanced understanding of health concerns, most readily found among former health practitioners. As a result, founding teams for health technology companies are usually interdisciplinary. “Understanding how to build a database is very different from knowing the science behind health care,” says Halle Tecco, the CEO of Rock Health, an incubator specializing in digital health. “Very few people have both skill sets.”
Prior industry knowledge will also lend entrepreneurs an advantage in navigating the many regulations that govern the industry. Companies that handle users’ personal data must comply with privacy standards set by the Health Insurance Portability and Accountability Act, or HIPAA. Additionally, companies that provide diagnostic tools or make health-related claims may soon require approval by the FDA before they can launch their services to the public, especially with recent studies raising doubts about the accuracy of certain screening apps.
Above all, in order to be successful, consumer health companies must eliminate the intimidation factor often present in conversations about health and medicine. The most popular apps and devices on the market, such as Nike+, have achieved this goal through an emphasis on design. Some companies have even gone so far as to acquire other firms for their design prowess. Aza Raskin, the designer who founded the mobile app company Massive Health, now serves as a vice-president of Jawbone, which acquired his company in February.
Areas to Avoid
Aspiring health-tech entrepreneurs should steer clear of products that focus solely on sleep. Two start-ups with an exclusive focus on sleep science, WakeMate and Zeo, eventually shut down after high-profile launches. Many wellness apps and devices have taken a broader approach by including sleep tracking as just one of many product features. For instance, Lark, a company that originally focused on sleep science, has since expanded its product offerings to address diet, exercise, and other aspects of health and wellness.
Where to Find Funding
Venture capital funding for health technology has continued to rise, with companies in the industry raising $849 million in the first half of 2013, according to Rock Health. But few health technology companies attract seed funding, as most investors prefer to fund companies that have already shown significant progress in product development. As a result, more companies are turning to crowdfunding platforms like Kickstarter to raise initial funds. Crowdfunding sites dedicated to the industry, such as VentureHealth and MedStartr, have also begun to emerge.
Establishing a sustainable business model remains a big hurdle for consumer health companies. Health care costs in the United States top $3 trillion, but consumers typically pay only 12 percent of that cost. “We still haven’t answered the question of who pays,” says Tecco. “We’re not used to paying out of pocket.” Though consumers have shown willingness to buy sleekly designed hardware, most health apps currently on the market are free. Many companies have sought to monetize their products and services by adding premium features, such as live consultations with doctors.
Despite business models, other tech companies have been eager to scoop up start-ups with promising products. Insurance firms and electronic medical record companies have been particularly active in acquisition deals. In February, for instance, the medical-records company PracticeFusion bought 100Plus, a personalized platform that uses game mechanics to encourage better health habits, for an undisclosed sum.
The Quick and Dirty on Consumer Health Technology
Jawbone, WeightWatchers, Nike. Privately held companies include Castlight Health and ZocDoc.
Investors are very interested…
Digital health care companies raised $1.4 billion from VCs last year, up 46 percent from 2011, according to incubator Rock Health.
…So are strategic buyers.
That includes insurance companies and other tech firms. Aetna bought Healthagen, maker of the health app iTriage, in 2011.
Brace for red tape
Start-ups have to navigate a maze of regulations regarding consumer privacy and health claims. Certain apps, like diagnostic tools, may require FDA approval.
What’s the ideal prior job?
Big Data engineer, doctor, or medical researcher. Design skills help, too.
Wearables: Sensor-based technology that tracks users’ vital signs. Wearables comprise one of the leading segments in consumer health care.
7.) Thinking of Starting a Business? Print Profits in 3-D Printing
BY ABIGAIL TRACY AND SAMUEL WAGREICH
Imagine you hit a button on your printer, and out emerges a prototype of a prosthetic leg or a component for a space shuttle. The moment has arrived, and it means big things for 3-D printing companies. Though the industry has been around for decades, 3-D printing is gaining momentum. In a recent report, Goldman Sachs named 3-D printing as one of eight technologies that will “creatively destroy” how we do business.
Indeed, companies in many fields are getting creative with 3-D printing technology. One Dutch architect has plans to print a 1,100 square-foot house. The European Space Agency is looking into building a lunar colony with a 3-D printer that uses moon dust. NASA wants to take a 3-D printer into space. In March, a British company, Oxford Performance Materials, printed new bone that replaced 75 percent of a man’s damaged skull. Another company, Organovo, based in San Diego, is building a 3-D printer that can create new organs. Meanwhile, the majority of hearing aids are now made using 3-D printing technology.
Looking to get started? Design your products for the aerospace industry and the medical sector: Those will drive the most growth, with the greatest profit potential. “Companies are going after markets where the volumes are relatively low and the value and complexity of products are high,” says Terry Wohlers, president of Wohlers Associates, a consulting firm.
How big will it get?
By 2017, Wohlers Associates estimates that sales of 3-D printing products and services could hit $6 billion worldwide. It forecasts that by 2021, industry-wide sales could reach about $11 billion.
The market segment that has experienced the greatest growth recently is the personal 3-D printing market, which includes printers such as 3D Systems’s Cube ($1,299) and Makerbot’s Replicator 2 ($2,199). Sales in this space grew an average of 346 percent a year between 2008 and 2011. However, growth slowed slightly last year, according to Wohlers, with sales up 46 percent in 2012.
How much do I need?
You’ll need capital. How much depends on your ambition: It can cost from $20,000 to $600,000 for a commercial printer if you want to make aerospace parts or prosthetics. For the DIY-crowd and 3-D printing hobbyists, the low cost models fall into the range of about $5,000 and less. A simple $500 version may suffice for making toys and jewelry.
Who’s in it?
There are big incumbents. Stratasys controlled 56 percent of the market in 2012, and venture capital-backed Shapeways is the leader in on-demand printing, but the field is getting more and more crowded as the industry shifts to producing real parts and products rather than just prototypes. Wohlers reports that finished parts now account for about 28 percent of sales in the 3-D printing market.
8.) Thinking of Starting a Business? Lock Down Profits in Virtual Data Rooms
BY JEREMY QUITTNER
Virtual data rooms let you store and access lots of documents in the cloud–thousands and thousands of them: Think souped-up versions of Dropbox for the corporate user.
Your customers would do complex transactions in which huge amounts of information change hands (think financial deals and lawsuits). Those transactions are sensitive and complicated, so virtual data rooms let users determine who is allowed to see what, and many provide detailed tracking services. They replace the physical “document rooms” that many law firms and financial companies used to employ during deals.
Now that nearly everything has migrated to the Web, VDRs have followed, servicing just about any industry that needs to share information with third parties. Big new users of VDRs include companies in life sciences, such as pharmaceuticals, as well as government and health care. The spike in bankruptcies, caused by the Great Recession, has also increased use of VDRs by the many parties involved in unwinding or restructuring corporate liabilities.
Typcially, data rooms let users set different levels of control and determine who can see what in sensitive transactions, and they can track which parties view which documents.
The growth of VDRs is expected to continue at a strong pace as the shift to digital gets more entrenched and as consumers see the benefits of sharing data–consumers that have fueled Dropbox’s growth to 50 million users.
“The space around sharing content externally is being pushed by the nature of our work today across organizations, and pushed by the cloud, which is the natural place where content can be shared,” says Rob Koplowitz, vice president and principal analyst for Forrester Research, of Cambridge, Massachusetts.
The VDR market was $628 million in 2012, and it’s growing fast as paper-intensive industries take to the cloud. The market is likely to grow to $1.2 trillion by 2017, according to research firm IBIS, of Santa Monica, California.
Much of your start-up costs will depend on what you bring to the table. If you come fully loaded with an IT team and your own software program that allows for cloud-based management of thousands of pages of documents, your start-up costs will be pretty minimal. Otherwise, it could cost hundreds of thousands of dollars or more. Costs include the most recent, state-of-the-art computers, servers, skilled IT workers, and programmers.
Margins are about 7.5 percent, according to IBIS. The majority of revenue is eaten up by the need for highly trained technology staff including programmers. You’ll probably need to secure at least one big customer with repeat business before you become profitable.
RR Donnelley and Merrill Corp. are the big public companies in this space, and the longtime established players. Newer company Intralinks is also public. But there are at least several hundred smaller players. Two notable smaller players are ShareVault and Box. Box secured $81 million in venture funding in 2011.
Venture Capital’s Role
Venture capital firms have flocked to companies such as Dropbox and Box with several hundred million dollar investments. So far, VC’s haven’t swarmed to the true, high-touch VDRs that service the most paper-intensive, security-bound legal and financial deals yet, but that’s probably only a matter of time.
Your customers will include investment banks, law firms, government service providers, and any company wishing to share documents with outside parties, including those companies’ customers and potential buyers.
Your supply chain downstream–meaning those who will be buying your services–will include investment banks, law firms, companies involved in mergers and acquisitions, and any other company looking to share information externally. People you’ll be buying from upstream include software suppliers and publishers, Data processors and hosting sites, IT consultants, programmers, and any other third party support involved in keeping your services up and running.
Barriers and Obstacles
Big, entrenched competitors and a moderately high cost for starting up will be your biggest barriers to entry. The software needed to run data rooms is extremely sophisticated and you’ll need an in-depth knowledge of programming. But if you have the right people and can find a new spin on the dominant technology, that’ll give you an edge. VDR provider ShareVault, for example, which started business in 2006 with more standard products, now offers foreign translation services for documents.
You can also compete on price and by offering excellent service.
Paths for Growth
The whole concept behind virtual data rooms–sharing huge amounts of information–is one that plenty of big companies, such as Microsoft and IBM, are developing with plenty of resources, with enterprise products like Sharepoint and Connections respectively. Start-up Box is stealing share with its own enterprise solutions. Google also knows the technology is important and has been working on its own collaboration products, and so has Dropbox, which is developing the space for consumers.
So while it’s intensely competitive, the market is also likely to be enormous, which means you can win business from other companies. Also look at new niches and think about developing a specialty in emerging categories like real estate or health care.
Experts to Consult
Virtual Data Rooms are a lightly regulated industry. If you are serving a public company you’ll have to conform to their own audit requirements as defined by Sarbanes-Oxley.
You probably won’t need to consult regulators to get started, but data rooms are highly susceptible to hackers, so make sure you talk to network security specialists and have the best network security available.