Investments and innovation: who rises and who falls

Early stage | Forecast 2023

• What are the innovation sectors attracting the most early stage investments? Which ones are declining? Are the sectors that are talked about the most also the ones that are experiencing the greatest growth? QuSeed, the software developed by Startup Bakery, cross-referenced financial data with conversational data, in search of the emerging sectors that are still talked about too little.

• In an early stage market marked by a general decline in both the number of startups founded and the number of funding rounds and capital raised, Pollution Control, Affiliate Marketing, and Quantum Computing lead the ranking of the sectors that are growing the most. In decline are Organic Food, Privacy, and e-Learning.

• Virtual Reality, Delivery, and e-learning are on the podium with the most startups founded, the most capital raised, and a greater popularity index. 

Milano, December 27, 2022 – What is the health status of the early stage startup market? Which sectors are growing the most and which are declining? Are the sectors that are talked about the most also the ones that are experiencing the greatest growth? QuSeed, the software developed by Startup Bakery, a startup studio specializing in SaaS solutions with AI elements, has cross-referenced structured financial data with conversational data to provide a snapshot of the past year, track some predictions for the coming one, and provide some reference examples for each sector. 

Early-stage investments in decline

What immediately stands out is a general decline in the early-stage startup market. 

In absolute terms, the number of startups founded and the number of funding rounds in 2022 are lower than in 2021: specifically, from 28,722 startups founded in 2021, it dropped to 10,567 in 2022, marking a decrease of 63% while regarding the funding rounds the figures fell from 31,706 in 2021 to 22,040 in 2022, tracing a decrease of 30.5%. Finally, looking at how much was raised in the two years, the value fell from $238.4B in 2021 to $174.7B in 2022, with a decrease of 26.7%.

“Why is it so important to look at the early stage startup market? Because it represents the first moment when investments meet innovation in the process of creating a business, and thus it is a useful litmus test to identify the most promising sectors where the interest of specialized investors is beginning to manifest” – commented Angelo Cavallini, Founder & COO of Startup Bakery.

QuSeed is an always-active antenna that allows for comparing the investment and growth dynamics of early-stage startups with the interest that these sectors receive online, enabling the identification of those potentially “hot” but still not popular with the general public. 

“QuSeed is also one of the tools we refer to when we have to make investment decisions, that is, bringing a new startup to life. Keeping track of how and in which sectors the world of innovation is moving is an essential requirement for us to start the business validation process and move on to the subsequent phases,” added Cavallini. 

Through the massive use of Artificial Intelligence, the QuSeed algorithm indeed aims to provide a pulse on the Innovation market with a dual approach: it processes both investment data collected from Crunchbase and data related to resonance, in terms of sharing and engagement, of a specific topic within the most involved and active online communities, relying on over 5000 international web sources.

Sectors: who is rising and who is falling

Through the analysis of the parameters listed above and the comparison between the market share occupied by a specific sector in 2022 with that occupied in 2021, QuSeed has therefore recorded the fields that are growing the most and those that are declining for 2022, assigning them a Growth Score (growth index) and an IDR-Information Diffusion Rate (internet interest index) – *see methodological note.

•  At the top of the ranking of the fastest-growing sectors are Pollution Control, Affiliate Marketing, and Quantum Computing, with a growth score of 4.98, 2.17, and 2.15, respectively. The ones declining are Organic Food (-1.36), Privacy (-1.14), and e-learning (-1.11). 

• e-learning, however, is the field that holds the record for the number of startups founded (81) in 2022, followed by Virtual Reality (72) and Delivery (27). The same sectors are also the ones that raised the most capital: leading is Delivery ($1.28B) followed by e-learning ($1.14B) and Virtual Reality ($1.11B).  

• This podium is also confirmed in terms of popularity, with Virtual Reality leading the ranking of the most “discussed” sectors (with an IDR of 2), followed by Delivery with 1.82 and e-learning with 0.75. However, Delivery and e-learning register a negative growth score and, thus, a decline. 

• The Retirement sector, in particular, shows good growth (growth score 1.74) and a positive IDR (0.37%), indicating a healthy sector that is slowly gaining more popularity. More or less the same IDR is shown by the Smart Cities field, which, however, is characterized by a decline (growth score -1.07). 

“This data is perfectly in line with the investment decisions that our startup studio has made regarding its third startup, Sencare, a platform for the digitalization of home care that has already raised €400K right after opening a funding round of €700K a few days ago” – added Alessandro Arrigo, CEO of Startup Bakery. 

Is there a correlation between the volume of investments in a specific sector and the number of news articles and conversations about it?

“One cannot really speak of correlation, although the increase in conversations on a topic brings investors' interest to examine it anyway, even if it may have been little known until that moment – concluded Angelo Cavallini and Alessandro Arrigo – In some cases, as highlighted by the matrix created by QuSeed, there are sectors that are talked about a lot but still register a decline, such as Delivery, possibly due to the lifting of lockdowns in 2022. Others are moderately growing but have a lot of discussion, like Virtual Reality. Others, finally, like Pollution Control, register significant growth but still remain below the radar in terms of visibility. Thus, intercepting these sectors at the moment they accelerate can allow for gaining a good margin of time and thus a competitive advantage.”

on the left: Angelo Cavallini, COO and co-founder of Startup Bakery;
on the right: Alessandro Arrigo, CEO and co-founder of Startup Bakery

Startup Bakery

Startup Bakery is the Italian startup studio founded by Alessandro Arrigo and Angelo Cavallini in February 2020 with the goal of creating sustainable B2B SaaS companies with a strong component of Artificial Intelligence and allowing founders, companies, and professional investors to express their potential. 

The studio guarantees the serial application of tools, skills, and methodologies already present in the team and assists the co-founder at every stage, from fundraising to exit, making them gradually more independent. Thanks to a proprietary algorithm, in fact, it can count on advanced capabilities of collecting and processing market data to identify niches of interest to monitor, while the cyclical validation of launched projects is ensured by the application of the lean method. 

The user-centered Interaction Design approach guaranteed by the know-how of Donux, a UX/UI agency born from Startup Bakery, finally offers simple and effective user experiences. 

Startup Bakery offers industrial partners a new way to do open innovation by entering the capital of new startups and progressively accompanying them in their development until acquiring them. 

The SB "Lab", operational companies within the group, are tasked with financially supporting the initiatives born in the pre-seed and seed phases (in co-investment), as well as building their core team (HR). 

At the end of November 2020, Startup Bakery closed a capital increase of €750,000. In April 2021, it opened capital raising of €700,000 for its first startup Veterly and in October of the same year, it launched it on the market. In January 2022, it completed the capital raising of €1,950,000 thanks to its first Lab. In March 2022, it presented its second born startup, Condeo, for which it closed the capital raising of €700,000 in October 2022 with Edison and Svicom among the main industrial partners.

Media Contacts 

Serena Orizi
PR and Media Relations, Startup Bakery
+39 (320) 420-5558 | serenaorizi@gmail.com 
skype: soloori