Startup Segmetation characteristics

How do you segment startups? Here are 3 models, but we need more

I love the approach, analytics and data associated with segmentation. The act of taking large numbers and breaking them down into manageable smaller parts fascinates me.

Yesterday, I had a chance to talk to a friend about segmenting startups. There were 5 ways we tried to segment them and finally figured out that 3 made sense and the rest were not useful or actionable.

Here are the 3 categories of segmentation we came up with.

  1. Segment by stage of company. (Idea stage, Prototype, stage, Traction, Growing, Scaling)
  2. Segment by growth rate (slow growth, medium growth, fast growth and rapid growth)
  3. Segment by category (eCommerce vs. SaaS vs. Media, etc.)
  4. Segment by location (where they are based)
  5. Segment by type of funding (Bootstrapped, Angel, VC, etc.)
  6. Segmenting by market opportunity (large existing market, vs, disruptive new company)

Segmenting by stage of company: This is the easiest to understand. Most companies call themselves in various stages based on their funding stage as well, so we figured #5 and #1 were fairly close. There were enough differences when a larger company was bootstrapped, so they were “Growing” and “Bootstrapped” but those are fair and few between.

Segmenting by growth rate: We wondered if this was similar to stage of funding as well, but there are enough differences. A slower growth “Startup” would be going through multiple rounds of seed and early stage funding, so we felt this was useful segmentation.

Segmenting by category: This is the one that most startups use as well besides stage. Companies call themselves as an eCommerce company, Consumer Internet, B2B startup, etc. Most startups use this as a way to segment themselves besides stage.

Segmenting by location:Companies tend to email me and segment themselves from “silicon valley” vs. “New York”, vs “Bangalore” for example. Not sure where we could use this, but this is one other way we could segment them. I suspect after you do a first level filter, this might be a follow on segmentation.

Segmenting by type of funding: Compared to 7 years ago, startups are taking longer to get to VC series A for some companies, but others are still taking less time. Some end up bootstrapping for longer, and still others go from accelerator to accelerator, trying to raise seed round, post seed rounds, bridge rounds and still trying to get ready for a series A raise. I dont think this is going to help us action them in a particular way, so this, albeit interesting is not very useful.

Segmenting by market opportunity:

There are other ways to segment startups, including the type of founder (hacker, vs. sales person, etc.) and founders background (serial entrepreneur, first time founder, etc.)

I wonder if there’s anything we missed. I’d love your input.

One thought on “How do you segment startups? Here are 3 models, but we need more”

  1. Don’t think most of the dimensions discussed here will matter much, maybe helps to build a yellow pages on start-ups – traditional segmentation implies clustering elements around closely bound parameters, so a general solution can be targeted at a segment – investments on the other hand are a bottoms-up affair, every investment will involve the same amount of study despite the growth/ownership segments involved, segmenting the start-up by industries served or whether its a B2B/B2C company (defined as categories in your post) might help with the initial filters for both financial and corporate investors and the location though important needs to be supplemented using target regions – sometimes (rather more often) a start-up based in Bangalore might be sourcing 100% revenues from US :). investment activity – eg. date of latest investment – can also be a good parameter to fuel discussions

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