Best Startup Markets for 2009
When I first started my bamboo clothing company, Rain Frog Apparel, I knew it would allow me some entrepreneurial freedoms: flexible hours, the ability to apply philanthropic principles in a business setting and a new way to express my creative passions. What I didn't know about, or perhaps what I underestimated, was the massive wave of innovation, dedication, collaboration and pure genius that was sweeping through the green market--coming straight from entrepreneurs like me who were driven by their desire to make a socially responsible difference.
These green businesses are just one example of how entrepreneurs have identified a trend and then acted on it, not simply because they wanted to make money, but because they had a real passion to create something of their own within a burgeoning market.
That's why we've devoted some space in this issue to the hottest markets for 2009. One of them is the green market, but we've outlined three others that are worth consideration. So if one of these appeals to you, know that you're not alone--and that now is the time to act on your aspirations.
The fact that the LOHAS, or Lifestyles of Health and Sustainability, market is currently worth $209 billion should be enough to get your attention. If it's not, then you'd probably be better off focusing your energies elsewhere.
If you're nibbling at the bait, however, it's important to note that there are multiple segments to choose from. From water and clean energy to the exploding organics segment, the possibilities are endless for entrepreneurs looking to make a difference while also making some green of their own.
"We're undergoing a significant environmental shift," says Jared Krause, 29, CEO of Santa Monica, Calif.-based Goodlife.com. The site, co-founded with Gunnar Lovelace, 31, and Summer Hoeckel, 36, is a newly launched online community, directory and calendar for goods and services in the wellness, green, spirituality, nonprofit and entertainment sectors. "There's a recognition that we're facing an environmental crisis the size of which humankind has never seen before."
The flip side to this grim outlook, Krause says, is that businesses and consumers alike are collaborating across geographical, social and political lines to bring about positive environmental change.
One such business is Numi Organic Tea, a $12 million organic and fair trade tea company in Oakland, Calif. Founded in 1999 by brother-and-sister team Ahmed and Reem Rahim, 40 and 42, respectively, the company sells its products wholesale to such national retail outlets as Whole Foods, Wild Oats and Safeway's Organic Marketplace, and also operates the Numi Tea Garden tea house in Oakland.
Reem, the company's chief marketing officer, notes that the company didn't always use organic tea in its products, but she and Ahmed recognized the importance after a few years in business. "As we got into it, we knew it was important to transition to organic," Reem says. "We saw our imprint in terms of what we were doing and how much we would purchase, and knew we had to make the transition."
One caveat about the green market: As consumers see more and more companies going green, they may grow weary--or even leery--of the message, no matter how noble the intentions. So focus on gaining media attention with an innovative product or service, and not only will you get free publicity, but you'll also be more likely to gain a loyal consumer following.
Also known as Generation Y, "echo boomers" and the "net generation," Millennials--the 30-and-under set--account for a whopping $1 trillion in buying power and roughly 80 million Americans, according to the U.S. Census Bureau. You'll find Millennials everywhere, especially all over the web.
"There are more members of this generation than any other generation in the history of the world," says John Della Volpe, founder and CEO of SocialSphere, a Web 2.0 product and strategy company launched in 2007.To understand this audience and where they're coming from, says Della Volpe, who is also director of polling at the Harvard Institute of Politics, you must understand the Millennial psyche. "If you want to work with, work beside or sell to Millennials, they need to like you," he says. And getting them to like you may mean you need to run a socially responsible business.
Consider this: "The 2006 Cone Millennial Cause Study" found that 61 percent of Millennials feel personally obligated to make a difference in the world, and a full 78 percent believe that companies have a responsibility to join them in this effort. This is also the 9/11 generation, one that wants to be active in social causes, and information technology has made it that much easier to connect with different causes around the world.
In addition to understanding their psyche, you need to understand their tremendous spending power. "They influence almost every kind of household purchase you can think of," Della Volpe says, from TVs and furniture to vacations and automobiles.
And 64 percent of them are creating content online, possibly about your product or service. "You don't own your brand and messaging; they do," Della Volpe says. "They have exquisite BS meters. They detect and detest corporate marketing."
That doesn't mean you can't advertise--you can, if you do it right. If your ad is entertaining and authentic, Millennials might just think it's clever enough that they'll want to buy from you. Back it up with solid customer service and a product or service that meets their high expectations, and you'll earn their repeat business.
Baby Boomers Market
On the other end of the spectrum, you'll find boomers, the 76-million-strong generation born between 1946 and 1964 that accounts for $2 trillion in annual spending. To market to this generation, think about life stages--empty nesters, singles, grandparents and so on--as opposed to their particular ages, as age is just a number to boomers.
Financial planning, travel and anti-aging products and services are just a few of the booming market segments to consider. New York City "image enhancement coach" Wendy Lewis, 49, estimates that entrepreneurs like her who help boomers navigate the anti-aging process will see unparalleled growth in 2009 and beyond. "People don't have time to do their own research," says Lewis, author of Plastic Makes Perfect: The Complete Cosmetic Beauty Guide. "They just want someone to sort through [the information] for them."
Lewis notes that boomers account for the largest portion of her clientele, including both men and women. Since founding her company, Wendy Lewis & Co. Ltd., in 1997, she's grown her client base to include a global community looking to America for their anti-aging needs--and willing to travel to get the results they want.
"The trend is toward noninvasive procedures," notes Lewis, who saw 20 percent growth in her business between 2006 and 2007. Boomers--and the generations following on their heels--want a fast recovery that won't keep them from their busy lives for too long. Better yet, they'll try to prevent the effects of aging altogether, by using anti-aging products before they have to deal with crow's feet. They also want to look natural and not distorted. Lewis says, "It's not about the extreme makeover."
Anyone who's ever watched a significant other merge with the couch during football season can attest that sports are big business. Add the internet to the mix, and you've got a billion-dollar market there for the taking.
OPENSports.com founder Mike Levy, a veteran sports entrepreneur who started SportsLine.com and later sold it to CBS after achieving revenues in excess of $100 million, recognized the growing popularity of online sports years ago. After his three-year noncompete agreement with CBS expired, Levy went on in February 2008 to start his Deerfield Beach, Fla., company, which consists of online fantasy leagues, video content, entertainment, and sports articles and information. Now 100,000 users strong, OPENSports.com is on track to reach sales and users in the millions over the next few years.
Levy's venture is well-capitalized: He raised $10 million from private investors to get the site started. "It would be hard to develop the right tech platforms and the marketing without having the [proper] capital," he says. Investors also want to see that you've thought far enough ahead to have an exit strategy in place. Levy plans to be retired from OPENSports.com within two to five years, saying the company will likely merge or be acquired.
Make enough money while you're in the game, though, and you can put your own retirement plan in place even before you open your venture's doors. Focusing on a niche like fantasy sports may help: The Fantasy Sports Trade Association estimates that upwards of 20 million (primarily male) North Americans participate in fantasy sports leagues, with a market size of more than $1.5 billion, including sponsorships, endorsements, contest management and advertising.
Once you've found your niche, it's critical to find ways to make your sports fan customers happy. Levy says of his OPENSports.com users, "These users are a dedicated bunch." And you don't even need to set out beer nuts to do it.