What are the best ways to identify comparable companies for a startup in a new industry?

Think of Tesla when it was first starting out. Traditional industry codes might have lumped it into "Automobile Manufacturing," but that wouldn't capture the nuances of it being an electric vehicle (EV) and clean energy company. Over time, as the EV market grew, more suitable comparables like NIO, Rivian, or Lucid might have emerged. Startups in new industries might have to create their own set of comparables by mixing and matching. For instance, a company that's part ride-sharing, part food delivery might look at Uber for the ride-sharing part and DoorDash for the food delivery aspect. Also, financial metrics and growth rates are vital in selecting comparables; they need to match the stage your startup is in.

It’s about cross category competition. Simple example “Diwali gifts to employees may be a wrist watch or a Milton casserole or a suit length or a silver coin. ‘ None of these compete with each other , but in gifting category they do. This is an exercise the promoters need to undertake. Finally the aim is a piece of the customer wallet.

Start up companies are unique; seldomly you could find two similar companies with same offerings, this phenomenon makes it difficult to find a right set of comparable companies. One approaches would be to look for companies that are utilizing the same platforms as the Target Start Up I.e Blockchain technology, Web3, SaaS etc. Once you identify a few peers you may have to go through financials, website or any other relevant documents to understand their underlying business in details, though it may be a time consuming exercise it helps you to narrow down & picks the right set. Usually Price to unique offerings (qualitative) market share, website visit, customers etc are being used instead of underlying financials (but not always the case)

I do the following, - Set a criteria - Scour Crunchbase, DealRoom, Traxcn for relevant companies, build an excel sheet with the companies and go through them line by line writing down comments as to whether they fit my criteria - Shortlist most relevant ones. Makes sense?

Think Broad, Then Narrow. Start with overarching sectors before honing in on sub-categories. Even if the industry feels 'new', there's likely a broader umbrella it fits under. Explore Standard Codes. Tools like NAICS (North American Industry Classification System) or SIC (Standard Industry Classification) codes can be your roadmap to finding related businesses.

Suppose you're starting a telehealth startup. Instead of starting from scratch, you could head over to Crunchbase and filter for startups in the telehealth sector. You'll find companies like Teladoc or Amwell, see how much they raised, who invested in them, and even what their revenue models are. This would offer you a clear view of the landscape you're entering. While these platforms provide great initial insights, it's worth noting that the data might not be entirely up-to-date or might lack granularity. So, they're best used as a launchpad, not as your only source of truth. Also, you might consider cross-referencing information across multiple platforms to verify data and gather a more holistic view.

Platforms like Crunchbase, PitchBook, or CB Insights offer a treasure trove of startup data, helping identify peers and competitors. Additionally, websites like TechCrunch or Business Insider often spotlight emerging startups, which might lead you to industry comparables.

Suppose you're launching a SaaS (Software as a Service) startup in the customer relationship management (CRM) space. You could utilize LinkedIn to research key people at Salesforce, HubSpot, or Zoho. Then, you might reach out to your college alumni or mentors who work in these companies or related industries for an introduction or some inside scoops. Don't underestimate the value of weak ties—the connections that aren't your closest friends but acquaintances. Sometimes, they can provide unexpected but incredibly useful referrals. Also, while platforms like LinkedIn are fantastic, don't overlook the value of offline networking events, incubators, or accelerators where you can make strong connections in a less formal setting.

If you have been at it a while, you probably know your competitors. They are comparables. You will also hear about comparables as you pitch VCs and talk with people in your network. Of course, you are the best. But, keep these others in mind. Some of them you might want to put on a competitors slide in your deck. And some of them you might want to use when discussion valuation with investors.

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Comparable companies can be found through quite a few premium databases such as the ? Capital IQ ? VCC Edge ? Pitchbook Further you can google product comparisons or reviews which gives you the best comparable company. And service comparable can also be identified accordingly. Then you can search on LinkedIn and you would get a section- people also searched for and similar companies section - that's really helpful because the key words and the people jumping from one company to another might be a factor used.

Leverage Your Connections. Talk to mentors, peers, or industry veterans. Sometimes, a casual coffee chat might reveal more than hours of online research. Although the whole world is in our hands still attending industry gatherings physically will help you instantly. Conferences, webinars, and industry meet-ups can be gold mines for finding startups in nascent spaces.

Consider Spotify and Apple Music as potential comparables for a new music streaming startup. Qualitatively, both aim for ease of use and extensive music libraries, but Spotify leans more into personalized playlists. Quantitatively, you could look at subscription revenue, the number of paid users, and market share to draw parallels or contrasts. The qualitative criteria are especially important when your startup is in a new or fast-evolving industry. The numbers might not tell the full story since everyone is still figuring things out. Similarly, you might encounter startups with impressive numbers but with a different target audience; here, qualitative criteria will give you a better idea of "fit."

Dive Deeper Than Mere Metrics! While tangible figures such as revenue and user tally are undeniably crucial, it's the nuanced tapestry of target demographics, distinctive brand narratives, and the very ethos of company culture that can offer richer insights. Employ sophisticated tools, such as benchmarking, to gracefully juxtapose growth trajectories, profit paradigms, and more. It's not merely about spotting similarities but understanding the intricate choreography of industry dynamics.

By leveraging these strategies, even the newest of industries won't feel like uncharted territory. Identifying comparables becomes less about seeking exact matches and more about understanding the landscape.

Most of the suggestions here are wrong. The best way to build a list of comparables is to look for companies who make products and services that directly compete with you. Doing a keyword search of your product or service is one of the best ways to identify who else is in your space. Searching for complimentary types of business is also good because it improves your understanding of companies around your industry.