Business Categorisation

Business Categorisation

28th July 2016 by Jeff Lynn

We have recently overhauled the way we categorise the businesses raising capital on the Seedrs platform.

In our old model, we would simply assign each business with one or more “industry” categories. With the experience and data we have acquired in the four years since we launched, we have come to view those industry categories as outdated and in need of a refresh.

In their place, we now categorise every business by three criteria: level of digitisation; customer type; and sector. Each business’s three categorisations can be seen on its campaign page, and prospective investors can search campaigns by any of the three criteria. This blog post explains a bit about what each means:

Level of Digitisation

We are often asked what proportion of our businesses are “tech” businesses, and increasingly we find this a difficult question to answer. Today there are very few businesses that don’t involve some level of technology use or production.

So we think a better way of addressing the same issue is by looking at businesses’ level of digitisation. We now divide our businesses into three categories based on how their customers interact with them:

– Digital: The customer’s use of the product or service is entirely or almost entirely digital. (Example: a business that creates mobile games would be Digital, because customers only interact with it through their mobile phones.)

– Non-Digital: The customer’s use of the product or service is entirely or almost entirely non-digital. (Example: A brewer would likely be Non-Digital: even if there is information about the beer on the company’s website, the substantive interaction between the customer and the product is fundamentally an off-line one.)

– Mixed Digital/Non-Digital: The customer’s use of the product or service is partially digital and partially non-digital. (Example: an online recruitment platform is likely to be Mixed Digital/Non-Digital: the initial engagement between the employer looking to recruit staff and the business is through the online platform, but the ultimate transaction—hiring an employee and having her come to work for the employer—is a non-digital one.)

Customer Type

Our second criterion is based on the type of customer the business targets. It is often assumed that equity crowdfunding is only meant for B2C businesses, but in reality we have had a tremendous number of successful B2B campaigns. And we view the customer landscape as ternary rather than binary: there are lots of businesses that target both consumers and businesses, and they make up a category unto themselves. So our three categories of business by customer type are:

– B2B: The business’s customers are almost entirely businesses or individuals acting on behalf of a business. (Example: an analytics platform that helps advertisers track the efficacy of digital ads would be B2B, as advertisers will be almost entirely commercial enterprises.)

– B2C: The business’s customers are entirely consumers or individuals acting in a personal capacity. (Example: a manufacturer of craft bicycles is likely to be B2C, as the vast majority of its customers will be individuals purchasing bicycles for themselves or as gifts.)

– Mixed B2B/B2C: The business’s customers include both consumers and businesses. (Example: the operator of a financial services marketplace, where the suppliers of capital are largely individuals but the recipients of that capital are businesses, would be categorised as Mixed B2B/B2C.)

Sector

Finally, we break down all of our companies into one of 17 sectors. This is similar to our old industry categories, but we have refined the sectors significantly in order to better reflect the substance of what a business does. Much as we think it does not make sense to talk about a “tech” business any more, many of the commonly-used industry categories fail to identify in what area the business is actually operating.

For example, the oft-used category of “e-commerce” really just describes a distribution mechanism: it says nothing about what the business sells (is it cars or clothes or package holidays?), and it ignores the fact that many businesses that began as brick-and- mortar retailers now distribute at least some of their products through online channels. Likewise, “software development” once referred to a specific industry but today describes one of the many functions that most businesses have as part of their operations. And there are many other examples.

The sectors we have settled on are as follows. We do not view this as an exclusive list, and as new types of businesses seek to use Seedrs, we may expand the list further:

Advertising & Marketing: The business’s primary activity relates to the creation or distribution of advertising or marketing technologies or materials, or activities ancillary thereto.

Automotive & Transport: The business’s primary activity relates to the transportation of people or freight, or activities ancillary thereto.

Clothing & Accessories: The business’s primary activity relates to the manufacture or distribution of clothing, apparel, jewellery or other accessories, or activities ancillary thereto.

Content & Information: The business’s primary activity relates to the creation, provision and/or aggregation of content, news and other information, or activities ancillary thereto.

Data & Analytics: The business’s primary activity relates to the provision or facilitation of analysis of data with a view to driving business-related decisions, or activities ancillary thereto.

Energy: The business’s primary activity relates to the production or distribution of energy or the extractions or harvesting of sources of energy, or activities ancillary thereto

Entertainment: The business’s primary activity relates to the production or distribution of films, television, theatre or music, or activities ancillary thereto.

Finance & Payments: The business’s primary activity relates to the provision or facilitation of financial or payment services, or activities ancillary thereto.

Food & Beverage: The business’s primary activity relates to the manufacture or distribution or food or beverage products, or activities ancillary thereto.

Games: The business’s primary activity relates to the creation, publication or distribution of games, or activities ancillary thereto.

Healthcare: The business’s primary activity relates to the development, manufacture, marketing or distribution of medicines, medical devices or other health-related products or services, or activities ancillary thereto.

Home & Personal: The business’s primary activity relates to the manufacture, creation, provision or distribution of products or services intended for general home or personal use (not otherwise classified), or activities ancillary thereto.

Programming & Security: The business’s primary activity relates to the facilitation or support of computer programming and development or technological security, or activities ancillary thereto.

Property: The business’s primary activity relates to the acquisition, sale, leasing or management of real property, or activities ancillary thereto.

Recruitment & Procurement: The business’s primary activity relates to facilitating the acquisition of human or physical capital, or goods and services used in business, or activities ancillary thereto.

SaaS/PaaS: The business’s primary activity relates to the creation and provision of software or a platform that is provided as an ongoing service, or activities ancillary thereto.

Travel, Leisure & Sport: The business’s primary activity relates to the provision of services for, or the provision or aggregation of information about, travel, leisure or sport-related activities, or activities ancillary thereto.

We hope you find this new approach to categorisation useful as you review investment opportunities on Seedrs.

Jeff Lynn

Jeff Lynn

I'm Executive Chairman and Co-Founder of Seedrs.

Digital Agency Kent