What's the best industry to start a company in?

Starting a company is one of the most challenging and rewarding things you can undertake. Aspiring entrepreneurs often ask themselves one critical question: What industry should I focus on? The answer lies not in trying to pick a universally "best" industry, but in finding one where you have a significant advantage. Whether it's deep knowledge, unique connections, or a specific operational edge, your personal strengths will determine the best industry for you.

All industries can be good industries

There are opportunities in almost every sector. From healthcare to fintech, SaaS to boring businesses, success stories abound across industries. This diversity of success underscores an important principle: industries themselves are not inherently better or worse. What matters most is your ability to execute within a particular space.

For example, someone with a background in healthcare might spot inefficiencies in patient care that they can solve, while a former finance professional may know exactly where the bottlenecks lie in lending operations. What separates successful startups from failed ones is less about the industry’s inherent potential and more about the founder's ability to capitalize on their unique advantages.

Leverage your advantage

Your advantage could take many forms:

1. Industry knowledge: Deep understanding of an industry helps you spot pain points others might overlook. For instance, someone with years of experience in logistics might recognize inefficiencies in last-mile delivery that could be streamlined with technology.
2. Connections: Relationships with key players in an industry can fast-track a company's growth. Whether it’s knowing decision-makers who can become early adopters or leveraging a network of investors familiar with the space, connections can open doors that are otherwise difficult to access.
3. Special hacks or expertise: Technical expertise or innovative processes can help you solve problems more effectively than competitors. For instance, a programmer who understands advanced AI might apply it in a novel way to disrupt an existing industry.

When choosing an industry, consider these advantages. Without them, you may find yourself competing in a saturated market without the tools to stand out.

Matching your company goals to the industry

Your choice of industry should align with your goals for the company. For example, if your primary goal is rapid scaling, you should prioritize industries where decision-making cycles are short and customer acquisition is fast. Conversely, if you’re aiming to build a deeply entrenched, high-revenue business over the long term, industries with longer adoption cycles might still make sense, provided the payoff is worth it.

For example at Softmogul (my previous company), we addressed a clear pain point, hotels needed better tools to manage operations. However, selling to hotels was not a straightforward process. The purchase decision involved multiple stakeholders: the general manager, front desk manager, housekeeping manager, F&B manager, revenue manager, and even the owner. Onboarding was another hurdle, requiring training across several departments to ensure smooth implementation. The result? Long sales cycles and slower scaling.

Contrast this with industries like e-commerce tools or personal productivity apps, where the decision-making chain is often a single individual, and onboarding can be as simple as a downloadable app or plug-in. These industries lend themselves to faster customer acquisition and scaling, making them appealing to entrepreneurs who want to grow quickly.

Understanding sales cycles and onboarding

Two critical factors influence how easy it is to scale a business in a particular industry:

1. The chain of decision-makers: The more people involved in the purchasing decision, the longer the sales cycle. Industries like hospitality, healthcare, and education often have multi-layered decision-making processes. This can slow growth, even if the market need is strong.
2. Onboarding complexity: If your product requires extensive training or significant changes to existing workflows, it can create friction for new customers. While these barriers are not overwhelming, they can limit how quickly you gain traction.

As a founder, it’s crucial to weigh these factors against the potential payoff. Industries with long sales cycles and complex onboarding processes are not inherently bad, success in these spaces often leads to deeply loyal customers and high barriers to entry for competitors. However, they require a patient and strategic approach to scaling (and lot's of funding).

Build the company you want

In the end, the best industry to start a company in is the one that matches your strengths and your goals. If you want to grow fast, look for industries where it’s easy to get customers quickly. If you want to build something long-lasting, it’s okay to choose a slower moving industry as long as you’re prepared for the challenges.

Your unique edge whether it’s knowledge, connections, or skills matters more than the industry itself. Success isn’t about finding the “perfect” industry. It’s about finding the one where you can stand out.