Technology driving accelerated growth among today’s young businesses

Within the 2014 class of Entrepreneur Of The Year finalists, EY has identified broad adoption of technology among a relatively young population of entrepreneurial companies as a significant trend emerging along the path to accelerated growth.

Some of the strongest performers among today’s entrepreneurs have leveraged technology into a game changer. These companies are revolutionizing traditional business models by blurring industry lines — using technology to disrupt, scale and change lives.

Consider how this year’s finalists are leveraging technology as a competitive advantage in their respective industries. Trulia’s online platform has modernized the traditional home-buying process, and thus, the real estate industry as a whole.

The Honest Company has built its business model around selling 80 percent of its products online, in addition to stocking shelves of major brick-and-mortar retailers.

The importance of technology among the finalists is reflected in a new trend: how these companies do business becomes the basis for who they say they are. Companies that in the past might have been classified as retail, banking, automotive or real estate are now self-identifying as technology companies.

Savvy entrepreneurs are aligning with the tech sector because they know it’s an investor magnet. Among Entrepreneur Of The Year 2014 finalists, technology is the top sector to attract private equity and venture capital investments.

Fifty six percent of the companies in the tech sector have received VC funding, compared with just 27 percent in other sectors. Similarly, finalists in the technology sector were the highest target for M&A activities, with 26 percent undertaking a merger or acquisition in the past three years. Digital transformation is driving deal making in this sector as companies seek to accelerate their adaptation to the technology megatrends of smart mobility, cloud computing, social networking and big data analytics.

Technology is no longer seen as a hurdle, but rather a facilitator for dramatic growth, quickly. This transition, coupled with reduced startup costs, has provided an opportunity for angel investors to fund companies that were once only in a VC’s purview.

Investors looking for high growth and faster returns have turned to young companies that produce exponential returns faster. Consider that 55 percent of private equity-backed Entrepreneur Of The Year 2014 finalist companies are less than 10 years old, with a median age of nine years. Shift to venture capital-backed companies and those numbers are 71 percent and seven years, respectively.

You can read EY’s full Blurring the Lines report here. For details on EY Entrepreneur of the Year 2015, including nomination information, visit EY’s website.