Innovation Blog

A Look Under the Hood: Top Startup Trends in 2020


Each summer, MassChallenge welcomes new startups to their US-based early stage cohort to help them connect to resources like mentorship, funding and education to advance their missions and impact the lives of their customers. This year is no different, in early June MassChallenge announced over 200 startups who will participate in the global not-for-profit’s – now virtual accelerator– in Austin, Boston, Houston and Rhode Island. You can check out our 2020 cohorts, which will kick-off on June 22, here.

The 130 startups in our Boston and Rhode Island cohorts reflect the top 10% of the total applicant pool. Yes, that means we received more than 1,300 applications from early stage startups around the world across all sectors. While the diversity of ideas and technologies is as always astounding, three key trends stand out in 2020:

  • Artificial intelligence and machine learning (AI/ML) are here;
  • Tough tech moves to center stage;
  • Biotechnology escapes the lab

This analysis specifically uses data from the Boston/RI accelerator programs. In 2020, the Boston and Rhode Island early stage accelerator program received more than 1300 startup applications from early stage applications.

The majority have less than $2M in revenue and less than $1M in funds raised and an average of 2.6 FTE employees. While our program is sector-agnostic, applicants are predominantly “technical”. Approximately 60 percent of startup applicants had at least one patent approved or pending. Seventy-five percent of applicants are from the United states. These startup statistics are more or less consistent with our Texas accelerators.

Key Trend 1: AI and Machine Learning is here

Artificial intelligence and machine learning (AI/ML) was the number one “core technology “category in 2020 by a factor of almost 3x. Specifically, over 35% (350) applications selected AI/ML when asked about the technology core to their solution. This is up from under 100 three years ago across all MassChallenge programs, indicating startups see AI/ML as essential in building 21st century solution.

Applicants indicated they intend to apply their technologies to a diverse set of end markets, reflecting what will be the far-reaching impact of AI/ML including across sectors; within business processes; and across products.

Specifically, no one sector commanded more than 50 applicants. Instead, we saw a long-tail effect with up to 44 sub-sectors represented.  However, enterprise software, medical devices, healthcare IT, fintech, edtech, online/internet, pharma and biotech, led the way with 20 plus applicants each.

What Could This Mean?

AI/ML is becoming integral. The explosion of AI/ML startups in our cohort supports our belief that there is no longer a debate that AI/ML will drive a meaningful next wave of disruption similar to software. While AI/ML started in “back-office automation,” use of AI/ML is spreading to front of house through use of chatbots, speech and image recognition, robotics and more. Based on our vantage point across hundreds of startups and corporate partners, this trend will accelerate. In fact, growth in venture funding for AI backed startups outpaced traditional venture last year while use of AI in U.S corporations grew over 270% in the past four years according to a report by Gartner. This aligns also with what we have seen across our corporate partner community where AI/ML applications have risen to the forefront of tech sourcing priorities.

Yet, as Innospark Ventures notes in published research, we are still “early in the innings.” As a result, AI/ML founders will very likely need significant support on both technology and business model as we move into this next frontier. There remains an open debate on the economic model of AI including whether it will be able to deliver software-level profitability: see here for interesting discussion of Andresson’s Horowitiz’s perspective on AI as service vs SAAS.

2020 Startup Spotlight: Dacon

AI makes faster and more accurate decisions than humans, which can save companies millions. But although companies have large amounts of data, most still don’t have the knowledge or resources to implement AI solutions for their problems. That’s where we step in. We connect organizations with AI experts through a platform where companies solve real world problems like prediction modeling, developing an internal program, and more.

Key Trend 2: Tough Tech moves center stage

Tough tech collectively (additive manufacturing, advanced materials, advanced electronics, hardware, integrated circuits, robotic process automation (RPA), robotics/drones, sensor technology) came in a clear second with 25% of all applications selecting one of the industry subsets.

Advanced materials represented one of the largest sub-categories and, like AI/ML, captured diverse potential end-uses. However, one clear trend jumped out: textile fibers. Startups are coming out of traditional “labs” with technologies looking to dramatically improve performance, durability, functionality and/or sustainability of materials in our everyday life.

Advanced-materials applicants also included those tackling bioplastics, alternative hydrogel’s for agriculture production, alternative composite materials from waste, and a novel class of metal alloys.

What Could This Mean?

Toughtech startups, which often emerging from academic research labs, are typically tackling multi-disciplinary opportunities at the intersection of the physical space and computer science. While “tough tech” has long been overlooked as a “tough investment” category, there are indications that the accelerating growth of toughtech startups will be met with open arms. Toughtech is estimated to be a growing area for venture investment in 2020 – certainl,y with some thanks to toughtech champion The Engine who announced the expansion of their Cambridge facilities in late 2019.

Forward-looking corporates also have a close eye on how toughtech startups may provide a leap forward. In fact, “toughtech” was also top sourcing priority for MassChallenge corporate partners in 2020 including startups leading the way in robotics, advanced materials, and 3D printing.

Toughtech startups often have several unique challenges including a longer development timeline and the need to build multidisciplinary teams. The diversity of our no-equity accelerator is often an aligned “first home” for these startups, which in the past have included Infinite Cooling, Analytical Space among others.

Startup Spotlight: Mi Terro

Mi Terro is a new material technology company that turns milk waste into soft, sustainable, and affordable fibers. Our fibers can apply to apparel, medical appliances, bed linen, and packaging film. Through our patent-pending technology, we created the world’s first apparel line made from milk waste. We can potentially turn any type of protein-based food waste into fibers. Our goal is replacing petroleum-based materials with protein-based materials made from food waste.

Key Trend 3: Biotech escapes the lab

Life science companies (as always) comprised a meaningful proportion of 2020 applicants. However, this year, we observed strong representation from biotechnology startups in particular. More than 120 startups applied with biotechnology solution and, we observed one notable emerging hot spot in particular: tissue engineering related to human hearts, livers, and crustaceans.

More broadly, across biotech startups personalization, use of wearables and/or sensor-technology, and internet of things were visible trends indicative of the themes of connectivity and personalization broadly across innovation.

What Could This Mean?

Biotechnology companies have extremely long (and more often than not regulated) development timelines. In fact, many definitions include biotechnology in the “toughtech” family given the similar headwinds they face.

These startups often opt to apply to MassChallenge as they look to make the challenging transition from “the lab” to “venture.” Gingko Bioworks and Sqz Biotech are two notable alums we supported in this move.  While historically, venture funding had a strict split between “pharma” and “non-pharma” – posing a challenge for companies operating at the intersection of biology and technology – there are signs that this have changed. As we look out across our portfolio and at the market data, it is safe to say there is visible opportunity in key categories including tissue engineering, DNA sequencing and wearable devices that will fuel a next wave of growth.

Startups Spotlight: Coalesenz Inc.

Coalesenz is developing a smart sensor that swiftly measures a patient’s blood coagulation status using a small sample of blood. This device addresses the unmet need to identify and manage patients with an elevated risk of life-threatening bleeding or thrombosis, the major cause of in-hospital preventable death. The innovation also enables coagulation testing at home for 15M patients worldwide who receive oral anticoagulants to prevent venous or arterial thrombosis, the world’s number one killer.

A Better Connection

One of the biggest themes linking these three findings was the possibility, or inevitability, of them intersecting. How VCs and Corporates are ultimately viewing these trends in a broader, more holistic way, is yet to be clear. What is clear, is that the innovation community is actively pushing their technology to be smarter at a similar pace as tactile and hardware is being advanced. Presumably, both will be vital roles in the sophistication of biotechnology, and this interconnection is extremely exciting. It’s precisely how we think of innovation communities thriving.


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