How we chose the companies

Digital transformation is the CNBC Technology Executive Council‘s reason for being – CIOs, CTOs and CISOs from companies and organizations of all sizes, from all industries across the economy, are eager to share ideas about how they can use the latest technology to meet customer needs, improve employee productivity and mitigate risk. These executives play a critical role for their organizations, as they recommend to their CEOs and CFOs how best to allocate increasing levels of technology spending and investment.

Often, those dollars find their way into up-and-coming companies. These are startups built by ambitious, creative, and innovative entrepreneurs who set out to develop the latest technology in business intelligence, IT, cloud, big data, cybersecurity and more, to attract big-time customers. 

Over the course of CNBC’s ongoing conversations with the members of the TEC, an idea for a new list emerged. It would be a list of enterprise-focused, technology-driven startups powering digital transformation, attracting strategic investments and potentially drawing acquisition interest. And so, we present this first annual list of Top Startups for the Enterprise, powered by the members of the CNBC Technology Executive Council.

Identifying the next generation in the enterprise

Nominees for this first-ever list were selected from the more than 1,200 companies that were nominated for the 2022 CNBC Disruptor 50 list, which was released this past May. CNBC reached out to companies from that list of nominees that self-identified as “enterprise” or “B2B” and asked them to opt in to being considered for a new list of startups for the enterprise. In addition to those companies, TEC members were given the opportunity to nominate new companies for the list via an anonymous survey.

All nominees from each source were asked for information on their businesses, their sales and user growth and other key metrics, with companies we selected from the CNBC Disruptor 50 nomination group given a chance to update the information they provided to us at the beginning of the year, and new nominees given the chance to provide the information for the first time.

The process of determining which of these nominees would make the Top Startups for the Enterprise list began with an anonymous survey of Technology Executive Council members. Members were asked to evaluate and weigh the eleven criteria that would be used to determine which companies made the list. These criteria include scalability, sales and user growth rates, profitability, and measures of workforce and boardroom diversity.

Use of emerging technology comprised an elevated portion of the evaluation process, as members were asked a series of questions about certain types of technologies, from artificial intelligence to software-defined security, and how they are thinking about those technologies in their discussions about future capital allocation, investment and acquisition opportunities.

Over one-third (37.5%) of members say cloud computing is the area likely to see the most capital spending from their companies over the next year, while 25% say it’s artificial intelligence. AI led the way as the technology most desired via acquisition, with 31% saying they might be looking to improve their AI capabilities by buying another company.

We also asked about new vendor relationships, which is perhaps the simplest way money can flow from large companies to startups, and ultimately is the lifeblood of new ventures. Nearly half of TEC members (47%) said they’re most likely to seek a new outside vendor for cybersecurity in the next 12 months, while 20% each said they’re looking for vendors in low code/no code software and machine learning.

After the data was collected, nominees were scored across the 11 categories, with each category score weighted according to the results of the TEC member survey. CNBC editorial then reviewed the top finishers, identifying the 25 companies to make the final, unranked list.

As a result of overweighting the use of key technologies in our methodology, most of the companies on the list tell us that some combination of AI, machine learning, and cloud computing are a critical driver of their business models, and more than a third of the companies provide cybersecurity solutions.

Why unranked? The companies on the list were chosen because they have the potential to meet a range of needs for larger enterprises – either as vendors/partners, as investment opportunities, or as acquisitions – and in some situations these needs conflict. A startup with a multibillion-dollar valuation has the scale to be an important vendor to dozens of large corporations, but would make for an expensive acquisition, while a smaller startup could be ripe for an early sale or investment but may still lack the ability to meet the demand of too many big customers. All this made it difficult for us to compare the companies on the final list in a linear way that made sense to us. And so, we present them to you unranked, as 25 digitally transformative companies to watch.

The 2022 Top Startups for the Enterprise list is powered and inspired by the members of CNBC’s Technology Executive Council (TEC). Learn more about CNBC Councils.

https://www.cnbc.com/2022/11/07/cnbcs-top-startups-for-the-enterprise-how-we-chose-the-companies.html