Nelson Center for Entrepreneurship

An industry is a group of companies that are related based on their primary business activities. This page covers two common systems for classifying (or grouping) businesses: NAICS and verticals.

North American Industrial Classification System (NAICS)

To do industry level research you need to identify the common industry name and a system that you will see in many reports and databases is called the North American Industrial Classification System (NAICS).

Overview on NAICS (pronounced "nakes") with examples

In this system, establishments are grouped together if they do similar things in similar ways, and analysts in think tanks, information or data vendors and governments perform analysis and produce research based on those groupings.

When you are in the early stages of your research, the insights and trends in these reports can help you learn more about industry operations, what the outlook is, and what recent changes have taken place.

Official NAICS Website

Verticals

Verticals are used by some business research and data companies to, “describe a group of companies that focus on a shared niche or specialized market spanning multiple industries.” ( via Pitchbook)

For example, EdTech (short for Educational Technology) is a vertical used to describe companies and products that develop software used to design, deliver, and assess learning. An example of an EdTech company is Kahn Academy. In a database that uses verticals, you could find competitors or comparables for Kahn Academy by searching for "EdTech". In a database that doesn't use use verticals (or this specific vertical, as they may be proprietary to a specific tool), it might be hard to find EdTech companies by searching only because something like Kahn Academy might be tagged only as a software company or an educational company separately. 

When thinking about how your venture fits in the overall market or industry, it's useful to think about both the traditional ways of classifying businesses, and some of the newer and emerging categories and systems used to group companies by activity, delivery method, operating location, etc.

1. Go directly to the source:

No matching or closely aligned NAICS? Try the SIC system:

2. Search a similar company in a database that contains company reports. Most secondary research reports will include an industry code.