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How we chose 2017's most disruptive innovators

The race to grab market share from today's public giants and attain the coveted title "CNBC Disruptor" has never been more competitive. A record 838 companies were nominated for this year's list across every sector of the economy - from social networking to senior living, mining to machine learning, even a professional basketball team. The companies that made the final cut share a common ethos; question established norms and discover billion-dollar opportunities.

This year's Disruptor 50 companies have the potential to upend multibillion-dollar industries. They have raised a combined $44 billion in venture capital at an implied valuation of $239 billion, according to PitchBook.

Read More FULL LIST: 2017 DISRUPTOR 50

IPO activity has been picking up. The first quarter's 25 offerings raised $9.9 billion, a seven-quarter high. One-third of that value was raised by Snap, a three-time former CNBC Disruptor and the biggest tech IPO since Facebook. In the first quarter, there were 24 U.S. IPOs, triple the number in the year-ago quarter. In all, 20 percent of the companies named to the Disruptor 50 list since 2013 have gone public or been acquired (see the all-time list).

Thirty-one of this year's Disruptor 50 companies have valuations of $1 billion or more — the unicorns. For some, an eye-popping number is enough. Our approach focuses more on the ideas and the execution behind the big numbers, and the likelihood that those numbers are sustainable.

Here's how we picked the 2017 CNBC Disruptor 50.

Companies nominated were required to submit a detailed analysis, including key quantitative and qualitative information. Nominees were scored across a wide range of quantitative metrics, including amount of venture capital raised and off-the-record information on sales and user growth, along with a holistic qualitative assessment by CNBC editorial staff.

The quantitative information was supplemented with data from our three official Disruptor 50 data partners. PitchBook provided data on fundraising and implied valuations. We used IBISWorld's database of industry reports to compare the companies based on the industries they are attempting to disrupt. And MCAM International, the firm behind the CNBC IQ 100 Index, analyzed how the companies protect the technology at the foundation of their business models. Using its unprecedented database of patent, trademark and other intellectual property information, MCAM revealed which of the 838 nominees had such protection and rated the quality of those protections.

CNBC's Disruptor 50 Advisory Council — a group of 39 leading thinkers in the field of innovation and entrepreneurship (see list below) — then ranked the quantitative criteria by importance in ability to disrupt established industries and public companies. This year the council found that scalability and user growth were the most important criteria, and these categories received the highest weighting.

However, our ranking model is designed to ensure that companies must score highly on a wide range of criteria to make the final list.

2017 is the fifth year for the Disruptor 50 list. Seven companies (Airbnb, Dropbox, Pinterest, Palantir, SpaceX, Spotify and Uber) have made the list all five years. Each year, we try to discover what the companies that make the list have done that's new, and these seven continue to deliver on the promise of what it means to be a Disruptor.

Read More: THE COMPLETE HISTORY OF THE CNBC DISRUPTOR 50

Other names have come and gone and now come back. Warby Parker has made the list again after a year away. The company has set the standard for brands born on the internet to break into brick-and-mortar in a meaningful way. Foursquare returns to the list for the first time since 2013, as it appears to be delivering on a promise that its consumer insights are more valuable than its consumer product.

And there are newcomers as well, disrupting the markets for grocery shopping, fertility services, stock trading and more. These are the companies that think differently — and force the incumbent giants to do the same.

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