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Investors explain COVID-19’s impact on consumer startups

Josh Constine Arman Tabatabai 4 years

Home fitness and games as gathering places are a few of the startup verticals propelled by unprecedented shifts in behavior due to shelter-in-place orders. We surveyed the top investors in consumer and social apps to learn about 2020’s startup trends, the M&A climate, the threat of incumbents copying new entrants, underserved demographics and which features are poised to be unbundled from the biggest apps.

The Extra Crunch survey series assembles the best minds in different verticals, drawing on investors who’ve backed or worked at the companies defining their industry. For this survey, we asked how COVID-19 was affecting their investment strategies and the operations of their portfolio companies. We also dug into whether founders are more or less hopeful about being acquired, which startup ideas they wish they were being pitched and what age groups or cultures deserve new social products. It follows up on our investor survey from a couple weeks ago on the overall social category in coming years.

Subscribe to Extra Crunch to read the full answers to our questionnaire from funds like General Catalyst, Kleiner Perkins and Sweet Capital.

Here are the 17 leading social network VCs who participated in our survey:

Olivia Moore & Justine Moore, CRV

How much time are you spending on social right now? Is the market underheated, overheated, or just right?

It’s been a tough couple of years for new social startups — but when something hits in this space, it hits big! We’re always spending time looking at consumer social — we have a network of 200+ college scouts at campuses around the country, so we hear about (and try) new apps pretty frequently.

It is difficult for new social startups to reach any kind of meaningful scale. The average person doesn’t download any apps in a given month, and even though younger users may be more willing to try new things, they often face storage or data constraints.

We feel that the market is probably “appropriately heated.” Once a social startup is “working,” it shouldn’t struggle to raise capital, but there are probably fewer investors making large pre-launch social bets because there have been so few breakout hits recently.

How has COVID-19 impacted social startups operationally?

A number of early-stage social startups have seen huge jumps in activity due to the coronavirus, which makes sense — when you can’t see your friends and family in person, you’re going to spend more time with them online!

Apps that enable video communication (e.g. Houseparty, Squad, Airtime) have been quickly climbing in the App Store. Virtual gathering places are also gaining steam — a recreation of Club Penguin keeps having issues with servers crashing due to overwhelming demand.

Even products that are more asynchronous (e.g. traditional social networks, dating apps) are seeing big spikes in usage because people are bored at home.

All of this demand can create operational challenges for startups, many of which are trying to upgrade their infrastructure, so they don’t suffer outages! Some are also seeing increased server costs, which can result in higher burn if they aren’t generating revenue yet.

How has COVID-19 impacted the social investing landscape?

It’s an interesting time to be investing in social! Startups are seeing unprecedented user growth and engagement, but we don’t yet know which ones will be able to retain users (and keep growing) when shelter-in-place ends.

There’s definitely an opportunity for the next big social network to emerge from this period, but we suspect there will be many apps that see fleeting fame and then fade out.

We’re looking for products that enable the creation and distribution of new types of content, like Snapchat did with ephemeral messages, Instagram did with filtered photos and TikTok did with short-form video. It’s tough to compete with social giants on their “own turf” — startups may be better off trying to create new categories!

Has your degree of concern about incumbents copying social startups changed in the past two years, and how has that impacted your investment decisions? 

Whether a company has a competitive moat is something we consider when making any investment decision — it’s not unique to social! There’s a lot of fear around the incumbents (particularly Facebook) copying startups, but it’s worth noting that most attempts have been largely unsuccessful.

Facebook has launched a bunch of new apps that often duplicate the features of other startups or other incumbents, and none have taken off. Occasionally, Facebook will integrate a “copycat” feature into the core platform (like Instagram Stories ripping off Snapchat), but they seem reluctant to make too many additions.

During our time in venture, we haven’t seen any startups fail because their features were copied by an incumbent. It’s far more common that we see social startups die because they can’t generate enough buzz to build a significant user base or the product isn’t valuable enough to retain users.

What major social networking feature bundled into a popular app is most ripe to be unbundled in a new social app?

We see a big opportunity in social events! We’re keeping an eye out for apps that help you organize everything from last-minute hangouts to more formal gatherings like birthday parties — anything that doesn’t belong on Eventbrite.

Millennials have used Facebook for event planning, but many Gen Zers aren’t making Facebook accounts or don’t spend much time on it. They’re hacking together solutions for event organizing with things like Instagram, Google Calendar and group chats, which is inconvenient and inefficient.

This isn’t an easy space to build a company. If you’re an active Facebook user, it’s a natural place to organize events — you’re already on the platform for other things and your social graph is there, so it’s easy to invite friends. New apps will need to figure out how to make browsing and organizing events a strong enough use case to attract people to the platform and retain them over time.

Connie Chan, Andreessen Horowitz

How has COVID-19 impacted social companies:

COVID-19 has revived investor interest in social. As all of us who are sheltering at home spend more time on Zoom and on our screens, we’re finding that meaningful relationships and interactions can happen completely online. I noticed on my Twitter feed this weekend that a former colleague held a baby shower on Zoom and said it went surprisingly well! The other reason I believe social will see more success in coming years is that social platforms also offer a cheap form of entertainment. And as our economy enters uncharted territories, it’s very likely that people will need to find ways of spending time together without spending too much money.

As the world learns to embrace remote work and spend more time at home, many startups in social have seen a sudden spike in usage, and I’m sure engineers at those companies are working harder than ever to keep up with user demand. Additionally, it’s a great time for any of those social startups to double down on pushing out new features and products and capitalize on the sudden growth in user base (and effectively a drastic decrease in customer acquisition cost).

How strong are M&A prospects for social startups now versus two years ago?

M&A outcomes for social startups are still possible. The big incumbents, for example, are still acquiring companies. Also, as social bleeds more into e-commerce, it opens up a new set of acquirers. I can imagine several large e-commerce companies wanting to acquire social teams. Or even content streaming companies realizing that social is a way to increase engagement and retention. Social doesn’t have to be a sector, just like “mobile” was never a real sector — it’s a way of designing product that can be adapted to all industries. And as more sectors realize that, I’d imagine there’s more desire for social talent.

Are startups more or less afraid of being copied and steamrolled by incumbents?

Ever since every social platform started rolling out their version of Snapchat Stories, I think all social startups are worried about being copied. However, the success of TikTok in the U.S. shows us that new apps can still become very popular and extremely difficult for incumbents to replicate. TikTok, for example, has an incredible algorithm that can accurately predict which videos you’ll want to see next.

What demographic is still most underserved by social networks? Tweens, teens, college students, young adults, romantic couples, single middle-agers, parents, older adults, senior citizens?

I think all demographics are decently served by social networks, but the use case I’d love to see more of is helping strangers meet other strangers in contexts outside of dating.

Alexis Ohanian, Initialized Capital

How much time are you spending on social right now?

We think after several years, there’s new energy around the social networking space. It’s been so cold and lame for a while (I called “Peak Social” back in 2018) and even by the end of last year we were starting to see a shift in the pitches from founders back to social apps, but with unique takes on the model. The dominant trend was away from ad-based models of the previous decade and more toward membership or community-based models. Making money on social in this new generation will be more aligned with the creators and their tribes than ever before.

We’re also seeing more thought and intention into experiences that make us feel better. With every new “heart” and “follower,” the last wave of social networks really amplified a feeling of anxiety, which we’ve been able to see in the data of some of our other companies, like Spate, founded by the Google Trendspotting team. They’re tracking consumer trends through this crisis, and we’re seeing more pitches going right at the heart of how anti-social so much of social media has become. We backed Ikaria for exactly this reason — we think the world is ready for technology to facilitate deeper connections between humans.

How strong are M&A prospects for social startups now versus two years ago?

By the end of the year, cash-rich Big Tech companies are going to be watching for what they may be able to acquire cheaply (without tipping off too much scrutiny from newly re-awakened regulators). I’d be curious if anyone takes any interest in enterprise brands like Zoom or Slack. (I’m personally a shareholder in both.) Cash-rich FAANG companies will have a field day. We’re already seeing a lot of talent getting scooped up, and we’ll see M&A throughout the year and into 2021 as we find the new normal in the economy and society.

Niko Bonatsos, General Catalyst

How much time are you spending on social right now? Is the market underheated, overheated, or just right?

Over the last few years, social has been underheated for sure. I’ve been spending half of my time on it over the last two years. It’s a very exciting time right now.

How has COVID-19 impacted the social investing landscape?

Consumers of all backgrounds globally have more time to try out new things. Growth has accelerated pretty much across the board. The app store rankings are very dynamic right now once again.

How has COVID-19 impacted social startups operationally?

Servers are melting… young companies are trying to seize the day. If they are ad-supported… then it’s getting tough.

How strong are M&A prospects for social startups now versus two years ago?

The same or worse.

Are startups more or less afraid of being copied and steamrolled by incumbents?

The same.

Has your degree of concern about incumbents copying social startups changed in the past two years, and how has that impacted your investment decisions?

It hasn’t. Trying to invest in new categories that in the beginning seem uninteresting for the bigger players. Also, I like companies that have a biz model from the early days.

Who is the best founder or CEO in social technology right now?

Define best :)?

Which demographic is still most underserved by social networks? Tweens, teens, college students, young adults, romantic couples, single middle-agers, parents, older adults, senior citizens?

Everyone is underserved because they don’t trust the mainstream social media properties for all their needs.

Which major social networking feature bundled into a popular app is most ripe to be unbundled in a new social app?

Facebook Events.

Josh Coyne, Kleiner Perkins

How has COVID-19 impacted the social investing landscape?

While COVID-19 threatens to trigger an economic recession, it also has the potential to catalyze what some have termed a “social recession” by virtue of its social-distancing countermeasures. This collapse in social contact presents new challenges for startups to tackle as our society works to fill the haptic void left in COVID-19’s wake.

An example could be the creation of virtual spaces. Common gatherings such as concerts, workout classes or churches are looking for ways to digitally recast their in-person experiences. Another example could be helping the elderly and those less immersed in technology to feel more connected. This group is most vulnerable to the isolation and loneliness caused by quarantine. Finally, a third example could be enabling hyperlocal networks. As we’ve seen with companies like Nextdoor, local communities are actively coming together in the face of COVID-19 to offer assistance and support — from picking up groceries or medicine for neighbors to helping with childcare. All while six feet apart, of course.

Wayne Hu, SignalFire

How has COVID-19 impacted the social investing landscape?

It’s possible shelter-in-place will be the single biggest disruption in our social lives most of us will experience. The obvious question is whether now changing social norms and behaviors will be a flash in the pan once the world returns to normal or if they will endure.

One of the clear beneficiaries of COVID-19 has been synchronous social platforms such as Houseparty, Marco Polo and others which have seen a massive spike in usage. Before coronavirus, these platforms had a difficult time scaling. Our lives are inherently unpredictable, and schedules are hard to line up. While these synchronous platforms are now helping consumers address the loneliness resulting from shelter-in-place, I think it’s more likely most people won’t suffer the friction of synchronous once the crisis has subsided. More generally, many consumer products and activities that are not inherently social (such as watching TV) may see social behaviors form around their products in ways that otherwise would not be happening if consumers weren’t locked in their homes. In my opinion, a lot of the magic of the social web is from asynchronicity, freeing users from having to coordinate with each other in order to connect.

There are, however, other social trends that were already picking up steam before COVID-19 that may further accelerate now. Many of these may be newer behaviors that sound dumb or are hard to explain, but ultimately provide value. Peloton sounded silly to many before they became popular, and there are several other companies now bridging the gap between consumers, trainers and fellow participants to bring the in-person social phenomenon of spin cycle and fitness boutiques into the living room. Tempo, a SignalFire portfolio company, is the first to offer high-intensity strength training complete with weights in the home. Beyond the convenience, 3D sensors automatically track reps and weights and users also receive targeted feedback on form from world-class trainers aided by real-time motion tracking — something that would be too expensive for most consumers otherwise. Coronavirus will be a catalyst for many to experience this and other accelerating trends for the first time.

Has your degree of concern about incumbents copying social startups changed in the past two years, and how has that impacted your investment decisions?

There’s a historical conception that the success of social startups hinge on hard-to-predict consumer behaviors, and top-down exercises such as market mapping is not particularly helpful. However, understanding the ecosystem of social platforms and their capabilities has become increasingly important. For example, YouTube managed their business to maximize watch time, leading them to prioritize long-form content in their recommendation algorithm. This kept the door ajar for platforms like TikTok that provide snackable short-form content consumable in a two-minute break between classes. The next generation of successful social startups will not only offer the compelling value necessary to cut through the noise, they will also need to answer for themselves why consumer platforms can’t copy them by throwing 50 engineers at the problem — for example, by catching social platforms in a business model conflict.

Who is the best founder or CEO in social technology right now?

There are so many phenomenal consumer social innovators I admire, but I will pick a few I can speak to from personal experience. Kevin Systrom and Mike Krieger (who are SignalFire advisors) bring uncommon rigor to their user and community-centric product design process. Chad Hurley (the current founder of GreenPark Sports, a SignalFire portfolio company) is another incredibly insightful student of consumer psychology. Adam D’Angelo (also a SignalFire advisor) is a rare successful repeat social entrepreneur at Facebook and Quora.

Alexia Bonatsos, Dream Machine

How much time are you spending on social right now? Is the market underheated, overheated, or just right?

The market is weird, so none of the above. People are scared — with good reason — about their own health and the future. If you have hope, believe that things will go back to normal and can stay calm, it’s a good time to invest. But no one knows what will happen, that’s the truly menacing thing.

How has COVID-19 impacted the social investing landscape?

Yes, more companies are raising bridge rounds as they might need 2+ years of runway to get to Series A. And the bar for Series A will be a lot higher.

How has COVID-19 impacted social startups operationally?

Yes, startups are doing whatever they can to run as lean as possible, across stages.

How strong are M&A prospects for social startups now versus two years ago?

They are weaker due to all the uncertainty and lowered market comparables.

Are startups more or less hopeful about getting bought?

Less.

Are startups more or less afraid of being copied and steamrolled by incumbents?

More or less the same.

Has your degree of concern about incumbents copying social startups changed in the past two years, and how has that impacted your investment decisions?

My concern has lessened personally, as I believe the incumbents are largely distracted with scale problems (like controlling harassment and fake news) and feeling the sting of regulatory push back.

Who is the best founder or CEO in social technology right now?

On a pure traction level, Eric Yuan from Zoom, inadvertently. He’s now facing a litany of issues due to the scale, growing from 10 million daily active users in December to 200 million daily active users in March. I don’t think he ever planned to be running a social startup.

At the early stage, all of the Dream Machine founders building social tech, Hannah from Trash, Naj from Ethel’s Club, Greg from YOLO, Alex from TTYL, Tracy from Block Party, Max from Volley, Stan from Powder, Cem from Catch and a couple others who are in stealth. But I’ll single out Esther Crawford from my portfolio company Squad, which was in the top ten free apps in the App Store last week. Esther’s the master of the pivot, and I’m impressed by how her and Ethan build iteratively based on user feedback.

What demographic is still most underserved by social networks? Tweens, teens, college students, young adults, romantic couples, single middle-agers, parents, older adults, senior citizens?

Women and people of color across all ages and generations are underserved in general, but by social networks in particular.

What major social networking feature bundled into a popular app is most ripe to be unbundled in a new social app?

Facebook Groups, and Facebook knows it and is shaking in its Faceboots. You can tell because it highlighted the feature in its first ever major ad campaign.

Are there startups that you wish you would see in the industry but don’t?

I’d actually like to see our federal government take more responsibility for crucial categories now seeing a decentralized “startup” approach, especially healthcare (!), education and housing. Startups cannot solve everything.

Plus any other thoughts you want to share with TechCrunch readers.

We need to take care of each other and our home, this planet, now more than ever. COVID is not a practice test for climate change, it’s the real test. Please donate to Frontline Foods, Operation Masks, the SF Food Bank and The Wing Employee Support Fund.

Josh Elman, Angel

How much time are you spending on social right now? Is the market underheated, overheated or just right?

I’m spending a fair amount of time here, though I’m not actively investing at the moment. It was overheated for a while, and then simply a dead category. Now we’re seeing embers that it might come back.

How has COVID-19 impacted the social investing landscape?

Being isolated is significantly changing the way the people interact right now, and that creates a window for new opportunities and patterns. This might support new companies getting formed on the back of new behaviors.

How has COVID-19 impacted social startups operationally?

Social startups have the benefit of serving their customers digitally so most of them are seeing increased behavior and usage right now.

How strong are M&A prospects for social startups now versus two years ago?

This is always a challenge. Facebook is so large in the space but there are antitrust worries if it were to buy any other social networks. It even got a backlash when it bought TBH for a small sum, which it shut down a year later. Chinese acquirers like Tencent or Bytedance (which bought Musical.ly and turned it into Tiktok) are under scrutiny for any other purchases. That feels unlikely. So when you take some of the top buyers out, it’s harder to see how the market will unfold. Epic buying Houseparty, which is seeing a resurgence in this COVID-19 era, was a rare recent transaction. 

Are startups more or less hopeful about getting bought?

Most are less hopeful than before. They are looking for paths to generating enough revenue to stay independent. VSCO is a great example of this with a now-promising recurring revenue stream.

Are startups more or less afraid of being copied and steamrolled by incumbents?

Startups continue to be afraid of Facebook in social. Facebook, Instagram, etc. tend to try to integrate whatever behaviors are getting picked up elsewhere. We saw this with Meerkat and then Facebook Live, and Snapchat Stories and Instagram Stories. That said, given that customers aren’t all loving Facebook these days, there do seem to be cracks that startups can exploit, and many are trying.

Has your degree of concern about incumbents copying social startups changed in the past two years, and how has that impacted your investment decisions?

In general, I’ve been very skeptical of a new startup truly breaking through. However, this era of shelter-in-place may trigger enough behavior change where it gets interesting again and the best products for doing things together virtually may have a chance to get to scale quickly. Look at Zoom going from 10M to 200M in a matter of weeks.

Who is the best founder or CEO in social technology right now?

Jason Citron @ Discord. They have a great product for gamers which is quietly getting used by many groups beyond. (Note: I’m an investor/on the board.)

What demographic is still most underserved by social networks? Tweens, teens, college students, young adults, romantic couples, single middle-agers, parents, older adults, senior citizens?

Teens and college students still tend to be the best adopters of new things and build patterns that become lifelong habits.

What major social networking feature bundled into a popular app is most ripe to be unbundled in a new social app?

Facebook Events.

Aydin Senkut, Felicis Ventures

I’m most excited about the professional side of social networking (I think the next large company will come in this area) along with other critical areas like a core age or school group (I respect Garrett @ Handshake a lot — we are unfortunately not investors).

I’m not spending much time on social at all except very few and very specific thesis (we just made an investment and will share when it’s public). I feel most areas of social are overheated. Though that might change in post-COVID when people can’t socialize offline for long times.

James Currier, NFX

How much time are you spending on social right now?

Social was very hot in the 2000’s and has been less hot since 2013. Zoom, Snap were founded in 2011; TikTok in 2012; Musical.ly in 2014; Discord in 2015.

Is the market underheated, overheated or just right?

It’s just right. There are few social apps getting funded and most are work-related, which makes sense.

How has COVID-19 impacted the social investing landscape?

Increased it. But the last time to benefit from investing in social for the bump COVID-19 is giving was 1-2 years ago. You have to have a great, solid, highly tuned and well-languaged and positioned product in place today, not in 12 months. Further, the COVID-19 crisis will last 12-24 months and 95% of the benefits of that surge will largely go to incumbents that were funded 2004-2013 like FB, Instagram, WhatsApp, Zoom, Snap, Discord, TikTok, etc.

How has COVID-19 impacted social startups operationally?

Everyone is running around, trying to increase server capacity, hire people and respond to the 30-50% increases they are seeing in traffic.

How strong are M&A prospects for social startups now versus two years ago?

About the same. So few social products get going at all, that when they do, they get noticed and M&A calls flood in. Once noticed, either FB will clone them and kill them or they get acquired for high valuations. Those valuations might be up 30% versus two years ago, but the dynamic is the same.

Are startups more or less hopeful about getting bought?

No good startup wants to get bought. :-)

Are startups more or less afraid of being copied and steamrolled by incumbents?

They should be more concerned every year. The incumbents are talented, paranoid and can use reinforcement of their existing network effects to kill newcomers more easily than the non-social, non-network effect tech incumbents of the past.

Has your degree of concern about incumbents copying social startups changed in the past two years, and how has that impacted your investment decisions?

Our concern about copycats has always been high. From the beginning in 2001 and 2002, cloning in the social space has been rampant. It’s a race to network effects, not first to market. That’s why viral growth and “magic” has always been so important to our investment thesis in this space. We also look for niches that the consumer incumbents might not care so much about, like gaming, non-mainstream content, and work, where the products can get a little breathing room, to build some momentum, to get tuned and perfected, out of the searching eye of Sauron. :-)

Who is the best founder or CEO in social technology right now?

Gentry Underwood (Navigator), Ben Rubin (stealth), and Stan Chudnovsky (CEO of FB Messenger),

What demographic is still most underserved by social networks? Tweens, teens, college students, young adults, romantic couples, single middle-agers, parents, older adults, senior citizens?

Not senior citizens (don’t use cognitive abilities, not acute/twitchy enough), not tweens (hard to serve and not valuable for monetization), not couples (not viral enough, heterogeneous needs, temporary needs). Probably college and young adults are the best zones. Parents networks seem like they make sense, but they don’t for many psychological reasons. If someone could break through there, that would be huge because parents spend all the money and are most valuable.

Are there startups that you wish you would see in the industry but don’t?

A network targeting lifelong learners, career enhancement, better calendars.

Plus any other thoughts you want to share with TechCrunch readers.

Social apps are the most artistic part of the tech ecosystem. You have to be really talented to make one work — a really talented data-driven artist. You have to be willing to dig very deep, become a real craftsperson, suffer hundreds of failed iterations and be bold when staking out new uses and modalities. You have to be a student of human psychology and emotion. Getting one of these products to go is very very difficult now. And you’re fighting the network effects of the incumbents. Half measures won’t work anymore. It’s going to take your whole self to make it go. It can’t be mechanic.

Pippa Lamb & Christian Dorffer, Sweet Capital

How much time are you spending on social right now? Is the market under-heated, overheated or just right?

Current macro trends are putting the sector in the spotlight again, but it’s always been part of our core thesis. ~20% of our portfolio is consumer social, and we expect this to grow.

How has COVID-19 impacted the social investing landscape?

In terms of sector fundamentals, we’re seeing a significant uptick on the use of social, as ironically, COVID-imposed isolation is unifying communities and driving people to re-engage virtually. We’re excited to see which trends stick around after COVID-19 and expect a broadening of the space as users become more accustomed to URL over IRL.

In terms of the investment landscape, the sector is likely to get more attention now, but it’s too early to say if it will meaningfully shift allocations in the long run.

How has COVID-19 impacted social startups operationally?

Same as above.

How strong are M&A prospects for social startups now versus two years ago?

We see a trend towards more M&A in the social space, compared to a couple of years ago. This is driven by the maturing of the major social players, while coming under more pressure to innovate in meaningful ways.

Are startups more or less hopeful about getting bought?

Most startup founders in our portfolio seem focused on scale as opposed to early exits. With the jittery public markets, we also expect that most founders prioritize remaining private and perhaps going the PE route as an alternative.

Are startups more or less afraid of being copied and steamrolled by incumbents?

We believe that this hasn’t changed much in the past couple of years. Incumbents will always remain a major threat to early-stage companies, so founders we back are highly focused on defensibility and differentiation.

Has your degree of concern about incumbents copying social startups changed in the past two years, and how has that impacted your investment decisions?

We always look for highly-innovative founders, building companies that are less likely to get copied by incumbents.

Who is the best founder or CEO in social technology right now?

No “bests” but two we love are Michelle Kennedy at Peanut and Sacha Lazimi at Yubo. The team at Highrise (a creative mobile community where over three million people create avatars, express themselves and make friends) — Anton Bernstein and Jimmy Xu — are also doing a fantastic job pushing the boundaries of creativity in virtual avatar worlds.

What demographic is still most underserved by social networks? Tweens, teens, college students, young adults, romantic couples, single middle-agers, parents, older adults, senior citizens?

It feels like all demographics are reasonably well served by one of the major social networks today. The needs gap will be defined by the niche player that manages to scale and hoards will migrate.

What major social networking feature bundled into a popular app is most ripe to be unbundled in a new social app?

Voice, featuring front and center.

Are there startups that you wish you would see in the industry but don’t?

There are plenty of instances where we like a “race” but are still looking for the right horse and the right jockey. For example, we’d love to see more innovation in the digital sustainability space (that go beyond carbon footprint trackers) or those that facilitate less waste in traditional polluting ecosystems, like fashion.

Jim Scheinman, Maven Ventures

How much time are you spending on social right now? Is the market underheated, overheated or just right?

Though we only make about six investments each year, we see thousands of startups and are always happy to invest in great consumer social founders with a vision worth fighting for. As we mentioned, we just made our most recent consumer social investment and are excited to announce more about that soon. I think that’s sufficient proof that we’re bullish on the market opportunities in social right now. In my experience as a founder, entrepreneur and investor over the past 20+ years, these turbulent financial times are often the best times to birth category-defining, outlier companies—here’s some relevant data to prove it. We know that in the years shortly following the market crash of 2000 & Great Recession of 2008, Friendster, Myspace, Facebook, Bebo, WhatsApp, Instagram, and Zoom were founded, to name a few.

How has COVID-19 impacted the social investing landscape?

Our social behaviors changed just as rapidly as the virus spread across the nation and perhaps in a more drastic manner than in any other time in modern history — certainly more than any time since the mass adoption of the internet. Massive behavioral changes like these make it ripe for consumer social internet companies to be founded. Social distancing in particular has created new habits for digital interaction — whether it’s group exercise classes or online happy hours with old friends. We have tried to recreate these in-person experiences as much as possible, which has led to a huge uptick on video platforms. Large gatherings like business conferences, weddings, funerals and graduations are taking place on Zoom now, and this trend will continue even when cities open back up. So although we haven’t yet seen the effects of the pandemic on social investing, I’m expecting many great businesses to emerge as our world interacts differently than ever before and after people realize the practicality and ease of socializing online. Once the virus is fully stamped out and no one is at risk anymore, I expect us to return to many of our previous normal behaviors. We have an innate human desire to connect in-person. But some of the new consumer habits we’re creating through Zoom and other video platforms that we’ve developed during COVID times will have hardened and changed our behaviors for good.

How has COVID-19 impacted social startups operationally?

We’ve always been big believers in the importance of culture at startups, and it’s now as important as ever with most startup teams completely remote. Cultures are being put to the test as teams try to move as quickly and smoothly as they did when they were working in the same building. For example, I wonder how startups are brainstorming and designing new features. This is often done in front of a whiteboard and fresh, company-changing ideas are often incubated during informal hallway or watercooler chats. I am hopeful that smart managers will design ways in which their employees can continue to keep the creative engines of their companies going in the days of social distancing. Another obstacle many startups are tackling right now is the concern over drying up capital markets and the implications this may have on their runway and cash position.

On a positive note, I’ve been so impressed that our internet infrastructure and social apps’ infrastructure have handled the unprecedented influx in traffic they’ve experienced recently. On April 1, Zoom said it had reached 200 million daily users in March, up 20x from its 2019-best of 10 million at year’s end. With almost 5% of the world’s internet using population zooming everyday all of a sudden, one would expect the platform to become unstable, but it hasn’t. I applaud engineers at all of our digital social platforms for maintaining our ability to stay connected.

How strong are M&A prospects for social startups now versus two years ago?

Over the past few years, when faced with the option to build, buy, or partner with an emerging social app that is encroaching on their user base, incumbent social apps have chosen to build their own features to compete. Instagram creating Stories to compete with Snap is a prime recent example, though parent company Facebook did initially make a bid to buy Snapchat. So companies with large cash reserves may continue to build their own features, but that doesn’t always fend off competition as we’ve seen with TikTok’s meteoric rise. I could also see a world in which a valuation correction in startups makes M&A much more attractive during COVID times.

Are startups more or less hopeful about getting bought?

There almost always needs to be a new platform, often hardware, to scale new consumer social experiences. The most recent example is the advent of smartphones and how many mobile social experiences were born thereafter. Though no platforms have taken hold in recent years that have been as consequential as the smartphone, the structural changes that will spread through society as a result of the COVID-19 pandemic will create new behaviors and make room for new social products like Zoom and other video platforms. So now is not the time to be focusing on getting bought, but rather on leaning into the opportunities that will arise for new social experiences. In fact, at Maven we partner with founders who have a vision worth fighting for — a vision that could truly alter the way we interact with one another — not quick-flip businesses. But if a founder is hoping to be acquired at this particular moment in time, I have to think they would need to set their sights lower in terms of valuation and the number of likely acquirers.

Are startups more or less afraid of being copied and steamrolled by incumbents?

Many of the leading incumbents just saw their market cap drop 25% or more in less than a month. So in this particular moment in time — during COVID-19 — I believe that incumbents will be less focused on what others are doing and more focused on their core competencies and cash cows. Now might be a great time to fly under the radar if you’re looking to create something new in social. Moreover, some of these incumbents might be more willing to work with startups rather than try to dominate and copy them. So I’d say startups should be fearless and take advantage of this moment before the dust settles. Had you asked me two months ago, I might have talked about how the giant gorillas were choking the competition, but the world has changed. Certainly, we’re not in the Wild West of 2004 where social media companies faced far fewer obstacles and smartphones were coming into form, but there are a lot of new opportunities for innovation.

Has your degree of concern about incumbents copying social startups changed in the past two years, and how has that impacted your investment decisions?

Our pace of investment in consumer social has slowed down over the years, but it could always pick up at any moment as we’re patiently waiting for new massive platforms to arise and for us to invest in new social consumer startups that can be built atop the platform/hardware experience. During my angel investing years from 2008-2013, I invested in ten companies, three of which were social (Zoom, Tango, Social Gold). Since 2016, between the fourteen companies in Maven’s Fund II and recently closed $65M Fund III, we have made two consumer social investments. So competitive concerns may be a growing threat and a reason for this slower pace, but I remain bullish on the category.

Who is the best founder or CEO in social technology right now?

We’re always excited about new, up-and-coming founders that exhibit a consumer product DNA and are audacious enough to start something in social right now. But as far as existing CEO’s go, I’ve always been impressed by Mark Zuckerberg. In fact, I first met him when we tried to recruit him and buy Facebook when I was heading up Corp Dev at Friendster back in the early days of social networking. He cleverly turned down the offers because he had other bigger ambitions. I remember being so impressed that even at his young age at that time, he had a clear articulation of his vision of wanting to use technology to connect the world. His focus on iterating and building a great product, putting together a great team, and making several smart and bold acquisitions (i.e., WhatsApp, Instagram) help explain why Facebook has maintained its market dominance.

What demographic is still most underserved by social networks? Tweens, teens, college students, young adults, romantic couples, single middle-agers, parents, older adults, senior citizens?

Gen Zers are at an age where social products take hold, and they might not yet have a social platform that is suited uniquely for their lives. They are possibly underserved and opportunities exist to create a product for them. And as we enter the peak of baby boomer retirement, their emerging social needs will be addressed by new companies. I also think we’ll be seeing more specialized communities crop up, perhaps coupled with a rise of successful “private” social networks.

What major social networking feature bundled into a popular app is most ripe to be unbundled in a new social app?

Zoom is fantastic and optimized for the enterprise use case but leaves elements to be desired for the social video-chatting experience. A Zoom for social, or social app built on top of the Zoom platform, is ripe to be built. Josh Elman gave a great talk on Launching a Rocket off Someone Else’s Back, the premise of which was that many great companies start by leveraging the brand, reach and resources of existing behemoths. I expect a great social app will be built off the Zoom App Marketplace platform in the coming years, and we want to be a part of that!

Are there startups that you wish you would see in the industry but don’t?

Our investment in Epic! Kids Books was an especially personal one as my wife has spent much of her career in childhood education and Epic! helps millions of children access high-quality books. It’s been humbling to see Epic’s rise in popularity through the COVID-19 isolation, and I expect rapid adoption of digital education technology to continue. I would love to see more startups like Epic helping kids continue to learn in the post COVID-19 digital world.

I’d also like to see more startups tackling climate change and opioid addiction, two of the most pressing issues of our time!

Plus any other thoughts you want to share with TechCrunch readers.

Community has never been more important and taking care of your friends and neighbors right now means distancing yourself from them — at least physically. Please stay social, but virtually for now. Let’s flatten that curve!

Eva Casanova, Day One Ventures

How has COVID-19 impacted the social investing landscape?

Shout-out to Josh for his recent TC piece “Under Quarantine Media is Actually Social” — on Day One we’re focused on investing in media that’s actually social. Instagram has become a marketplace plagued by a pervasive culture of perfectionism that’s detrimental to our mental health and in reality makes us feel less than, left out and lonely. COVID-19 has brought this to light more than ever. Apps like Houseparty, Squad, Ikaria and Octi are growing 10X and the common thread between all of them is a focus on human connection IRT.

How has COVID-19 impacted social startups operationally?

In our experience, it’s put an increased emphasis on the importance of apps infrastructure and their ability to support droves of new users and still provide the same quality of UX for 10X users — quickly. Testing teams ability to identify bugs and bottlenecks quickly and fix them faster than ever before. Also, top social startups are putting an increased focus on identifying emerging trends in users’ activity and innovating on those insights as fast as possible. With 1,000s of new users in short periods of time teams are able to identify opportunities for feature development 100X faster.

How strong are M&A prospects for social startups now versus two years ago?

In my opinion, M&A prospects are stronger than ever for social startups making a splash right now. The future is being shaped right now and consumers behavior is changing forever. The startups soaring to top charts are clearly onto something incumbents have missed and as they say “if you can’t beat them, join them” or in this case acquire them. EX: Instagram/WhatsApp were acquired by Facebook. Think we will see more of this by incumbents in the coming months / year.

Are startups more or less hopeful about getting bought?

Hard to say, think they’re focused on the now. In my opinion, the best startups don’t strive for acquisition, it’s a result of their obsession with customers and unmatched ability to innovate, listen to users, make calculated decisions quickly and embrace powerful trends faster than anyone else.

Are startups more or less afraid of being copied and steamrolled by incumbents?

Never works. Incumbents are too big, too slow and too stuck in the space they’ve carved out for themselves. Perfect example: new Snapchat integration with Squad / Octi (D1V portcos) – instead of copying them, they partnered.

Has your degree of concern about incumbents copying social startups changed in the past two years, and how has that impacted your investment decisions?

This was never really a concern of mine. The best startups in any sector are too unique to be copied. The founder, team, vision and passion can’t be stolen by social giants. Of course, we see companies in the social space that can clearly be copied in a heartbeat. But what sets aside an okay startup and something special is the team behind the technology. Early-stage investing is based on the founder, team, their collective story and as investors – an ability to identify a spark within the team that can’t be replicated.

Who is the best founder or CEO in social technology right now?

Chrys Bader (Ikaria, formerly Secret).

What demographic is still most undeserved by social networks? Tweens, teens, college students, young adults, romantic couples, single middle-agers, parents, older adults, senior citizens?

Romantic couples — Relationship Hero’s going to fill the void. Keep an eye on them.

What major social networking feature bundled into a popular app is most ripe to be unbundled in a new social app?

360 personal development: gratitude journal, guided experiences that bring us closer to our existing community and extended community we just haven’t met yet. (Summit LA is IRL example).

Dan Ciporin, Canaan

How much time are you spending on social right now? Is the market under-heated, overheated, or just right?

I am a consumer investor first and I include social in that bucket. But beyond that, I don’t segment out my time — I want to see interesting companies regardless of the vertical. Having said that, there is no question that social is having a ‘moment’ right now with shelter-at-home making social interaction via digital platforms a necessity, and not just a diversion. I believe we will look back on this moment in time as not only a tragedy of immense proportions, but also a time when social innovation and experimentation was at its most intense in many years.

How has COVID-19 impacted the social investing landscape?

It’s mixed. This whole thing has created a situation where people gravitate towards things that help people connect and social is right in the middle of that global phenomenon. On the other hand, there is a lot less willingness to invest in general these days. But I do believe that when venture investing comes back in full force social will be at the ‘front of the line’ in terms of interesting companies to invest in.

How has COVID-19 impacted social startups operationally?

I can only speak directly on this question for Homeis.com, where I sit on the board. But I know their engagement and growth numbers are going crazy right now. It’s a social platform for immigrants to build community locally — recommend businesses, share information, and in general connect with people from their birth country in their adopted one. They have seen a 400 percent increase in daily active users since early March – like other platforms they are racing just to ensure their infrastructure can handle such an explosive increase.

How strong are M&A prospects for social startups now versus two years ago?

Stronger. The need and desire to interact digitally is going to be significantly greater after this crisis is over than before. One could look at the explosion in digital interaction as a demonstration of sociology in action. We are basically training people to be more digitally-focused than physically-focused, and that “training” will ensure that the evolution of social grows much more rapidly than before the crisis.

Are startups more or less hopeful about getting bought?

Right now? Less — period. We’ve had several term sheets fall apart — as well as funding. This exact moment is not an environment conducive to M&A. Having said that, once the crisis is over, as mentioned earlier I think social will be a much more attractive asset for many companies to consider buying.

Are startups more or less afraid of being copied and steamrolled by incumbents?

This is a concern I hear often from startups but I don’t think it’s more or less intense in this particular moment. If anything incumbents seem to have their hands full just keeping their platforms running smoothly with the jump in engagement we are seeing, rather than focusing on new innovation. As a result that innovation is being done right now mostly by new companies rather than legacy ones.

Has your degree of concern about incumbents copying social startups changed in the past two years, and how has that impacted your investment decisions?

Again, if you look at something like Facebook Groups — it’s really hard to do verticalization. It’s hard to be “neither fish nor fowl.” However with horizontal innovation, there is a different dynamic, and copying there is easier. The most obvious example of that is Instagram and their wholesale incorporation of Snap’s Stories product. They’ve had great success there but making a product experience targeted and relevant to specific vertical communities is much harder than doing so for horizontal ones.

Who is the best founder or CEO in social technology right now?

Lots of potential answers here but someone that’s top of mind for me is Zhang Yiming, the CEO of ByteDance. What he’s done with TikTok is incredible.

What demographic is still most underserved by social networks? Tweens, teens, college students, young adults, romantic couples, single middle-agers, parents, older adults, senior citizens?

Older adults, but it’s a difficult group to get, as they are – albeit as a grossly simplistic statement – simply more technophobic than other demographics.

Masha Drokova, Day One Ventures

How has COVID-19 impacted the social investing landscape?

Social investing is growing as a result of COVID-19. Many more investors are now becoming aware that the next generation of social companies likely won’t look anything like Facebook, Instagram or Snap. We did eight social media investments in Fund 1 and its part of our portfolio we are most confident in.

How has COVID-19 impacted social startups operationally?

It’s forced teams to think more about infrastructure and the ability to take the flow of users. Also, we’re seeing founders put a focus on testing new hungry audiences, which is a huge opportunity.

How strong are M&A prospects for social startups now versus two years ago? 

M&A prospects are stronger now than they were two years ago, understandably so, as it would be smart for players like Facebook, Snapchat, etc. to buy future competitors earlier than later.

Are startups more or less hopeful about getting bought?

The best startups right now are using this time to think about how to make people more connected, they are not thinking about being bought. Rather they’re listening to customers and paying close attention to the ways they use their products. There is so much opportunity to learn, test and iterate quickly right now.

Are startups more or less afraid of being copied and steamrolled by incumbents?

Successful social startups build their products based on insights from customers, which come from talking with them and listening to them. I wouldn’t say they are more or less afraid of being copied. It’s more common to see incumbents copy features and when they do the experience for the user isn’t the same.

Has your degree of concern about incumbents copying social startups changed in the past two years, and how has that impacted your investment decisions?

Concerns about startups being copied by incumbents will always be present but this doesn’t have a significant impact on our decision making. We look at user behavior, metrics and the values underlying the foundation of startups and we would not be afraid of features being copied.

We also believe that the culture and motives of a company can’t be copied. You also can’t copy the brand. A good example of this is Facebook stories versus. Instagram stories, same feature but totally different user experience. Even though Instagram was acquired by Facebook, the experience of stories on Instagram’s platform remains impossible to replicate on Facebook.

Who is the best founder or CEO in social technology right now?

Esther Crawford, founder of Squad, because of her ability to listen to customers and scale rapidly. Since the start of social distancing, Squad has seen 10X growth in new users, named app of the day and was selected as one of five apps to be apart of Snapchat’s new integration.

Gregoire Henrion, co-founder of YOLO for his ability to make the product safe. The team has also seen massive growth since the onset of social distancing, currently ranked #8 in top free apps.

Justin Fuisz, founder of Octi, for his ability to critically analyze product and act quickly on opportunities for improvement. As a result, he’s created the most compelling AR-native framework for social interaction I’ve seen.

Pavel Durov, founder of Telegram, for his creation of an effective medium for personal media channels.

What demographic is still most undeserved by social networks? Tweens, teens, college students, young adults, romantic couples, single middle-agers, parents, older adults, senior citizens?

Single middle-agers in regard to high-quality dating apps that cater to their specific wants and needs.

Senior citizens across the board.

What major social networking feature bundled into a popular app is most ripe to be unbundled in a new social app?

Groups on Facebook, comments on YouTube and a product like Twitter feed for reading/discovering content.