To learn more about the next wave of consumer startup investment outside Silicon Valley, I’m speaking to leading B2C-focused investors in various hubs about the trends they’re excited about right now.
Recently, I shared the responses from several London-based investors; today, we spoke to eight of New York’s top consumer VCs:
- Rebecca Kaden, Partner at Union Square Ventures
- David Tisch, Founding Partner at BoxGroup
- Anu Duggal, Founding Partner at Female Founders Fund
- Craig Shapiro, Partner at Collaborative Fund
- Jeremy Levine, Partner at Bessemer
- Beth Ferreira, Partner at Firstmark Capital
- Graham Brown, Partner at Lerer Hippeau Ventures
- Eric Reiner, Partner at Sinai Ventures
- Chris Paik, Partner at Pace Capital
Consumer health and banking startups were recurring areas of interest, and there’s a sense that apps and product brands which provide a deeper sense of community are an untapped opportunity.
Rebecca Kaden, Partner at Union Square Ventures
At USV, we are focused on opportunities that broaden access by leveraging technology to increase value and decrease cost in big buckets of consumer spend. In doing so, we are looking for ways to make products and services previously available to a select segment available to many more. In particular, we have been investing in areas of consumer health where the delivery mechanism not only makes the care more convenient but also more affordable and higher quality; products and platforms in financial services that change the traditional underlying model to drive financial health for a mass customer; and opportunities that create new access to education both for kids and lifelong learners.
Within each of these segments, I’ve been very interested in how new communities are forming inside products–users that come for a specific offering are forming allegiance and increasing engagement by interacting with other users. I think that is a trend we will only see accelerate.
David Tisch, Founding Partner at BoxGroup
People are bored on their phones, not of their phones. I am most excited to meet founders working on consumer apps that bring happiness and fun to a mass consumer audience, as I continue to believe we are in the early days of mobile and the app store is not dead.
These apps may look like a game, they may be a game, or they may be a new feed, but TikTok, Twitch, HQ, Yolo and other Snap app kit apps, Tinder and others have shown consumers want new apps, the barrier for adoption and retention is just very high. All apps and games have a half-life, creating something with a very long one is really hard, but the demand is sitting on the phone scrolling thorough feeds, waiting for some new fun. We are excited about apps that allow people to interact with others in different ways, in new worlds, using new hardware, or new interfaces.
Anu Duggal, Founding Partner at Female Founders Fund
With the rise of the sober curious movement, we invested in Kin Euphorics, offering consumers a sexy option to an alcoholic drink, creating a social experience around a non-alcoholic beverage that doesn’t exist in the market today. With beer sales decreasing five years in a row, brands like Heineken are offering alcohol-free alternatives catering to this growing audience.
With the decline of religion, we have seen the rise of what we call the “rise of the alternate community.” Consumers are looking for ways to connect online and offline based on specific interests. Examples of this in our portfolio include The Wonder, a membership model for familyhood, Peanut, a social network for modern motherhood, and Co-Star, an astrology app.
Craig Shapiro, Partner at Collaborative Fund
Marketplaces and software that enable trust, transparency and accountability — a few examples include our investments in Flip, Yup, Spruce and Science Exchange. It’s much harder to hide behind exploitative business models than it used to be, because so much information that used to be hidden and owned by middlemen is now transparent. Companies that recognize this and use transparency as a competitive advantage can win huge market share in their industry.
Values aligned consumer brands that can define a generation — 7 out of 10 Millennials actively consider company values when making a purchase, compared to 4 in 10 Baby Boomers. With broader access to information and knowledge about where are how products are produced, the next generation of consumers demands certain values of the companies they spend money with. Companies can now use values as an economic competitive advantage to attract and retain the most loyal customers and employees.
Future of Food — No longer just a trend for the 0.5% of the population that follows a vegan diet, the shift towards a more plant-based diet has gone mainstream. This is partly driven by new scientific research on the health benefits of a plant-based diet, but companies like By Chloe and Beyond Meat are increasingly attracting meat-eater customers who like the prospect of eating healthier, animal- and planet-friendly foods without sacrificing taste or enjoyment.
Jeremy Levine, Partner at Bessemer
Consumer startup investing is treacherous because new companies must compete for consumer time and dollars against the FAANG (Facebook, Amazon, Apple, Netflix and Google) oligopoly. I spend my time looking for any company that has discovered an innovative technique to attract consumers that doesn’t require spending lots of money and that can’t be easily shut down by a FAANG oligopolist. In real estate, the age old maxim is “location, location, location.” With consumer startups, it’s “distribution, distribution, distribution.” Consumer distribution today is so challenging that distribution innovation may now be even more important than product innovation.
Beth Ferreira, Partner at Firstmark
“We continue to be bullish on the consumer space as consumers continue to become more educated and exacting about the quality of products as well as the associated services. As costs, time and resources involved rapidly decrease, there is an opportunity for new great products to be developed. Companies focused on accessibility, community, service and creating inherent distribution advantages will separate from the pack.
All companies will become multi or omni-channel, using each channel to reinforce the next. Whether it’s voice to support users inclination to use multiple services and platforms simultaneously or wholesale supporting DTC strategies, we will see winners in the consumer space capitalizing on these advantages.”
Graham Brown, Partner at Lerer Hippeau Ventures
We look for complicated, technology resistant markets with broken customer experiences that are undergoing shifts — the healthcare industry in particular is feeling unsettled for many reasons. Healthcare spending is excessive (approaching 20% of U.S. GDP), and rising costs have dramatically outpaced income growth over the past twenty years. As preferences change and patients shoulder more of the economic burden, they become more discerning consumers with higher expectations, regardless of their coverage. That’s why we’re excited about companies that clearly improve access to better quality care while also reducing costs — a few of our investments include K Health, Doctor on Demand, Uniform Teeth, Medly and GoodRx.
Eric Reiner, Partner at Sinai Ventures
We’re excited about the change in financial services around optimizing customer experience, support, and expanded services. The emergence of neobanks has forced traditional banks to compete and create similar digital experiences for their customers. Companies like MANTL, a b2b2c company, are allowing this behavior to take place, by offering a modern infrastructure and user experience on top of legacy core systems for things like online and mobile account opening and servicing.
Ultimately, most of the neobanks do not actually operate a banking license or backend, and we are excited to support companies that allow traditional banks to compete and better serve their communities. For context, there are over 12,000 regional community banks and credit unions in the U.S.; we don’t believe they are going anywhere.
Chris Paik, Partner at Pace Capital
At Pace, I’ve been interested in the Series A of companies that redefine work for people. This requires the enabling of a new behavior in time spent coupled with the opportunity to be significantly economically compensated. As the world becomes increasingly specialized, opportunities to make a living doing different things will also increase. AirBnB, Uber, YouTube, Twitch, Patreon all allow sustained earning potential that was impossible at scale prior to the existence of the platforms.