American Dream 2.0 & The Future of Income
Where I see startup potential in 2019
2018 and The Future of Data
Nearly a year ago, I wrote a blog post about the changing tide in the world of venture-backed startups. I posited that compounding controversies, particularly around personal data, opened the door for a new class of startups to recapture the public’s trust (and win market share). I also touched on this point in my recent TED talk (originally recorded in December 2018 and going live imminently).
Fast forward to now, I see signs of seed stage investor appetite in ‘Privacy as a Service’ (Aileen Lee of Cowboy Ventures recently wrote a great, in-depth blogpost on this [1]). Meanwhile the regulatory response to all that has happened with personal data is only beginning to unfurl as I write this. Some in the ecosystem are concerned that new regulatory hurdles will make it too expensive for younger startups to comply, making it harder for new entrants to innovate around data protection. It’s too soon to say for sure. I, for one, will continue to track the space over time as the societal contract over people’s data continues to be renegotiated.
2019 and The Future of Income
I’ve always been a fan of tech that reflects and serves practical human priorities. Fresh products (or feature upgrades) that effectively speak to people’s perceived immediate interests will always be compelling. My current investment focus is an area of utmost immediate concern in most people’s day-to-day lives. Personal income.
Now a lot of ink has been spilled about the gig economy and the future of work (while the savings apps proliferated). But I’d like to take the conversation in a different direction. The prevailing paradigm of income traded for labor fails to adequately capture the generational shift in money mindset and the evolving ways everyday people receive income from activities not traditionally thought of as ‘work’. This is the place where I am concentrating my investment focus next.
To shed some light, I’ll include a few quick stats, compiled with the support of my terrific Columbia MBA interns, Urvi and John. [2]
American Dream 2.0
We know that historically, home ownership has been a lynchpin of middle class wealth creation. That story got more complex post 2008 crash.
Across income levels US home ownership is trending downward (surprise!). *On one hand we have 89% percent of millennials reporting a desire to own but have less that 10k for a down payment. On the other we have a 48% growth in the number of high earners who are electing to rent instead of own over the last 10 years.
(Most of us have seen the avocado-toast-shaming theories about how these numbers came to be followed by infographic-wielding clapbacks to said theories. [3] But being a seed investor, I am personally most interested in where we are going next.)
Of course, lower home ownership does not necessarily mean people are not thinking about personal finances. (On the contrary.) So if we are statistically less likely to stake our fortunes on the habitable piggy bank of owning a primary residence, how are people thinking about money these days instead?
The Financial Wellness Movement
Just as there has been a movement toward physical wellness & health conscious self-care, my theory is that there will be a movement toward Financial Wellness. The physical wellness movement has many motives but I believe three key ones are personal enjoyment, social engagement around a shared lifestyle and a desire to reduce dependency on the (challenged) health care system. Getting healthier is a desired benefit but enjoying the stylized process of becoming healthy is intrinsically rewarding. And this is how I envision an analogous financial wellness movement taking foot.
In contrast to the finger-wagging saving apps that hate on your latte habit, financial wellness integrates finances with fun. Its not a matter of taking the same old banking services and slapping an app on them to keep the young folks awake. People want to be made to feel like they are financially resourceful, that they have robust earning prospects, both inside and outside of their primary work, and that activities that they already enjoy can also be good for their wallets.
As with other forms of well-being, I foresee people taking financial wellness into their own hands, seeking community support from peers and financial role models, and exploring fun, new, user friendly ways to monetize time spent online.
So far this active interest in engaging money is reflected in the data. 89% of Gen Z (fresh out of college as of the date of this post) say planning for their financial future makes them feel empowered. 64% have already begun researching on their own or asking others about financial planning. [4] For comparison, 21% of Gen Zers had a savings account before the age of 10, up from 15% of millenials. [5] The prevailing narrative is that Gen Z has learned to be cautious with money after watching the millennials experiences play out.
Intentional wealth creation is one thing. But people earning side income have motives apart from necessity too. For some, career/income growth may be the primary goal, for others it may just be a pleasant by product that enhances the experience. There is a wide open world of people who earn online for fun, or participate in what I call Recreational Earning.
Recreational Earning includes platforms like Roblox (for the uninitiated, members can choose to sell access to games they build by charging “Robux” currency to other members). Or earn.com where users can trade crypto for access to other users’ professional knowledge. An important feature of the Future of Income startups is that the products sometimes bear zero resemblance to a ‘fintech’ app and financial opportunity may not always be presented as the value proposition. Instead, they might look more like something you would do anyway of out of personal interest.
Additionally, there are still side-money tech products coming out of the now well established sharing economy. This includes old-fashioned-by-today’s-standards platforms for exchanging personal goods (like the more recent startup Let Go, the app that lets you seamlessly sell your stuff online, which is low-key valued at 1B). And I don’t think at this point anyone would ignore the auxiliary income hosts make from Airbnb. Users are reportedly earning upwards of ~15–20k per year in major cities like Boston, NYC and Chicago.
Another feature of the Future of Income will be the emergence of new alternative investment vehicles for ‘retail’ investors fueled by blockchain technology plus key changes in regulation [6] that took a while to take hold but have now gotten sorted. These startups are bringing every day investors access to whole new asset classes, like Republic and WeFunder have done by giving anyone the ability to invest small dollar amounts into start-ups.
And finally, internet fatigue (partly a by product trolls, polls and endless scrolls) has lead to shifting priorities as we look for ways to get more from our engagement. People are valuing their own time and attention differently than in the past. I see a tremendous opportunity to create deeper and more enduring engagement when companies combine an already interesting user experience with financial rewards or other mediated exchange of value. Financial wellness can evolve from feeling like a necessary chore (like flossing), into something people find compelling and resonant with how we already want to spend our time.
Nowhere have I seen this expressed more eloquently than in startups like Mogul and Financial Gym (both Rogue portfolio companies). Mogul is ostensibly an aspirational career platform but it is foremost an online community designed around mutual upliftment. Its a destination , a digital environment where users want to spend time and comfortably bring their whole selves. Financial Gym in addition to being a no BS tool for getting your money right, is a nurturing community and physical gathering place to get financial reassurance, sometimes over a glass of wine.
Its worth noting that financial wellness is not a replacement for a social safety net, a panacea for the threat of automation or a substitute for job security. What I think it will be is a driver of startup growth coming out of people’s desire to mitigate inevitable financial uncertainty and explore new ways to participate more fully in our dynamic economy. And, perhaps, even enjoy ourselves a little in the process.
I will be sharing more about my investment interest in the Future of Income, my season as TED’s resident tech investment specialist and Rogue’s updated thesis in the coming weeks.
- Sources:
- Cowboy Ventures Blog
2. Rogue Capital Collective
3. Huffington Post
4. The Center for Generational Kinetics
5. Visual Capitalist
6. SEC.gov
