COVID-19 did not break the sharing economy — it fractured it.
By Stephanie Tonneson
In July of 2017, CNBC released an article titled “How stock investors are cashing in on the red-hot ‘sharing economy’ trend.” (Keyword: trend.) It detailed how venture capitalists everywhere were directing their attention towards companies that “connect strangers through technology.” Five in particular — Uber, Lyft, Airbnb, Ola, and Instacart — were receiving 75% of the funding allocated to the industry.
The article highlights the team of thematic investing strategists at Bank of America Merrill Lynch, who “[considered] Sharing Economy exposure as an important and positive point to track,” especially given it’s “long lifespan.”
Fast forward to three years later, and the aforementioned industry giants’ soaring revenue projections are now plummeting due to stay-at-home measures.
Here are the numbers:
Uber: $2.1 billion loss in investments. 14% of employees get cut. 80% decrease in its ride-sharing service (as of April).
Lyft: $360 million in predicted loss on an adjusted basis. 17% of employees get cut. 70% decrease in usage (as of May).
Airbnb: $18 billion in value (down from $31 billion in March 2017). 25% of employees get cut.
In one sweeping motion, COVID-19 has paralyzed the transit and hospitality companies within the gig economy, and — with predictions of a second wave on the horizon, their future does not look bright (…not to sound glum, or anything).
Considering the big picture, though (and, again, to avoid sounding too glum, which I’ve been finding myself more and more at the risk of lately), it’s important to note that one section of the sharing economy in particular — grocery and food delivery — has been afforded an entirely different fate.
InstaCart: $700 million in sales in the first two weeks of April (a 450% increase from December 2019).
Uber Eats: 231% growth over the past year.
Doordash: 106.4% over the past year.
Taking into account this second set of data, it becomes clear that the pandemic is creating a stark divide within the sharing economy by swiftly knocking companies to opposite ends of the growth spectrum.
The pandemic is creating a stark divide within the sharing economy by swiftly knocking companies to opposite ends of the growth spectrum.
So — aside from the fact that I can rest assured I’ll be able to order Chinese food nightly — what, exactly, does this tell us? To answer that, we need to examine the thematic investing trend that helped fuel the growth of the sharing economy.
About thematic investing
Thematic investing is a popular trend among venture capital firms that involves making investments based on “social, economic, corporate, demographic, or other themes that are popular in society.” Jay Jacobs, Head of Research & Strategy at Global X ETFs explains it as identifying “powerful macro-level trends that are disrupting the global economy” with a “multi-decade or evergreen” predicted duration. (Or, as this blog post puts jestfully, “Thematic investing tends to be about capturing the zeitgeist. Or trying to.”)
A ‘theme’ could be a rapidly growing industry (like robotics or artificial intelligence); a specific initiative (like the shift from fossil fuels to clean energy); or a social movement (like gender equality).
By this logic, the sharing economy — a cultural revolution founded on technological advancement — seemed like a perfect thematic selection when it was first picking up steam. Drawing a whopping total of $23 billion of new capital for the sector between 2009 and 2016, the prediction of these companies’ collective success made it so that “sharing businesses [were receiving] more venture capital funding than any other category.”
But now that the sharing economy has been suddenly fractured, the entire premise of thematic investing is called into question.
Thematic investing: Do or don’t?
In the 2010s, the companies within the sharing economy were united by their efforts to reimagine stagnant industries by adding a bit of technological magic. Whether it was taxis, groceries, lodging or dog walks, the “theme” was simple: get what you want at the touch of a button. The problem, though, is that the “touch of a button” isn’t much of a theme, and, consequently, the sharing economy “zeitgeist” did not play out as predicted.
It’s one thing to notice the broad similarities between successful companies; it’s another thing entirely to use those attributes — which are also shared by other less successful companies — to then try and predict the future (especially when that future has a multi-million dollar sign attached to it).
The wide array of companies that became semantically conjoined underneath “the sharing economy” umbrella may have, indeed, had some things in common, but it’s in the most elemental aspects of their businesses (products, demographics, and overall infrastructure) where most of the difference — and ultimately foresight — lies.
Stephanie Tonneson is a content writer & storyteller at ZoomInfo, serving you people-driven insights from the latest data & trends.
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