Maveron’s 2019 Year in Review & 2020 Predictions (hint: the Baby Yoda frenzy is just getting started)
Just one year ago, Juul and WeWork were two of the most valuable venture-backed companies, scooters were flooding streets across America and few had heard of a VSCO girl, Baby Shark or TikTok. As we reflect on the past twelve months at Maveron, we share with you our recap of 2019 at Maveron and our predictions for the consumer world in 2020.
2019 at Maveron
Our goal is to invest in emerging consumer brands and help them make the journey from obscurity to ubiquity. In 2019, a number of portfolio companies made progress toward ubiquity by achieving relevance in the cultural zeitgeist. Leonardo DeCaprio helped launch Allbirds in China. Portfolio company Dolls Kill saw its influence bleed into the high fashion world when Viktor & Rolf featured a collection at Paris Couture Week which the press deemed “Dolls Kill inspired.” Big Sean and Ariana Grande both bragged about Co-Star in public as the astrology app reached millions of fervent users. Illumix launched an AR game based on Five Nights at Freddy’s, which sent fans of the horror franchise into a frenzy. Otis was substantially oversubscribed in equity commitments for fractional shares in pieces from artists such as Kehinde Wiley and Virgil Abloh. Clean body brand Necessaire won an Allure Best of Beauty Award and was called by InStyle “the cult brand making body wash cool.”
On the business front, we closed our 7th Fund, at $180 million. We saw Maveron portfolio companies collectively raise $325 million in growth capital, across 35 separate financings. We also proudly made five new Series A investments in brands we believe have the potential to achieve ubiquity:
- Co-Star: Social app centered around astrology
- Tempest: digital health platform building a modern to addiction recovery
- Otis: fractional ownership of cultural assets
- Gallant: cord blood banking for pets
- Necessaire: clean body products
Increasingly, we heard a drumbeat in the market that consumer investing is once again cycling out of favor. Our fellow VCs are making the age-old claim that there are no more big consumer companies to be created. There has been deep criticism of IPOs from companies such as Uber, Pinterest, Peloton and Smile Direct — even though these brands collectively created tens of billions in market value for their early investors.
We heard similar sentiments in 2001 and in 2008/09. As our peers flee to the safety of enterprise SaaS, we are excited to double down on consumer. Big legacy industries are begging to be disrupted by companies that create customer-centric and mission-driven brands. There are big companies to be built in industries ranging from nextgen retail to real estate, energy, health care, augmented reality, financial services and consumer tech. Over the past year, we made seed investments across these industries and look forward to some of those seeds maturing into core Series A investments.
Looking Ahead to 2020
As we pull out our crystal ball (or Co-Star app) and look ahead to 2020, our team crafted a series of predictions.
Ok Boomer / political fatigue (or not). Generational rifts will be amplified with a Presidential election likely to feature two septuagenarian candidates. Our partner Jason predicts disillusionment with the system will lead to low voter turnout for younger Americans, while Anarghya predicts the opposite — record numbers of Americans becoming politically engaged.
Profitability for Startups as Capital Markets Tighten. The growth equity markets for consumer companies will become increasingly tight — forcing companies to respect capital more than any other time this past decade. At Maveron, we never bought into the Softbank belief that you can use capital as a blunt force weapon. Instead we have always had a penchant for backing entrepreneurs building capital efficient businesses (eg backing Zulily and Allbirds rather than Fab and Gilt). The pendulum is swinging back in our direction. Rather than trying to use capital to drive rapid hypergrowth, you’ll see consumer companies in 2020 focus on more prudent growth, establishing clear unit economics and a path to profitability.
Full throated environmentalism as the next “Me Too” movement. Climate change activist Greta Thornberg was named Time Magazine’s youngest ever “Person of the Year.” Over this next year, we will see young people globally display unprecedented environmental activism. In the same way the “Me Too” movement called out sexual harassment in 2019, brands will be called out and chastised for not acting as strong environmental stewards across multiple industries.
Further differences emerge between Gen Z and Millennials. Gen Z just acts differently. They don’t value instagram fame. They instead value fun experiences that blend the virtual and physical world — creating TikTok videos together, going to immersive experiences like Burning Man and Meow Wolf.
Social media, constant connectivity and on-demand entertainment are innovations Millennials adapted to as they came of age. For GenZ, these are largely assumed. This has spawned some of the most distinctive behaviors that highlight several of the most incredible aspects of this generation but also cast light on its shadows. It’s a generation that is characterized by its open minded, pragmatic, independent, expressive, and digitally connected nature. They view their screens as their canvas and are comfortable creating and sharing content. The content they grew up watching were YouTube stars who recorded videos in their homes and were like them, not the elusive, glossy Hollywood celebrities that millennials popularized. As such, they appreciate brands that are less filtered, and lead with boldness and true authenticity. They recognize that in order to standout on social media they must be unique, and unique is today’s global cool. For GenZ, the meeting places for and opportunities are increasingly presented in the form of digital layers. They don’t distinguish between friends they meet online and friends in the physical world. While they are connected online, it doesn’t mean they always feel true human connection, leading to a rise in mental health challenges among our youth. We are hopeful that the companies we invest in can help address these challenges.
The show is over for cable TV. On the back of Baby Yoda, the Mandalorian becomes the hottest TV show of the decade. The success of both Disney Plus and ESPN Plus lead to rapidly declining profitability for traditional cable companies like Comcast. Cord cutting becomes the rule rather than the exception. Sports leagues like the NBA and NFL need to scramble to figure out how to monetize as cable declines and future TV contracts decrease in size. Even as we are seeing a massive unbundling of the traditional cable TV networks, even more interesting is the acceleration of innovation of the definition of entertainment content itself. The young generation that grew up swiping on TikTok and Instagram has become accustomed to having a sense of agency in their entertainment, and actively participating to some degree, even while watching what we would consider a lean back experience. As a result, we are seeking the definition of passive viewing content evolve with new lightly interactive formats from Netflix toying with a choose your own adventure movie in Black Mirror: Bandersnatch to Twitch’s Emmy winning live show Artificial using overlays to engage the audience to the Marshemello concert in Fortnite that drew over 10 million live viewers. Innovation is coming quickly from even the most unexpected platforms: even Tinder launched a new short form interactive show with an interactive engagement mechanic in their Friday Night Swipe Nights.
Screen and device addiction. As we watch people in a subway, a hotel lobby or a party, they are glued to their phones. Fighting digital addiction will become a rallying cry as loneliness becomes an epidemic and people crave real world connection.
Move away from alcohol. Increased awareness around health and wellness, along with the toxicity of alcohol and unhealthy relationship many folks have with the substance, is leading to a sharp decline in drinking amongst young people. Young people are embracing the “sober-curious” movement, those who dress less or not at all, and broadcast their abstinence with pride. At the same time we’ve seen an uptake in alternative beverages, whether that’s various flavors of sparkling water, CBD infused drinks, or alcohol-free alcohol. Companies like Tempest see users gravitating towards them through social media, something that certainly wouldn’t have happened 5 years ago.
The holidays are a time to reflect. As we look back at 2019, we give thanks to the founders we back, our Limited Partners and all the employees across our portfolio who sacrifice so much to help these companies reach their potential. Most importantly, we thank our families, who display great patience, as all us fly across the country to pursue the work we love. Cheers to 2020 — we wish everyone in the extended Maveron family a healthy and prosperous year ahead.