XRC Ventures Investment POV for the Accelerator & Opportunity Funds

Market Opportunities Created by Beneficial Disruption in the Consumer Retail Space

Forward

There’s a terrifically descriptive theory in evolutionary biology called Punctuated Equilibrium. The term is used to describe the disruptive shifts in the evolution of species due to sudden changes to the environment. These dramatic changes, in the theory, so change the living and competitive environment in which organisms live that they force permanent changes into the way these organisms compete, ultimately leading to mass extinctions and to the creation of new species. Essentially, change is continuous and gradual, until it isn’t; that is the point when some singular massive interruption radically forces a new normal.

While not as extreme as asteroids wiping out dinosaurs, today’s rapid advancement of technology is having a not dissimilar, permanent impact on human culture, and is ‘making extinct’ many businesses that used to serve them. The pace of technology driven change is accelerating exponentially, punctuating how humans will live as consumers in the future; ushering in changes, both negative and positive, that will permanently alter how humans lead their lives. These changes are dramatic and far reaching enough to redefine what it means to be a consumer and, even ultimately, what it means to be a human.

As it relates to our investment objective at XRC, we are concerned with helping support the disruptive technology that is beneficial to how humans live their lives as consumers of goods and services. We believe the opportunity to invest in these significant disruptions over the next decade is unparalleled. We have identified four core areas in which we invest in the pursuit of the manifestation of our thesis:

1. Commerce Enablement
2. Emergent Channels & Revenue
3. Consumer Healthtech
4. Sustainable Commerce

For each of these areas, we will take you through (1) the human disruption triggering the change; (2) the tech catalysts emerging to create new models of human consumer behavior; and (3) the likely investable opportunity areas created because of these disruptions and catalysts.

Tech Maturity Matrix

Below you will find matrix charts explaining how XRC Ventures views the potential future value of investment opportunities in target sectors. These charts place our sectors’ investment opportunities within a matrix informed by two predictive judgments:

1. Tech Maturity Value — How likely is the technology to mature within the horizon of our fund?
2. Customer Economic Value — How impactful would that technology be on the lives of human’s as consumers, within the horizon of our fund?

Specifically, for each emerging opportunity, we look to categorize against the following legend:

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Human Disruption

Today’s reality is that brands and retailers serve customers using business models that were built in the past. The economics of delivering goods and services in today’s omnichannel world using what are essentially upgraded versions of yesterday’s monochannel business models is ineffective and has severely damaged the profitability of most retailers. Frankly, these losses will be unrecoverable for many businesses.

To thrive in the years to come, the future retailer / brand will need to adapt to operate in a world where every point of human contact is a commerce channel. Doing so will necessitate a complete rebuild of core business models and enablement of the tech stack of most brands and retailers.

This looming need for enterprises to rethink their technology stacks is often referred to as a ‘Tech Debt’ and is normally assumed as addressable over time. However, several macro trends have been building, particularly in the US, that will force ‘Tech Foreclosure’ on many companies whose tech debt has grown too great and has lingered for far too long.

All enterprises wanting to serve the consumer in the future will have to deal with three large macro trends hovering somewhat ominously over the ecosystem, creating both danger and opportunity:

Consumer Economic Insecurity

The increasing wealth gap means US middle class consumer discretionary spending power will continue to decrease, resulting in challenging political and social environments. Job insecurity due to technological disruption, AI in particular, will further exacerbate this environment for blue and white collar workers alike. All together, economic insecurity will be a challenge throughout our investment horizon, particularly in the US where our retail system was largely grown to serve the US middle class. We believe the US consumers’ economic stress will lead people to seek other means of security beyond just traditional ownership and credit models.

Consumer Price Inflation

Even as consumer spending power declines, consumer goods prices are likely to continue to increase over our investment horizon. The Federal Reserve interest rate adjustments may mitigate inflation, but they will do so in the larger macro environment which is in the midst of a long term shift away from global free trade toward protectionist national trade policies.

In our view, the implication of this reality is that beneficial technology must be necessarily focused on driving costs down through efficiency and aggressive rethinking of sourcing, manufacturing and supply chains; and, where it makes sense, to allow the consumer to pay for the service of goods, not just for the accumulation and ownership of them.

Technology Cost Deflation

The cost to develop software/tech continues to plummet because of advances that are still in their nascency. Distributed cloud and compute environments, no-code tools, headless/API platforms and AI coding writing in particular form a perfect storm to commoditize development of tech swiftly.

The subtext of Andreessen’s prediction in 2011 that “Software would eat the world” was that techies in the valley, the ‘magicians’ making this ‘world-eating software,’ were the ones who would ultimately own it. But we now approach an environment where non-coders anywhere can create world changing tech. The implication of this deflation will be terrific for enterprises and B2B platform builders who have unique IP, assets or data on which tech can be built. It will also be terrific for B2C companies that can use emerging AI/Technologynology without the tech teams traditionally required. For venture investors, it means we will need to be much sharper about what should actually be considered an unfair advantage for a platform tech company. VC’s’ valuations of these tech startups should reflect the reality that simply having the tech will no longer be the moat it once was.

Catalysts to Enable Universal Commerce

Amidst these three human disruptions, technology is simultaneously advancing in four specific areas which will be catalysts for new business ventures. Each will have unique application in the retail world:

A. AI & ML

The four Ps of retail merchandising have always been about having the right Product in the right Place at the right Price with the best Promotion. Yet all of these functions are limited by the human capacity of the teams that perform these analysis, optimization and execution tasks. All are functions which AI & ML automation will perform better than their human teams. More importantly, they allow decisions to be made and content created in real time across an infinite number of unique, personal human touch points. This is not about doing today’s work slightly better or cheaper. Instead, AI & ML in retail specifically will be about fundamentally enabling the delivery of the 4 Ps across tomorrow’s channeless commerce environment, a task that humans alone cannot do.

Breaking the Hype Cycle — 100x ROIC multiples

We want to address separately our point of view on the speed of AI maturation in the retail industry. There are those who believe AI is just one more technology that, like the internet and mobile before them, will take years/decades to grow out to maturity. Others believe the impact of AI will be shocking in its speed and significance. We fall into the latter camp, at least as it relates to enterprises in the retail/consumer space.

Both the internet and mobile eras required retailers and brands to invest massive capital, ultimately resulting in new revenue that was less profitable than in their former brick and mortar only worlds. In 2016 Walmart spent $3.3B on Jet.com to begin competing with online competitors like Amazon. Doug McMillon, WM’s CEO shared with investors that year to expect continued similar investments amounts for years to come, even as he assured them that he would endeavor to maintain near or only slightly reduced ROIC for shareholders (23% — 18%).

Contrast these staggering costs to implement omnichannel with early estimates of the costs resulting from training AI to augment and replace humans in process activities. Costs are a low $10–50K per use case, 6–8 weeks to train and deploy with 20–80% productivity improvements / headcount reductions within a year. Same year 100x ROICs are impossible for boards/CFOs to ignore.

Our assumption is that AI/ML will fundamentally change how retailers/brands operate, make money and are structured organizationally — within the time horizon of our OF II.

B. Blockchain and Token Platforms

The underlying idea behind blockchain and tokens (fungible or non-fungible) is simply that the distribution of documents and business rules should flow without centralized control of big tech companies in the middle. Although they have been given a bad reputation due to the crypto crash, we believe that these technologies will be essential in the future consumer space.

In particular, they will make possible new kinds of stronger, persistent connections between consumers and brands, as well as novel methods of commercial transactions between disparate enterprises trying to serve the same consumer. We predict that these will form the foundational architectures for many upcoming platforms of the future ‘universal commerce’ world.

This tech will allow us to form new types of tradable currency humans can use to purchase goods and services as well as novel ways for them to earn these currencies through participation and loyalty. Blockchain will also play an important role ensuring the trustworthiness of communications and products in a post-ai commercial environment.

C. Marketing Technology Stacks

The marketing function has been pummeled by technology-driven change: CRM, programmatic automation, CDPs, predictive personalization, Account Based Marketing (ABM), Journey Orchestration Engines (JOE), now AI Content Creation. All of these technologies are intended to aid humans using them, not to replace them. But humans and their organizations have a limited capacity to implement and absorb all of this change.

At the same time, we are moving from pre-made mass content made for a few channels, to real-time context aware and shoppable content that needs to be created and delivered in real time across hundreds of channels/contexts. This means there will be overwhelmingly greater demand for quality content, requiring more resources — beyond what humans alone are capable of providing.

Clearly, the limiting factor for martech evolution of most enterprises is the human in the loop. They will be replaced, over the horizon of the fund, by AI largely responsible for all creation and execution of demand generation/marketing tasks, being supervised by humans. That is fundamentally different than how marketing works today, and we foresee large scale disruption to all of the corporate ‘engines’ powering marketing today (i.e., agencies, consultancies, affiliate platforms, etc.) as we move toward one where AI becomes the Chief Revenue Officer of the enterprise (or at least their hands and legs).

Even as we write this, the changes are transpiring in a world of tremendous tech development cost deflation. We couldn’t wish for better fertilizer for the incubation and growth of new businesses related to this sector.

D. Robotics & IOT

Technology deflation will be slower in these two areas than in AI/ML, where the cloud/ compute hardware challenges have been largely solved, as robotics and IOT require the manufacture of physical vehicles and materials that are not yet achieving mass scale deployment costs. That said, they should hit scalable costs for mass adoption in the next few years, certainly well within our 10 year fund horizon. Enterprises turning to Robotics and IOT to modernize their businesses will also need platforms that manage them and for many businesses, robotics-as-a-service platforms (RAAS) that manage robotics and IOT for enterprises.

SUMMARY: THEME 1 OPPORTUNITIES

Given the disruptions happening to the consumer, and the emerging tech catalysts for the retail industry, we will be looking to invest across seven opportunity areas:

1. AI automation of the retail and brand corporate stack
2. Distributed commerce platforms
3. Retail Media Network management & automation
4. Loyalty Technology
5. Consumer Fintech
6. Evolution of the commerce supply chain

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Human Disruption

Within just a generation, we have moved through two epic transformations in how humans communicate and share information. First the internet itself and then mobile have fundamentally changed how younger generations grew up in these post-internet and post-mobile worlds. The changes were so impactful on cultural beliefs and behaviors that they became the defining parameters used to label Gen Y & Z. We now sit at the dawn of a third digital era, the post-AI era.

The impact of the first two digital eras on human behavior as it relates to their lives as consumers was twofold: (1) a dramatic shift in the time spent consuming media and (2) a corresponding rise in the amount of consumer transactions happening through nonphysical touch points.

These trends are going to accelerate with two likely meaningful impacts on humanconsumer behavior during our fund’s horizon.

The Coming AI-Digital J-Curve

The first inflection beginning in the Teens through today broadly reflects marketers’ growing ability to use technology to be context aware when delivering previously prepared content (e.g. personalization, mobile/social channels).

Throughout both the internet and mobile eras, two limits were clear:

1. Mass content: All content had to be prepared in advance; then algorithms were used later to try to best time/geo-target the delivery to rough cohorts of customers
2. Limited channels: Any targeted content in ‘era one’ had to be delivered via email or the internet through search or website. By era two, we expanded to include mobile and social channels as well. However, to date, other content delivery channels, such as TV, voice touch, bot, in-situ display, have generally remained ineffective for personalized/context aware delivery

A second inflection in the rate of commerce through non-traditional channels is on the post-AI horizon. The post-AI era will break through both of these two previous limitations. Massive tech depreciation will enable marketers (humans and AI) to deliver context-aware personalized and transactable content to any channel available to human senses. To state simply, in post-AI, all content is a channel and all product is content.

The Trust Promiscuity Conundrum

The sheer volume of communication thrown at the average human consumer is overwhelming, intoxicating and largely unregulated. While there are positive ramifications of facilitating brands and influencers ability to speak directly to consumers, there are certainly negatives as well.

Humans are promiscuous in that we are inclined to give trust to the most recent and emotionally compelling messages we hear. The conundrum, of course, is the difficulty of policing nefarious parties intent on accessing the consumer with false messages, false products and scams. Our regulatory environment is ill equipped to respond to this risk in the near term, leaving consumers, increasingly sensitive to security and trust issues, on their own devices to manage.

Technology cost depreciation again will help. It will enable the building of AI to help consumers directly protect themselves through personal ai bots or ai driven trust security platforms. These will have profound impacts on how basic digital interactions work. Interactions like: search, commerce, chat and ads. They will also make persistent, loyalty based relationships between brands and customers much more valuable than they have been in the past.

Trust will be such a valuable commodity in the future that retailers and brands who protect it will have rights to dramatically expand how they serve the consumer…alternative revenue.

Catalysts For Building New Revenue Channels

When we started XRC Ventures back in 2015, the tech world was speculating and investing in the emergence of “super apps” in the west, mimicking a means of communication with consumers flourishing in Asia. Super apps were singular platforms that unified search, entertainment, social, communication and commerce/payments all through one monolithic provider platform.

For a lot of terrific reasons that thankfully never happened, leaving the rest of the world with an infrastructure more broadly set up to support distributed commerce. The fact that commerce can be supported in many ways leaves us numerous paths to innovation. A mere eight years later, an environment exists that is filled with terrific tech advances for building new commercial channels, including:

A. API & Headless Architectures

No code platforms, AI assisted coding, Open source AI/ML platforms, API platforms, Cloud based Consumer Data Platforms, Authentication and Content Delivery Networks, yada yada yada. I could go on for a page of buzzword after buzzword. But the effect of these cumulatively is that a competent entrepreneur today can create a reasonable MVP of a product in days or weeks, not in the months or years it would have required in the past. And these platforms would be deployable and scalable from the beginning. These platforms will be essential in the future as AIs will need to access and negotiate with other AIs through these modern architectures.

B. Generative AI

Just as AI will lower the cost to operate businesses in the retail and consumer domain, it will also create new businesses that haven’t existed before, and new channels to existing businesses where accessing the channel would previously have been cost prohibitive. Consider retailers adding how-to content channels made by AI, AI designing and manufacturing new products for on demand production. Consider AIs being empowered to negotiate in real time, purchases from multiple brands on behalf of their ownercustomers. All of these exist today in nascent form today and with tech cost deflation are primed to be scaled over our fund’s horizon.

C. Web3

We are uncertain whether the future of the internet is a decentralized one. The current trend to a few very large companies owning the large AI and Ad platforms seems to indicate not. But, AI in particular is going to create significant trust and privacy challenges, for which web3 tech (blockchain, tokenization, etc) are the natural counters. It is therefore likely that web3 tech like blockchain authentication, decentralized privacy protection, platform environments, and utility NFT tokens will continue to create areas for technology innovation, particularly for distributed commerce, even if early attempts to use web3 for crypto currency and NFT collectables drop by the wayside.

D. Extended Reality (XR)

These Augmented (AR) and Virtual (VR) business models, collectively referred to as XR, suffered through much hype and overvaluation in the last few years. But the underlying tech is still very sound. We believe the infrastructure enablement for each will be important places new business emerge within the horizon of this fund. Some of these may be customer facing, many will be for business tools.

SUMMARY: EMERGENT CHANNELS AND REVENUE OPPORTUNITIES

Given the disruptions happening to the consumer, and the emerging tech catalysts for the retail industry, we will be looking to invest across six opportunity areas where brands/ retailers who are able to build and maintain trust will be able to expand both the products and services they offer, and they amount of channels they do commerce through:

1. Shoppable Content
2. Product-As-A-Channel
3. Loyalty Commerce
4. Service Retailing
5. Trans-Channel Experiential Retailing
6. AI bot mediated commerce

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Human Disruption

The US in particular is ripe for disruption in the healthcare space. Its healthcare system is the least efficient in the industrialized world, generating the highest costs for the lowest quality of results.

Contrast this with a time that is unprecedented in the amount of emerging tools to build better health outcomes (AI, digital, edge sensors and cloud compute, distributed services, molecular fabrication, gene engines, etc) and a consumer who increasingly can’t obtain health outcomes through their traditional employer based provider networks and you have an environment that is primed for consumer direct solutions to non-acute medical solutions to be delivered outside of the traditional hospital/clinician ecosystem.

The Home: Health Commerce’s fastest growing format

Across existing preventative, acute, post-acute and end of life hospice care, the US has always had some amount of non-facility based care. But with the expansion of digital communication, monitoring, testing and delivery management solutions, we are experiencing a rapid growth of both virtual and at-home care; a growth rate that McKinsey says will reach to 25% of the total cost of care in the US health system by 2025 ($265B annually). This is largely from businesses/services that couldn’t exist ten years ago.

The real challenge for the home as a location to deliver health and wellness services is that it historically lacked the infrastructure to do it properly: in-home monitoring platforms, predictive diagnostics, precision medicine, non-facility based supply chains and fintech/insurtech support. Advances in AI and tech cost depreciation in health science will create a bloom of new tools and approaches to address these shortcomings.

Health Assurance vs Care

Just as health services have largely been focused on delivery in dedicated facilities, they have equally focused on treatment instead of preventative health and assured living. Recent advances in biology and AI related tech allow for management of healthy lives better than ever before. Yet our insurance, finance, regulatory, management and delivery systems are today still oriented to a world where that was not possible.

Within the horizon of our fund, the rise of personal bots, health ai, remote sensing and precision wellness are likely to create entirely new solutions to managing the care of currently health individuals, increasing the total efficacy of healthcare spending & delivery. For the near future, the innovations will largely be incubated as new ventures, rather than the borne out of the legacy health payer enterprises whose existing models are tied to the legacy, treatment based economic model.

We believe the equation is simple: new, never before available, high quality solutions + dissatisfied consumers = great investing opportunities.

Catalysts for Consumerizing Healthtech

The rise of Consumer Healthtech is due to the confluence of two factors: need and ability. Clearly, Covid and its impact on the historic health system provided the massive need to approach health delivery differently. But its timing arrived just as many technologies were maturing as enablers. We see five trends as most impactful during our funds’ horizon:

A. Personalized Medicine

The fastest growing of our first funds companies in the consumer healthtech space have been those associated with diagnosing and executing personalized or precision health solutions. Consider low cost full genome mapping, in-home testing, asynchronous telehealth and remote management platforms, generative AI for health care providers, etc.

B. Health Monitoring Technology

Telehealth usage exploded during Covid amid a pandemic driven need and a spike of new enabling technology. Remote care continues to grow even post pandemic and is forecast to exceed $630B by 2028, from a base of just $90B in 2021.

Considering the home as a standalone new retail format for the sales of goods and services, this 32% CAGR would make it the fastest growing of all channels/formats. These numbers are understating the opportunity size as they do not include all of the health adjacent products and services related to in-home health delivery (nutrition, pharmaceutical, assistive electronics and homegoods, monitoring and security, etc).

Successful sale and execution of remote health services requires a tremendous infrastructure which largely didn’t scalably exist just a few years ago; tech like: asynchronous telehealth platforms, multi-channel communication platforms, sensors for real time patient-consumer monitoring, remote test kit delivery and measurements sharing, home health delivery logistics supply chains, etc. All of these areas will need to be innovatively scaled if they are to support this future $630B channel.

C. Personalized Health Solutions

Personalized healthcare involves tailoring medical treatment to an individual’s unique characteristics, such as their genetics, lifestyle, and medical history. This approach is made possible by advances in technology, such as precision medicine, artificial intelligence and large scaled IOT/Sensor networks.

It is not a coincidence that the first significant demonstration of modern scaled deep learning was the demonstration of the ability to identify protein folding and new protein assembly. Health care and biology are so attractive to technology innovators as they create some of the most immediate ROICs given the high costs and low effectiveness of legacy solutions.

D. Molecular Manufacturing

Of all the trends we keep an eye on, this one is probably the furthest from scale application, but still falls within the horizon of our fund. Molecular manufacturing is the willful use of nanotech tools that manipulate matter at the molecular level to create a wide range of products otherwise impossible or too expensive to make today through conventional means. This is important for many industries (e.g. sustainable textiles, biodegradable plastics, computational electronics, food fermentation/production, etc) but will be especially so for health outcomes.

E. Regulatory Evolution

Just as Covid spurred a need for test kits, prescriptions and treatments to be delivered outside of the traditional facility based ecosystem, it also spurred a change in how the FDA allows new businesses to serve health in this new non-traditional environment. Bringing new innovations to market through In-Home Prescription certifications will not be as swift as through traditional OTC-retail distribution, but it is much less onerous than it was prior to Covid. We think this will only improve as both Medicare and Medicaid regulatory guidance is to promote the development and deployment of inhome health delivery due to its lower cost, higher availability for patients.

SUMMARY: CONSUMER HEALTHTECH OPPORTUNITIES

We believe the ability for the consumer to directly purchase, or obtain through a traditional benefits payer, personalized health outcomes outside of the traditional facility based ecosystem, will be necessary to address the poor cost and effectiveness of today’s US Healthcare system. These changes are ripe to create beneficially disruptive new businesses in five areas, which will be our focus areas:

1. Consumer healthtech enabling technology platforms
2. Remote health services
3. Subscription wellness
4. Health outcomes-as-a-service
5. Aging-In-Place & Assured Living

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Human Disruption

While climate change is an overtly political topic, there are two indisputable changes happening which will affect humans as consumers into the future: the rate of economically significant natural disasters is rising dramatically,4 and humans are increasingly prioritizing it as a threat to their lives.5 These two factors mean that over the horizon of our fund, humans will increasingly weigh their consumer choices against a backdrop of rising climate driven consumerism perception, which we call, the ‘Climate Tax.’

Understanding the Climate Tax

Within our fund horizon, brands and retailers that sell products/services will do so in a competitive environment where consumers increasingly weigh their commerce choices against a perceived environmental impact standard. Brands and retailers will be forced to spend capital (the tax) to manage this impact perception. Some of this tax may be explicitly mandated by governments, for example legislation prohibiting or taxing single use plastics. While others may simply be implicit, such as fast fashion retailers facing increasing marketing costs to address their unsustainable models with climate conscious younger consumers.

That the first world is unlikely to meet its carbon goals to prevent large scale climate disruption by 2030 is at this point nearly inevitable. This timing will coincide with the replacement of the baby boomer generation, who are most reluctant to confront climate change, with younger generations as the significant economic demographic in the western economy. The ‘climate tax’ driven sentiment towards conscious consumerism is therefore, in our POV, likely to continue accelerating.

Technology Driven Climate Solutions

Even as human-consumers slowly march towards a very different global climate, they do so in a world that is quickly discovering and creating new tech to manage, avoid and address that change, particularly in the venture space. Venture funds raised to invest in mid- and late-stage climate related tech have risen 500% since 20176, which bodes well for early stage ventures looking to raise future priced rounds addressing climate change.

A Preference Toward Profitable Growth Models

Sustainability related startups encompass a broad range of ventures, from media, to ESG transparency, material science, and more. Our learning from Opportunity Fund I is that those sustainability related businesses whose business models are making sustainable commerce more profitable than non-sustainable, traditional commerce models do best. For example, Fillogic, Recurate, Returnity and Croissant all allow their enterprise customers to immediately increase revenue and profits by using their platforms, making it very easy for CFOs to say yes.

This is not to say that startups whose mission is transparency, visibility or education aren’t important, just that they are less likely to produce venture sized investor returns. So we will be focusing our sourcing efforts on those that immediately and demonstrably improve profits for enterprises through the enablement of more sustainable practices and products.

Catalysts for a Sustainable Future

When we look at the world of early stage startups trying to impact sustainable consumerism specifically, they tend to pursue one of three strategies: to change what we buy, to change how we make or buy, or to change how we use a good or service. In other words, the playing field for finding and aiding beneficially disruptive founders is vast. We believe the most successful of these disruptors leverage recent advances in one of four areas:

A. Material Science Innovation

Advances in AI/ML and deep learning, in particular, are exponentially growing our capacity to simulate and test new molecules and materials without first figuring out how to produce them. This in turn is dramatically lowering the cost to invent new, functionally specific materials and molecules that can ultimately become new products. Examples are enzymes that digest plastics or dyes and fabrics made without significant water or animal carbon footprint costs.

This AI-fueled enhancement of the scientific method is already increasing the efficiency of R&D spending by 40–50%,7 which in turn results in geometric growth of the amount of new materials alternatives that can go to market in any given period.

B. Electrification & Automation of Supply Chains

While electrification might sound too singular to pin so much hope on, it is incredibly important in the world of consumer goods and retail. The operation of future supply chains will be dependent upon highly automated and electrified manufacturing and logistics equipment in order to manufacture and distribute products that are both sensitive to carbon footprints and economically profitable. Traditional ICE and human managed processes cannot achieve cost structures to supplant non-sustainable retailing with sustainable alternatives. Cities across North America and Europe are investing in the micro grids that will make this power more available and affordable locally, acting as catalysts for innovation in this area to happen outside of the traditional Silicon Valley dominated space.

C. AI Automation

The pair of shoes you are wearing right now was likely designed by a human, prototyped somewhere thousands or tens of thousands of miles away from you, shipped around the planet multiple times to sample, test and finally produce the pair of shoes you could purchase 18 months later. Beyond that, if you were to look in your closet, for roughly every three pairs of shoes you see, a fourth one had to be produced, shipped around the world, handled multiple times in multiple geographies in order to arrive, unpurchased and unworn in a landfill.8 We must stop doing this.

The path forward is clear; shift to using AI, automation and on-demand manufacturing using circular/recyclable materials to build consumer products. Companies that figure out how to do this are not only more profitable but are achieving better outcomes for the planet. Corporations are rarely inherently malevolent; instead, they have been forced to rely on inefficient, unsustainable processes for lack of affordable options. Now, rapidly depreciating tech development costs will make all of the necessary capabilities (e.g. AI-aided design, mass personalization, automated on-demand fabrications, sustainable materials) economically viable during our fund’s investment horizon. As government tax and regulatory incentives motivate corporations to shift their methods, the options will now be available to them to execute this shift.

D. Consumer Alternative Economics

The three catalysts above all address how corporations will manage to develop and sell consumer goods and services. But, the consumer herself has a large say in this area. With decreasing discretionary spending power, consumers are already turning to alternatives to traditional retail; like resale, rental and shared economy. All of these options are simultaneously better for the environment in that they reduce waste streams and carbon footprint. So we expect to continue seeing innovation in these areas.

SUMMARY: SUSTAINABLE COMMERCE OPPORTUNITIES

We see an acceleration in the amount of new businesses created to enable sustainable business operations and brand-consumer relationships.

The changes above are ripe to create beneficially disruptive new businesses in five areas, which in turn will be our focus areas:

1. On-demand, local or near local manufacturing
2. Alternatives to ownership
3. Alternative materials
4. Circular Retail
5. Sustainable consumer finance

The Opportunity Fund was first launched on the fundamental belief that technological advances were coming to dramatically change the lives of humans as consumers.

In Opportunity Fund I, we started with similar theses and had terrific success.

Our conviction has not changed, only accelerated. Advances across tech place us all in an age of unprecedented speed of change, providing many opportunities to use our venturing assets to positively influence the future. We are excited to continue seeking and supporting those daring founders, harnessing technology to create a better future.