The HBS Entrepreneurship Club is starting the year with a series of articles written by Fellows from Pear VC. They’ll cover a wide range of topics from the US Seed stage venture landscape to predictions for the year and deepdives on building your startup on blockchain and cloud hosting!
This feature is authored by Pear VC Fellow Jad Esber.
Questions or ideas? Reach out to Jad — Pear Fellow and HBS Entrepreneurship club’s leadership team.
1. Kim Kardashian to co-invest with Sequoia?
There’s a clear trend toward fewer and larger investments in companies, with US annual funding hitting $99.5B amid falling deal activity. Interestingly, more of these deals will see celebrity investors. According to CB Insights, in 2015, traditional celebrities invested around $2 billion across 101 private technology company deals. Celebrities have been investing in startups alongside VCs for a while. In June 1999, Google’s $25 million Series A round included Shaquille O’Neal, Arnold Schwarzenegger, Henry Kissinger, and Tiger Woods. At the time, Google was worth $75 million. There have been a growing number of celebrity involvement models, from equity for endorsement (e.g. 50 Cent in VitaminWater) to co-founding venture funds (e.g. Ashton Kutcher’s A-grade Investments) and this is likely to grow in 2019.
Investing in startups is sexy and celebrities are realizing that they can leverage their clout to help generate useful buzz for startups — especially consumer-focused ones that are reliant on network effects. It isn’t just about companies hiring celebrities to help with their marketing. Traditional celebrities are investing in companies to extend their brand and diversify their revenue streams. Should VCs look to strengthen relationships with celebrities in 2019? I predict that they will.
2. Consumer-grade(!) enterprise software
From Slack to Dropbox and even Facebook’s Workplace — there’s a trend towards the consumerization of enterprise software.
Businesses want enterprise software that’s as familiar to employees as Facebook or Instagram.
In 2019, we’ll continue to see enterprise software that’s first built for individual consumer use steamrolling its way into professional adoption, with the product evolving into an enterprise platform and ecosystem. This has been a consistently successful enterprise product strategy for low-cost, and sustainable, customer acquisition.
Specifically, there’s an opportunity for a consumer-grade engineering management enterprise tool. Sara Choi spoke about how other verticals have their own unique set of tools, but engineering management only really has Atlassian and Jira’s capabilities — which break for managers with multiple scrum teams. I predict that 2019 will be the year that we see someone build the definitive engineering management enterprise tool.
3. Flexible work isn’t just a lifestyle choice
The gig economy is a powerful enabler, but it’s more than just a lifestyle choice. Between the burgeoning gig economy, and the growing global refugee crisis we are in an era of continued mass displacement. It is important to note that, to an increasing degree, these migrants are usually technologically literate. In Uganda for example, mobile phone & internet use is greater among refugees than in the general population. Legal blockers to employment drive migrants to seek opportunities online. The case of Uganda highlights how the Internet is mostly used for income-generating activities. I predict that in 2019, we’ll be seeing more companies like Natakallam, which hires Syrian and Iraqi refugees to teach Arabic over Skype.
Temporary migration causes the creation of survivalist enterprises, which exist to generate income for migrants while they are in transition. This usually means resorting to informal economies. However, many migrants are looking to build sustainable entrepreneurial activities that support their embeddedness within their new community — and online platforms and the local gig economy will become an even bigger enabler here.
More side projects will become full-time jobs
Despite Gen Z growing up in a precarious and unstable economy, and thus valuing safety and financial security, there is still a big emphasis among Gen Z on carving out the right path and finding entrepreneurial ways to support themselves.
In Stockholm, there is a workplace norm that you can take unpaid leave for six months or go part-time to try a start-up and your company will hold your job for you. This will become a more common expectation for our entrepreneurially-minded generation.
In China, where the wanghong (Internet celebrity) economy is booming, WGSN found that over “54% of Gen Zers listed “livestreamer” as their dream profession. Brands are waking up to the power of micro-influencers and creator-focused online platforms know that to attract the best creators they need to make it as profitable as possible for them to create on their platform. With this, we’ll be seeing more financially lucrative opportunities for creative side gigs as a Twitch streamer, Instagram or YouTube creator, Medium partner, Spotify or SoundCloud musician, etc.
4. Learn now, pay later.
Our current education system is not functioning properly. It’s too expensive and it doesn’t train students on job-specific skills, especially for ‘modern jobs’. Educational courses are becoming hyper-focused and will train students on exactly the skills they need to get a job, especially digital jobs. For example, The Chongqing Institute of Engineering, a college in southwest China, partnered with a local company to offer a three-month program on how to become a better livestreamer. And companies like the Lambda School and Flatiron School offer courses to train students on exactly the skills they need to land a specific tech job. Training comes with the explicit goal of employment and students only need to pay their tuition once they’ve landed a job that pays them above a certain range.
5. The ‘Digital Escapist’ era
“In everyday life, you’ll take a stroll, but in electronic life, you take a scroll”
There’s a deepening tension between digital escapism and anxiety.
Escaping into virtual worlds
We have been spending time in virtual worlds for as far back as we have been telling stories to ourselves and each other. However, the breadth of our virtual world has clearly deeply expanded. ‘Digital escape’ takes the form of scrolling through our Instagram feed to playing online games or even watching others play them on Twitch. It is difficult to predict what the next wave of platforms that offer this form of digital escape will be — but social VR/AR/MR should surface this year and shouldn’t be as much of a step function as it’s made out to be.
However, the heightened concerns around data privacy on many of the platforms that offer digital escapes are causing a surge in digital reclusion, as people who are concerned with how their data is being used go off these platforms. In 2019, I predict the resurgence of trusted platforms that offer gratifying digital escapes without leaching on personal data and maximizing time spent.
Shopping as entertainment
Beyond gaming, entertainment and music, mobile shopping app sessions grew 54% YoY according to Kleiner Perkins — 6% more than movie/music session growth. Users are looking for more experiential shopping experiences — with YouTube and Instagram responding with their different approaches to in-photo/video purchase features. This trend is also taking form offline with a bigger focus on stores launching as experience centers or wellness hubs, and even napping spaces! The battle to make shopping a fun and fulfilling ‘escape’ will intensify in 2019.
The business of anxiety
Barnes & Noble announced a huge surge in the sales of books about anxiety; a 25 percent jump from June 2017. In line with this, there’s a massive increase in the number of applications that enable us to responsibly escape the humdrum and worries of life — from gaming apps focussed on relieving the symptoms of anxiety (SuperBetter) to mindful music (humm.ly) and AI-based smart journalling (Reflectly).
I predict that anxiety and digital escapism will become an increasingly bigger problem; it’s up to us what shape this will take.