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The Difficulty of Consumer Investing: Reimagining the Endpoint


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A talking points deck walking through current challenges in investing in consumer facing technology companies

Published in: Technology
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The Difficulty of Consumer Investing: Reimagining the Endpoint

  1. 1. The Difficulty of Consumer Investing Reimagining the Endpoint @EzraMoGee
  2. 2. All Attention Has Turned to Mobile @EzraMoGee
  3. 3. Yet Mobile is a Dead End for VCs @EzraMoGee
  4. 4. No One Downloads Apps Average Monthly App Installs Across iOS/Android Spectrum: • 65.5% = 0/mo • 8.4% = 1/mo • 8.9% = 2/mo @EzraMoGee
  5. 5. So Where Do You Focus? • Hybrid Web/Mobile Transactional Platforms • Whether the hook is a tool, community, or content, there must be a transactional core @EzraMoGee
  6. 6. Web 1.0 vs Web 2.0 • The early generation of consumer victories – from eBay, Opentable & Zillow to as recent as Grubhub – was about digitizing offline processes. • The next wave is about re-imagination of consumer behavior: Airbnb, Uber. – What would the world look like IF – What macro trends do we see appearing in the world? @EzraMoGee
  7. 7. Dwindling Opportunities (But still exist) • Digitizing offline processes (few pockets still exist). • Vertical commerce ($400M upper band for exits) • D2C branded products – Honest Co, Casper, Harry’s – winners in many of the big categories though food (the largest prize) still exists. • Geo-located/Mobile On-demand: Few markets support better, faster, AND cheaper. @EzraMoGee
  8. 8. Larger Pockets of Opportunity • Concierge/Conversational Platforms – Trunk Club may have pioneered but The Middleman Has Struck Back. [Stichfix, Laurel & Wolf, Havenly]. • Low Cost of Capital Arb Models – Avant, Beepi (managed marketplace that purchases cars upfront & holds inventory), Opendoor (managed marketplace that purchases homes upfront & holds inventory) [Window may be closing]. – Unclear if investors still have appetite for this category of investment (high capital requirements) as market adjusts… @EzraMoGee
  9. 9. Emerging Opportunities We are entering the “reimagination” phase of Venture: • Millenial Reimagination – Common, Room Service, • Gen Z Reimagination - Younow • Adult Home Living Reimagination – Blue Apron, Casper • Professional/Office Reimagination – Breather, WeWork • Healthcare Reimagination - Oscar ** Must be going after LARGE markets: Living, Transportation, Food, Jobs, Fashion, Health @EzraMoGee
  10. 10. Emerging Opportunities • Dependent on existing macro factors. Millenials have: – Less time – Overwhelmed by life & optionality, resentful – Cash constrained – Looking to avoid friction, encumberment – Distrust of corporations, government, authority – Focused on community, relationships – Re-emergence of the family – Independence, control over work life. @EzraMoGee
  11. 11. Example 1: Spothero • Description: Mobile app for on-demand or scheduled booking of parking spaces. • Why Fundamentally Broken: Pricing information entirely opaque, horrific customer service, no quality control. • Macro Trends: Distrust, Time Constrained • Verdict: Cheaper, Good margins AND better • Category: Mobile On-Demand @EzraMoGee
  12. 12. Example 2: Sprig • Description: Vertically integrated mobile app for on-demand food delivery in <15 mins with constrained choice. • Why Fundamentally Broken: Grubhub digitized food ordering but choice remains a burden. Blue Apron still requires meal choices a week in advance. Choice remains a burden. • Macro Trends: Overwhelmed by choice, less time, looking to avoid friciton. • Category: On-demand, Millenial Reimagination @EzraMoGee
  13. 13. Summary • The focus MUST be on reimagination – nuanced difference from “disruption”! They will be the biggest opportunities. • Very unclear if low cost of capital arb models won’t be HUGE implosions, but we learn that challenging transactional status quo has value. – Are consumers en masse willing to sacrifice economics for convenience? • MUST own the BRAND. Huge loss of value if you don’t OWN the end consumer. • Brand Building is Expensive!! Unlike SaaS which is now all about cash efficiency, I am not convinced that B2C startups must be perfectly cash efficient. – Healthy unit economics + Growth are Primary. – Cash efficiency is important but ultimately secondary because appetite still exists for GO BIG plays. @EzraMoGee