by Anarghya Vardhana

In the last 15 years, technology has become deeply woven into the fabric of consumers’ lives. It started with early game changers like eBay (market cap $28B), which took in-person swapping and trading and made it digital. America Online changed communication paradigms forever with early adoption of email (current, global email adoption is nearing 40%). More recently, innovation and technology has penetrated every single industry, from healthcare to art, from entertainment to transportation.

As a consumer-only venture fund, Maveron is deeply interested in finding, investing in, and growing the next, big, consumer-tech brands of tomorrow. We’re struck by how interconnected the world has become. In a short period of time, consumer technology in the social networking space has completely changed how people interact with each other. We now “Facebook” one another to find, cultivate, and maintain friendships. Birthdays and relationships are validated by their existence on Facebook. To provide a sense of the pace, in a mere 12 years Facebook has grown to a multi billion-dollar business with more than 20% of the world’s population using it monthly.

We also note how industries with notoriously poor consumer satisfaction are particularly ripe for disruption. No consumer ever says says “I love my bank”. By contrast, Earnest is a portfolio company that allows for easy, transparently priced digital lending in an industry that has historically been mired with painful, lengthy processes. We believe every industry marked by a poor customer experience will have a consumer-friendly brand emerge with which millennials can relate. In fact, this is the premise behind our investments in businesses like Common (residential real estate), Booster Fuel (gas), Dolly (large goods delivery), Arivale (heathy and wellness), and Instamotor (used car buying and selling). As consumer investors, we challenge ourselves with finding founders and teams who can create an emotional layer and stickiness on top of technology, thereby building a brand. Visionaries who can turn products into passions.

As an investor at Maveron, I often find myself answering the question, “what do you mean by consumer-only?” from other investors and entrepreneurs alike. Before I address what qualifies as a consumer, tech brand, let’s quickly familiarize ourselves with what b2c companies are versus b2b companies.

A b2c company is one in which a business sells products or services directly to a customer, and where the product or service completely integrates into a consumer’s life. Examples of b2c companies are Netflix and Uber or Google and Snapchat. These companies are all providing different types of services or products to the consumer, and have different ways of monetizing. But ultimately, all resonate deeply with the consumer and are integral to the end user’s life. In contrast, a b2b company sells products or services to a business or company. And b2b company examples include Salesforce and Oracle, or Workday and Tableau — companies that are oriented around products designed for use within the enterprise.

As a venture capital firm interested in consumer technology, we are looking to form relationships and partner with entrepreneurs that are building technology companies which provide products or services directly to a customer. More importantly, we are looking to be inspired – to partner with entrepreneurs who want to fundamentally change industries and delight consumers.

In the past, Maveron has invested in non-technology consumer companies, such as Potbelly and Pinkberry. However, over the past few funds, we have refocused our entire effort on technology-based consumer companies as we believe digital leverage significantly increases the chance of a venture-scale outcome in three important ways:

  • The path to forming a technology startup is more unhindered and frictionless than ever with the infrastructural support of ubiquitous internet and accessible cloud services. Technology companies can, and do, start from homes and garages as entrepreneurs quickly spin up servers in the cloud and build their website or app. Infrastructure costs that could be well past six figures a couple decades ago, are minimal now. Barriers to entry are low, appetite for technology is high, and a culture of entrepreneurship is burgeoning.
  • Technology-based companies have the innate advantage of benefiting from economies of scale. Software scales quickly, and is well-suited to provide venture returns. You can serve more users without having costly additions to the company, unlike traditional brick and mortar businesses where more customers means more employees, bigger storefronts, and higher inventory costs. And it’s becoming more apparent daily that these technology-based brands can far outrun their legacy counterparts. From 2014 to 2015, online and mobile consumer spending grew by nearly 17% while brick and mortar sales grew by a mere 3.2%. Mobile only commerce is expected to grow by a whopping 30% in 2016. Consumers want brands to meet them where they are, on their phones, and the brands that are responding, are winning.
  • Technology is uniquely positioned to solve big problems through massive improvements in current processes. For example, internet based map technology allows us to not only easily navigate the world, but provides real-time information on traffic and other critical information — a huge step up from the legacy practice of consulting a static map. And the consumers have responded accordingly, with map based apps (Google Maps and Apple Maps) appearing in the top 10 used apps of 2015, and accounting for a large percentage of mobile mindshare.

Technology companies have proven time and time again that they have the ability to scale. In fact, nearly 50% of billion-dollar valuation companies in the CB Insights Tech IPO Pipeline Report are consumer facing. The most successful technology-enabled consumer businesses over the past decade have created almost a trillion dollars in equity value while massively disrupting incumbents across a variety of sectors. Consumer companies have also shown immense promise to change the way people live, think, and interact. We, at Maveron, are excited to combine the magic of both.

So what are we looking for? We are looking for founders and teams that understand and deeply care about consumer delight, and those who can build a big business using that knowledge. We’re looking for founders building consumer tech companies that have the ability to acquire and retain customers in a cost effective way over a long period of time. We are looking for entrepreneurs who have the audacity to change painful, existing consumer experiences. These companies will span sectors, from healthtech and fintech to digital marketplaces and ecommerce. The team will understand their user base intimately, and will know how to delight them repeatedly. These companies may leverage frontier technology such as virtual reality or artificial intelligence to create an entirely new category of consumer experience. Or they may shake up existing consumer experiences by utilizing basic internet and mobile technologies. These founders will be diverse in nature and the companies will cover a wide variety of consumer needs. But in their essence, our founders will be hyper focused on building a consumer brand, one that people recognize, and will be motivated by what their users want and need.

Over the years we have developed an expertise and a network that specializes in consumer technology. We’ve seen repeatedly that every authentic consumer brand comes from a distinct past, the first one we ever saw being Starbucks in 1991, which has now grown into one of the most recognized and respected consumer brands in the world. From the challenge of user acquisition to the nitty gritty details of sign-up flows. If you are excited about long-lasting consumer, tech brands … if you are building something that changes the way people work, think, and interact … if you are excited to be the next, big, breakout consumer-tech company of tomorrow, hit us up, we’d love to be involved.