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Why Investing in the Everyday Economy Isn’t Just a Consumer Strategy
For several months now, my partners and I have spent a lot of time talking about why we’re investing in the Everyday Economy. We dove deep into how this investment thesis extends to major verticals of consumer spending like entertainment, clothing, and home. We’ve also shared why our approach is also “horizontal” — a company we invest in doesn’t have to neatly fit into the consumer spending verticals, but it should have the potential to touch millions of people or become deeply habitual for a smaller group of end-users.
Through all of those posts, we’ve received one common question from founders: Are all Everyday Economy startups consumer-facing?
The answer is no. More than a third of our investments at NextView is B2B, and here’s why:
We want to invest in companies that directly affect how people experience the world in any context, and even if they’re not directly interacting with or purchasing from the startup.
Let me explain. We think there are two main categories of Everyday Economy B2B startups: enabling layers and pervasive tools.
Types of B2B Everyday Economy Companies
1) Enabling Layers
First, there are “enabling layer” companies that facilitate the redesign of major aspects of people’s lives, even if they’re invisible to the consumer.
In the home spending category, while we’re investors in a consumer-facing home renovation marketplace startup Renoviso, we’re also investors in Payfully. This B2B startup allows homeowners and small business property managers renting out their properties on sites like Airbnb to get paid early. This benefit changes the cash cycle for property owners, freeing up more capital to improve customers’ experiences with property improvements and additional services. For consumers renting a property from a Payfully customer, it’s not immediately apparent that Payfully affects their stay, but it changes the way they experience it.
In a similar fashion, while we’re investors in consumer subscription meal service MealPal, we’ve also backed Upserve, a front-of-the-house restaurant management platform. Consumers at an Upserve-powered restaurant won’t ever know it, but their restaurant experience will be dramatically better because of online ordering, loyalty programs, and a personalized menu & experience — all facilitated by Upserve.
And in the entertainment category, our portfolio company TripleLift provides monetization for online publishers through native ad technology. This technology enhances a consumer experience for literally thousands of media properties across the web.
In all of the above cases, a B2B startup provides a direct enabling layer that’s hugely beneficial but entirely invisible to the consumer.
2) Pervasive Tools
The second main category contains B2B companies that can change the daily lives of people working at their jobs. After all, most people spend at least a third of their working lives in an office or workplace.
This is where that horizontal lens I mentioned before applies.
B2B services have the ability to become pervasive within a corporate environment (e.g. Slack). It feels “consumery” because it is — it’s consumed by end-users who just happened to be at work. The consumerization of IT is not a novel trend, but indeed a profound and continuing one.
Startups also can become extremely habitual for a smaller subset of business end-users. In our portfolio, Code Climate is a perfect example of this, as its software becomes embedded within an engineering team’s daily workflow. Troops is similarly embedded into the workflow of sales and marketing teams — it’s the glue between daily internal conversations and customer interactions.
What Types of B2B Startups Aren’t Part of the Everyday Economy?
Particularly, there are situations when the software isn’t directly enabling the consumer or end-user, which encompasses a lot of classic “enterprise software.” IT sold to the CIO facilitating technology infrastructure or non-recurring business processes is outside our purview. Network security, data management, and serverless PaaS all may be exciting categories, but not part of our focus. Similarly, if a service is not habitual for the intended end-user (like say the periodic use-case of tax & auditing software), it’s outside of our strategy because end-users aren’t likely logging in every day.
Impact First, Business Models Second
In the history of NextView, we’ve invested in approximately 60% consumer and 40% business oriented startups. But we don’t think that delineation is all that helpful when you’re looking for companies redesigning the Everyday Economy.
Lots of Everyday Economy companies don’t fit neatly into either category. Within our portfolio, you’ll see a number of two-sided marketplaces (e.g. Paintzen), companies with multiple products with different customers (e.g. BookBub), hybrid B2C/B2B2C models (e.g. Parsec), or startups aimed at small business owners who are effectively consumers (e.g. Alignable).
In the end, we look for companies dramatically improving people’s everyday lives first, and then search for startups that design the business model around that transformation.
For us, the designation between B2B and B2C is immaterial as long as the startup is reimagining how people live in our Everyday Economy.