The CQ: Our 2023 Reflections and Forward Looking Focus
Plus the Forerunner Team's Must-Reads of the Week
The CQ is Forerunner’s weekly newsletter rounding up the most pressing consumer news and analysis, plus some bonus musings from our investment team. Subscribe now to get the latest edition in your inbox every Saturday.
By Kirsten Green, Founder and Managing Partner
It’s AGM season — which, in non-industry terms, means it’s the time of year when VCs host annual meetings with investors to run through the numbers, company updates, and what’s ahead. After hosting ours on Thursday, we’re filled with immense gratitude to be working with our partners — from those who have been investing with Forerunner since our earliest days to the founders we invested in last quarter.
For many, sharing a 2023 metrics update isn’t, shall we say, simple. We are still in the “hangover” phase of the 2020-2021 boom and deep in an industry reset. We think that if there were a theme for 2023, it would be “back to basics” — and that’s not specific to Forerunner, but the whole industry. This past year magnified the distance between what’s working and what’s not — a tough but valuable truth for startups looking for product-market fit, growth stage valuations, and investors who expanded beyond their core competency. We’re confident that this reset will reveal that what’s tried and true and defensible is what shows best and endures.
At Forerunner, we’ve always been fierce believers in sticking to our strengths and doubling down on what we know we’re uniquely excellent at. Our longstanding internal mantra is (and always has been): fewer things better. We think we’ve been focused and disciplined before it was fashionable: we’ve been calculated and even conservative about the immediate opportunities of crypto, honest and true to our process when growth stage valuations were soaring from 10x to 100, and today are committed to walking before we run when it comes to big bets on AI’s most enduring opportunities.
But despite this tense time for the industry, we still see an abundance of ambitious immediate and forward-looking opportunities. Where we’re doubling down:
Commerce: our bread and butter, both b2b and b2c
Wellcare: healthcare-grade tools applied in a proactive capacity
Empowerment: tooling for the modern consumer related to careers and beyond — and often through a new model we’re tracking, digitally-native franchises
The reinvention of dated, massive categories, often in the historically-overlooked SMB sector: the travel agency, the legal experience, home services, veterinary care, and more
AI as an underpinning superpower for business model efficiency and new consumer value
It can be easy to assume that with the tech-driven advancements of the past decades, all the clear gaps have been addressed. But when we look closely at consumer needs, we still see an abundance of opportunity right before our eyes. The next generation of tech industry leaders are not just modernizing big, established markets, they are defining new consumer standards that tangibly improve quality of life. That fuels our passion and energy every day.
What We’re Talking About on Slack:
Although economic growth is strong and unemployment is low, the gap between how Americans feel the economy is faring vs. how it’s doing has never been bigger. The country’s intense political polarization and the media’s gloom-and-doom headlines about an ever-impending recession may be factors, but so is — what The Atlantic calls — the “Economic Annoyance Index.” People’s personal financial situations feel stressful — they’re bothered by rising inflation driving up prices of essentials (and everything else), high interest rates keeping them from buying a new house or a car, and a nagging nostalgia that life used to be better. “Things are great, but folks are mad. All we need is for prices to come down, interest rates to stabilize, housing markets to normalize, polarization to decrease, and the news media’s incentives to change. Until then, the Economic Annoyance Index will just keep getting higher.”
America’s downtowns are empty. Fixing them will be expensive. The era of remote work brought about a median drop in foot traffic of 26% since 2019 across major U.S. city centers, and restaurants and shops are shuttering. Some cities — like Minneapolis, which has seen a 44% decline in foot traffic — have been pushing to transform office districts into neighborhoods where people live, work, raise families, and partake in entertainment and fun, but it will take years and billions of dollars to implement large-scale changes. One challenge: Nationwide, only 0.8% of office buildings meet all the criteria to be converted to apartments. Other obstacles include crime, downtown layouts that aren’t well suited for family life, and the idea that no one wants to be downtown if nobody else is. “Failure to arrest the decline risks the loss of remaining residents and businesses, as well as tax revenue, in a downward spiral that could take U.S. cities decades to escape.”
Welcome to the age of the hermit consumer, says The Economist. In 2020, when people were stuck at home due to Covid lockdowns, spending on goods from exercise bikes to computer equipment increased, while services like hotel stays and haircuts decreased. According to The Economist, some of those numbers haven’t bounced back and it's a sign of a real shift in behavior. “Rich-world consumers” are spending $600 billion less a year on services than they were expected to. People are less interested in leisure activities and services outside the home and are instead purchasing furniture, appliances, clothes, food, and wine.
Golf courses are so 2015. Now, people seal the deal with a cold plunge. The Wall Street Journal spotlights the newest eccentric way to close business deals: a communal ice bath, a practice some wellness experts claim reduces stress and inflammation and boosts mental clarity. Some executives and entrepreneurs say makes people more open and receptive. “There’s nothing more bonding than suffering together.”
As hybrid and remote work has taken off and more workers have moved away from major cities, food halls, a hot real-estate investment, are now conquering the suburbs. Once just a staple in metropolitan areas, these dining venues that feature an array of indie restaurants and ethnically diverse cuisines are popping up in places like Omaha, NE, Grapevine, TX, and Selma, NC, since they can now attract both nighttime and daytime customers. There’s expected to be a 33% increase food halls open by the end of 2024.
Baby Boomers are aging; their kids aren’t ready. Vox delves into our country’s caregiving crisis, revealing that nearly 25% of Americans—and more than half of people in their 40s—are sandwiched, meaning they take care of kids in addition to at least one parent over 65. Others have put off having children because they are burnt out from caregiving for a parent. Many are caregiving while trying to keep their jobs, sacrificing earnings, and shelling out an average of $7,242 out of pocket every year on health expenses. As The Wall Street Journal reports, an estimated 18.7 million caregivers now are men, up from 16 million in 2015. Many men say they’re experiencing a steep learning curve and feel ill-equipped. “It can take a particular emotional and financial toll on sons because they tend to keep things to themselves, don’t seek support, and feel uncomfortable providing personal care.”
Americans are falling behind on car payments at the highest rate in nearly three decades. The percent of borrowers at least 60 days past due on their loans increased to 6.11% in September. With car prices soaring, the Federal Reserve looking to keep interest rates higher for a longer period of time, and school loan repayments starting soon, those who are budget-crunched won’t be seeing relief any time soon. “The subprime borrower is getting squeezed. They can often be a first line of where we start to see the negative effects of macroeconomic headwinds.”
New data on SAT test scores reveals the inequality of American education: One-third of the children of the very richest families scored a 1300 or higher on the SAT, while less than 5% of middle-class students did. Just 1 in 5 children from the poorest families even took the test. “Kids in disadvantaged neighborhoods end up behind the starting line even when they get to kindergarten. On average, our schools aren’t very good at undoing that damage.”
Why are the lifespans of Americans shorter than those of peer nations? Stress is weathering our bodies from the inside out, says The Washington Post. Socioeconomic factors out of our control continually activate our fight-or-flight response and the production of cortisol to try to return us to a normal state. The repeated triggering of this process eventually leads the body to malfunction. While anyone can be susceptible to this “weathering,” research has shown marginalized communities are most vulnerable. For instance, more Black people tend to get hypertension, diabetes, and strokes 10 years earlier than White people. “It isn’t just living in an unequal society that makes people sick. It’s the day-in, day-out effort of trying to be equal that wears bodies down. Weathering helps explain the double-edged sword of ‘high-effort coping.’”
Gen Z and Millennials are working several gigs to get by, but it’s not enough. More than 4% of Millennials and over 3% of Gen Z are working side hustles to make ends meet (if those numbers seem low, they’re more than double what they were six years ago). Considering Boomers possess half of America’s wealth, at $96.4 trillion, it may seem that once older generations start to pass away, younger people will inherit some of that to help them catch up financially. But this might be the myth of the Great Boomer Wealth Transfer. Instead, what may likely happen is that most of those savings will get eaten up by Boomers’ long-term care and end-of-life costs, leaving younger people pretty much in the same boat as they were in.
Portfolio Highlights:
The Wall Street Journal looks at three at-home tests for measuring biological age, including Tally Health.
The Humane AI Pin makes Time magazine’s list of the Best Inventions of 2023.
Ampla makes Inc.’s Power Partner Awards 2023.
Ritual’s co-founder and CEO Katerina Markov Schneider and chief scientific officer Dr. Nima Alamdari offer insight to Bustle about regulation limits in the supplement industry and what consumers should look for when shopping.
CBS News, Observer, and Entertainment Tonight announce Away’s new holiday collection.
Michael Furstenberg is the new vice president of Duos.
Oura expands into Canada with its Best Buy partnership.
Work at a Portfolio Company:
VP of Communications | The Farmer’s Dog: The Farmer’s Dog is the fastest growing pet health service company in the US, born from a mission to change the landscape of pet health with honest, smart, and simple products and care. This role will lead and oversee the company's public relations efforts, playing a critical role in telling the company’s story to dog lovers, the veterinary community, like-minded partners and regulatory bodies that impact the mission.
Direct of Investment Operations | Homebound: Homebound is making it possible for anyone, anywhere, to build a home using technology, transforming the residential construction industry by improving the costly and inefficient process. The role will sit at the intersection of all functional areas, combining structured finance, lending operations, data analytics, and building and scaling the overall financial operations framework.
UX/UI Designer | Stan: Stan is helping people make a living and work for themselves by providing a suite of services for people to run their own content creation businesses. This role closely collaborate with the engineering and product owners, generating ideas and translating visions into visual concepts.
There are ~555 other openings on our jobs site. Check ‘em out.