The CQ: The U.S. Economy Reaches "Superstar Status" Even As Funflation Winds Down
The Forerunner Team's Must Reads of the Week
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By Forerunner
Early this year, we published an article in The Information about how the performance consumer startups meets (and often surpasses) that of enterprise startups. This was based a review of over 12,000 tech companies that raised a series B since 2012, where 7,800 were then classified as enterprise or consumer and analyzed.
We received a lot of interest in the report and its underlying data, so this week, we published the larger body of research we did to produce this analysis. People can now flip through the data themselves to get a more granular view of how startups fare in both markets.
Overall, evaluating enterprise vs. consumer is a more nuanced effort than any one research report can show (even one based on analysis of 7,800 companies). But if we were to give a TL;DR on what we’ve learned, it’s that the consumer startups shine with the Rule of 40, are as likely to go public, and are as likely to fetch 10x< revenue multiples at IPO.
Now, as AI ushers in a wave of new business models and value propositions, we’re entering a cycle of fundamentally new change and growth across all industries. Consumer is especially well-positioned: it’s known for its agility, adaptability and business model variation, and the top companies are almost always born out of a major technological shift. That means the next generation-defining consumer businesses are being built right now. (More on this to come in another post!).
Check out the full report and let us know what you think.
What We’re Talking About on Slack:
The Atlantic says, if the United States’ economy were an athlete, right now it would be peak LeBron James. “From the end of 2019 to the end of 2023, U.S. GDP grew by 8.2%—nearly twice as fast as Canada’s, three times as fast as the European Union’s, and more than eight times as fast as the United Kingdom’s.” Unemployment is historically low, wages are increasing faster than costs, household wealth is rising, and that recession that experts keep predicting never seems to materialize. Meanwhile, Japan and Germany, which previously had some of the strongest economies in the world, are in the midst of a recession, mass layoffs, and street protests.
A lesson Gen Z is learning: your manager is not your therapist. “On TikTok, people are recording their on-the-job breakdowns. Across social media, Gen Zers swap tips on avoiding toxic workplaces.” A 2023 survey revealed Gen Z is nearly twice as likely as other generations to admit they struggle with their mental health and almost half are cool with talking about it at work. Another poll found 75% of workers think it’s appropriate to discuss mental health at work, and even more said supervisors and senior leadership were responsible for helping employees feel comfortable discussing their mental health. But now psychologists say all this focus on one’s issues can make people feel worse, leading to self-fulfilling prophecies and rumination.
Enrollment in vocational programs was up 16% last year, and now Gen Z plumbers and construction workers are making #bluecollar cool. On TikTok, the hashtag #bluecollar had 64% more posts in the first four months of 2024 than in the same period last year. (#electrician and #constructionworker saw similar bumps of around 77%). With videos about installing boilers and surprisingly high blue-collar wages, some skilled-trade influencers are making more from clicks and brand deals than from their day jobs, with a few raking in $200k+ a year.
U.S. small-business optimism improves to the highest level this year. The National Federation of Independent Business sentiment index increased 0.8 point to 90.5, which is slightly better than projected by Bloomberg’s survey of economists. The report also showed that the share of businesses planning to increase prices jumped 2 percentage points to 28%.
Promotions are hard to come by, blocking entry-level workers from even starting. According to ADP, the annual rate of promotion into management fell for nearly all workers last year. With a labor market that has fewer people quitting their jobs, employers are under less pressure to give promotions. Adding to that is more companies looking to trim costs and eliminate unnecessary layers of management. That lack of movement means there’s little opportunity for young people to get their foot in the door.
Americans are getting pickier, but they are still spending on hot items. Consumers’ interest in big-ticket home purchases has dropped off, with falling sales on electronics (down 1.9%) and homewares (4.2%) in the first quarter. That’s not stopping them from shopping for other nice-to-haves from on-trend brands like Hoka, On Holding, Vuori, and Skims. The categories that saw a sales boost include clothing (up 2.3%), sports goods (up 1.9%), and footwear (up 0.4%).
The ‘funflation’ economy is winding down as the ‘hard pass’ attitude takes over and major artists, from Jennifer Lopez to The Black Keys, cancel concert tours. While Taylor and Beyonce may still be able to charge top dollar, consumers may be feeling sticker-shock from the exorbitant prices of concert tickets these days—between 2019 to 2023, the average cost went from $91.18 to $122.84, increasing at a rate that outpaced inflation. There’s also the fact that more artists are touring more often because they can make more money from touring than streaming. “But since fans’ time—and wallets—are finite, that ultimately translates to a smaller slice of the pie for some performers.”
What retail apocalypse? Shopping centers are making a comeback. Demand for retail space has finally exceeded supply for the first time in 20 years. The shopping centers that are thriving are the ones featuring restaurants, venues, and recreational experiences beyond retail shops. Developers are on the hunt to find other potential locations, whether in the form of troubled retailers or properties that can be converted. “A handful of threats could derail the good times. Most notably, industry experts say, consumers are feeling squeezed by inflation and have pulled back on discretionary spending, as recently reported in Walmart’s and Target’s quarterly earnings. Shopping center owners and retailers alike are being pressed by higher interest rates as well as the increasing cost of construction and insurance, all of which elevate occupancy.”
Internet addiction alters brain chemistry in young people. Researchers examined how different regions of the brain interact in people 10-19 years old with internet addiction. There was increased activity in parts of the brain when participants were resting and a decrease in functional connectivity in parts of the brain involved in active thinking (the parts responsible for memory and decision-making). “This can lead to potentially negative behavioral and developmental changes that could impact the lives of adolescents. Ex: they may struggle to maintain relationships and social activities, lie about online activity and experience irregular eating and disrupted sleep.”
Welcome to the dawn of the AI smartphone era. Apple and Google announced their upcoming AI software updates that will be available in the fall. Apple says its completely revamped Siri, which will be powered by a LLM that will allow users to talk more naturally with the assistant. iPhone users will also be able to access AI to generate images, summarize articles, and write texts and emails. Meanwhile Google’s upgraded version of Gemini, called Nano, will be able to offer homework help, scam detection during phone conversations, as well as an automatic rundown of audio transcripts.
Portfolio Highlights:
Time features Henley Vazquez, co-founder of Fora, who shares her advice for planning a restful vacation.
The launch of Away’s new collaboration with La Ligne is covered in Forbes, Fast Company, Town and Country, The Hollywood Reporter, Variety, Good Morning America, and Entertainment Tonight.
Forerunner Highlights:
Founding partner Kirsten Green speaks with Fortune about Forerunner’s recent research report on consumer startups.
Kirsten also joins the This Week in Startups podcast, sharing her thoughts about standing out in consumer venture, where there are opportunities, and more.
There are ~565 open jobs at Forerunner portfolio companies, check them out.