Previously published on Fast Company.
If I were a budding founder building a product in early 2021, my first consideration would be timing. What will the world look like in the next 6, 12, and 24 months? Where will my product fit in the new context? Will it?
When venture capitalists decide whether or not to invest in you, timing is probably the most delicate criteria to assess. Often, the hard question is not whether a technology or a product will disrupt an industry, but when that will happen.
A key aspect here is the friction that product will face when bringing it to the market; for example: whether customers will have to substantially change their behavior to adopt that new product. With COVID-19 causing the most dramatic changes to human behavior in our lifetime, some consumer trends have been wildly accelerated, while others have emerged unexpectedly. This alone has altered the amount of time many products will need to become mainstream (or disappear).
So, if I were a founder about to build a product in early 2021, I would ask myself two questions, in this order:
- Is this a problem that is worth a decade of my life?
- Will the next 2-3 years be the right time to bring this solution to the market?
The second question is the most relevant in assessing the likelihood of my success. Nobody can determine exactly where we will be in a year, but there are things about consumers and the pandemic that we know for sure today. For example, that it will take a long time to develop population immunity via the vaccine, meaning many “pandemic” behaviors will continue to strengthen. Also, the process will take different lengths of time in every country, depending on their distribution capabilities and the population’s eagerness to get vaccinated.
When we project these into the future, we can understand what the markets might look like.
So here are some consumer behaviors that I expect to see happening over the next two or three years, and how founders can create products that are in harmony with those trends.
The K-shaped recovery
The economy will especially suffer in emerging economies. The recovery has required countries to abruptly increase their debt, which will have to be repaid at some point. Regardless of whether you’re building a B2C or B2B, pay attention to the unemployment rate of the market you will target. An economy that can quickly create jobs will soon return to previous consumption levels, and it will gradually repay its debt thanks to tax collection. That will be the case in the United States. But it might not happen in other countries that have traditionally been dependent on industries that have been severely hit (and won’t immediately bounce back), like tourism. For example, in Mexico, tourism represents almost 10% of GDP. It will take some time before those countries get back to previous levels of consumption.
When it comes to consumers, we can probably expect a K-shaped recovery, where some consumers will do well and some others won’t, depending on their jobs. For instance, this crisis might be long enough to kill restaurants or hotels that had been severely hit. But at the same time, food delivery companies will be accelerating their growth; the recent success of Instacart is a good example.
Sir Arthur C. Clark’s prediction more than 50 years ago is finally happening: Men will no longer commute, they will communicate. If this visionary is right, cities and suburbs will be different moving forward. We are seeing a lot of buzz around founders and companies leaving Silicon Valley for Miami or Austin.
Large companies have already announced that their workers will continue to WFH beyond the rollout of the vaccine, and many people who have relocated during the pandemic won’t be rushing back to overcrowded and overly expensive cities.
This can only be good news for the startup world, as innovation is not a zero-sum game: The strength and uniqueness of Silicon Valley is compatible with new hubs popping up in other geographies, probably with a different DNA and focus.
For instance, if you are building a startup that also targets customers in Europe and Latin America, I cannot think of a better hub than Miami these days. The most determining factor when deciding where to locate your startup is usually the location of your team and your customers—but if your team is now working remote, you’ll only have to think of being within reach of your customers (and maintain good team communication).
If many jobs are no longer attached to cities, maybe socializing will be the main reason to pay high rents in the city. Business trips? I would imagine myself making less, but on average more meaningful, business trips, which means I will be willing to pay higher for those few business trips.
What does this mean for new entrepreneurs? For those looking at real estate, they’ll need to factor in future changes in the attractiveness of (former?) business districts and inner-city residential areas. For those into holidays and leisure, they may be looking at less demand but higher-paying customers. And as we spend more time at home, I expect to see a lot of innovation in this space: We are already witnessing fitness at home exploding as a new category, and gardening becoming part of our routine.
David Rubenstein, founder of legendary private equity firm Carlyle, said that he recently learned how fragile life can be. I believe the consumers in Western economies now feel more vulnerable than they did in 2019 and will pay more attention to health and prevention (for them and their loved ones).
We’ll probably start demanding more tools and services that enable us to track our health—such as wearable devices—for not just our physical but also our mental fitness. The same goes for products that connect consumers with faster, cheaper, and more accessible healthcare, virtually or in person. This includes technology that allows us to share our health data easily, facilitate diagnosis, or even improve self-diagnoses.
But don’t stop at human health: There are over 100 million cats and dogs in the United States. Don’t they also deserve some attention? There is tremendous value to be unlocked from wearables in the pet space. Now match the data coming from pet wearables with predictive analytics and you will get a whole new industry: pet’s telehealth and insurance.
Digital fluency is effectively understanding and employing digital tools. Throughout the pandemic, business, schools, and people could continue their lives, at least to a certain extent, thanks to digitalization. The no-code movement is stronger than ever, allowing non-specialized users to build and launch digital products without an engineer in their founding team. I expect to see a powerful wave of innovators who previously had a barrier to launch digital products now thriving.
Technologists are more bullish than ever, as their products have proven crucial to overcome this crisis (could you imagine bitcoin replacing gold as a safe-haven asset? The world’s largest asset manager now says yes). But for such disruptive technology to achieve its full potential, we need to close the gaps in digital fluency and accessibility. That will require true access for populations who don’t have the resources, connectivity, or education to tap into the newest technologies. It also means we’ll probably pay more attention to systems and apps that can ease less familiar users—the elderly, for example—into digitalization, with easier interfaces or training tools. In the next decade, I believe we will see access to the internet become a human right.
It took humankind a couple of centuries to understand that there is only one planet, but in large part we finally got our head around it. However, as resources and wealth are not uniformly distributed, those economies that can afford it will probably fully embrace sustainability faster.
The shift towards a more sustainable economy is happening from both the top and the bottom of the consumption pyramid. From the demand side, consumers are already demanding companies to embrace this change. From the supply side, companies are responding.
But perhaps more importantly, those who are investing large pools of capital, such as pension funds, are demanding that money managers such as private equity firms (including venture capitalists) invest in a more sustainable economy. If you are building a digital product, my bet is that, in a few years’ time, consumers will ask you to share how much energy it takes to run it on their cell phones. The code of the future will be environmentally friendly, or it won’t last. So, if you are raising venture capital in 2021, make sure you have an impact on at least one of the 17 UN Sustainable Development Goals, and you’ll increase your likelihood of getting funded.