1、2023andBeyondDisruptorsEmergeintheFaceofChangeTheSlowdownSpeedsUpStateofConsumerInternet20232StartupsShiftFocusasExitPlansArePutonHoldSteppinginto2023,atoughermarketenvironmentpersists:Elevatedinflation,continuedinterestratehikes,risinggeopoliticalrisk,andfalling
2、consumersentimentdotthemap.Once-pandemic-relatedtailwindshavenowbecomeheadwinds,causingeconomicgrowthtoslow,publicmarketstofall,capitaltobecomescarceandconsumerstoscalebackonspending.Yetwhilethecurrentlandscaperemainschallenging,thisispreciselywhendisruptorsare
3、born.Today,foundershavetimetoslowdown,focusonproductmarketfitanddeveloplong-lastinginnovations.Furthermore,recenttechindustrylayoffswillprovideagreateravailabilityoftalenttofoundnewcompaniesgivenfallingopportunitycosts,fuelingthenextwaveofinnovation.Thekeyforco
4、nsumerstartupswillbetwofold.First,companieswillneedtobeagileandnimble;theabilitytoquicklycutburnandextendcashrunwaywillbeparamount.Companieswillneedtobecomegrittierandstretcheverydollar.Thiswillultimatelyforcethemtobemoreefficient,betterequippedforlong-term
5、growthandbetterpreparedtomeetthedemandsofexitmarkets.Second,startupswillneedtocapitalizeonshiftingconsumertrends.Forexample,consumersincreasinglywantamorepersonalizedexperience,yettheyexpectmoreprivacy(looknofurtherthanthedemiseofcookiesandcross-apptracking).T
6、heongoingproliferationofgaminghasledtogreaterdemandformultiplatformandon-demandgames.Corevaluesarecontinuingtoshiftamongstconsumers,especiallyasthedemographicofthemodern-dayconsumerchangesasyoungergenerationsmakeupagreaterpieceofthepie.Factorssuchassustaina
7、bilityandenvironmentalimpacthavenotcheduptheprioritylist.Thesearejustsomeofthechallengesandopportunitiesstaringdownconsumerstartups.Onlycompanieswiththebesttechnology,ideasandgo-to-marketstrategywillclearthehurdles.Luckily,thereisnoshortageofinnovativeideas.Thr
8、oughoutthisreport,wehighlightafewexamplesofnichesdisruptingtheconsumerspace,fromreverselogisticscompaniesspecializinginbrandedrecommercetoemergingsubsectorswithincommerceenablement.Withcarefulnavigation,consumerstartupscantakeadvantageofleanertimesandshiftingcons
9、umerpreferencestobuildbetterbusinesses.Thisisthemomentwhenstartupscancapitalizeontheopportunitypresentedandturnthemselvesfrommarketplayerstoamarketleaders.Webelieveinthesecompanies,andwebelieveintheinnovationeconomy.SeniorMarketManager,ConsumerInternetStateof
10、ConsumerInternet20233StateofConsumerInternet20234BrickandMortarRevivalConsumersarebackoutinthephysicalworld,butthecommercialspacesofoldneedreinventing,givenreduceddowntownofficefootprintsandpandemicclosures.This,coupledwiththeneedtocutthroughincreasinglynoisyon
11、linechannels,posesanopportunityforcompanieslookingtoreachconsumerstheanalogway.Offeringcustomersanexperienceincreasesloyalty.NotableCompaniesFormedduringtheGFC(2007-10)EntrepreneurEnablementThereshufflingoftheworkforcecoupledwithinflationarypressuresplacesgreaterimp
12、ortanceonthesidehustle,andontoolsthatcanhelpindividualentrepreneursandcreatorsefficientlymonetizetheiroutputandproductsbothinphysicalanddigitalworlds.APrescriptionforSubscriptionsMorecompaniesareleaningintopaidsubscriptionsasapredictablesourceofrevenue.Followi
13、ngAmazonsPrimemembershipmodel,Walmart,BestBuyandBarnes&Noblenowofferpaidannualmemberships.Weexpectotherstofollowsuit.Themodelresonateswithinvestorsandcompanieswhofavorthereliabilityofsubscriptionrevenueandthebenefitsitcanhaveonretention.CAConTrackWithprofitab
14、ilityinthecrosshairs,consumertechcompaniesareprioritizingacquiringfewer,higher-qualitycustomers.Customeracquisitioncosts(CAC)areunderscrutinyasinvestorswantthebiggestbangfortheirbuck.Thishasledtoadrawbackinspendingwitharound60%ofconsumertechcompaniesdecreasingth
15、eirmarketingspendYoYasofQ42022.1VerticalCommunitiesAssocialmediamigratestowardcontentforentertainment,usersareseekingnewchannelsforconnectionbasedonsharedinterests.Itsanaturalextensionthatthesemorecuratedspaceswouldinvitecommerceopportunities.Weexpectbrandsan
16、dcreatorstomonetizetheseemergingsocialspaces.Afterall,moreengagedusersaremoreengagedcustomers.M&AManiaValuationsarebeginningtoresetafterreachinghighmarksin2021.Asthebacklogoflate-stagecompaniesbuildsamidaclosedIPOmarket,pressuremaygrowforfounderstoachievean
17、exit.Withsomepublic,andmorescaledprivatecompaniesflushwithcashfromtherecentbullmarket,weexpectstrategicacquisitionstospikein2023.ThequestionisatwhatvaluationItmaynotbepretty.AIforE-commerceArtificialIntelligence(AI)tookaleapforwardinthelastsixmonths.E-comme
18、rcepresentsanidealspaceforthesenewtechnologiestotakeroot.Writingtaskssuchasadcopy,productdescriptions,andmarketingemailscanbespedup.Thetechcouldalsoimprovecustomersupportandenablemorepersonalizedmarketingandshopping.Evenreportsabout,say,ConsumerInternet,couldb
19、ewrittenwithAI.WasthisoneWellnevertell.2StreamingGetsInTheGameGamingwithstreamingandsubscriptionserviceswilllikelycontinuetogrowmorerobustthankstoanincreaseingamesthatareavailablecross-platformandimprovedinternetspeeds.Theremayalwaysbeasegmentofgamerstha
20、tprefertheperformanceofPCandconsoles,buttheaccessibilitystreamingofferscontinuestoaddvalueforgamers.RecommerceRisingMorebrandswilllikelyreclaimtheirsecondhandsupplychain.Third-partylogisticsprovidersareenablinganybrandtoestablishandorwhite-labelaresaleprogram.
21、Thisoffersbrandsanewsourceofrevenueandbrandprotection.Consumerscanbothsavemoneyandshopmoresustainably.Notes:1)Seepage9.2)Itwasnt.4.1%6.7%6.6%11.2%19.1%-4.8%-8%27%-10%0%10%20%30%2004200620082010201220142016201820202022YoYchangeNotes:1)Debtpaymentsaveraged9.7%ofdisposableinc
22、omeinQ32022downfrom13.2%inQ42007.2)Personalsavingsaveraged14.3%ofdisposableincomein2020-21,upfrom3.5%in2006-07.3)AveragemonthlyreturnsindexedtothesettlementpriceonJan3,2022.4)Ratesandyear-over-year(YoY)changebasedontheDecember(orlatest)readingforeachyear.Federal
23、FundsRateisthedefaultlendingratetobanks.5)Spendingandinflationdataexpressedasaverageannualpercentagechange.InflationistheYoYchangeintheConsumerPriceIndex(CPI).Source:St.LouisFed,MorningConsult,BureauofEconomicAnalysis,S&PCapitalIQandSVBanalysis.AverageUSInteres
24、tRatesbyType4StateofConsumerInternet20236S&P500NASDAQ-90%-80%-70%-60%-50%-40%-30%-20%-10%0%Jan22Mar22May22Jul22Sep22Nov22Jan23GFCPandemic21%8%5%1%0%-1%-9%-10%-10%-12%-14%-19%-22%DuringtheGFC,spendingondurablegoodsplungedasconsumerspostponedbig-ticketpurchases.Stimulusspen
25、dingCOVID-19lockdownYoYchangeinNov2022Forallitsintensity,thecurrenteconomicslowdownhasfailedtodeliverwidespreaddamage(yet).Yes,economicgrowthhasslowedandpublicmarketshavebeenpummeled,especiallytechstocks.However,unliketheGFC,whichwasmarredbysweepingjoblosses,fore
26、closuresandbankruptcies,thecurrentdownturnhaslargelybeenabsorbedbyshareholders.Profitsfromthepandemic-fueledbullrunhavelargelyshieldedthebroadereconomy,asfundamentalslikeemploymentandwagegrowthremainpositive.Yettheprevailingoutlookisgettingmorenegative.AJanuaryp
27、ollbyTheWallStreetJournalfoundthat61%ofeconomistsexpecttheUStoenterarecessioninthenext12months,upfrom18%ayearago.Consumertechhasnotbeenimmunetotheimpactsofthedownturn.Areversalofpandemictrendslikeonlineshoppingandremoteworkcaughtcompaniesflat-footedl
28、astyear.InJune,Shopifylaidoff1,000employees,roughly10%ofitsworkforce.CEOTobiasLtkesaidthecompanyoverestimatedthepermanenceofonlineshoppingshiftsingrowingtoorapidly.“Itsnowclearthatbetdidntpayoff,”Mr.Ltkesaid.OtherbigconsumertechcompaniesincludingMeta,Alphabet,T
29、witterandSnapfollowedwithlayoffsinH22022,insomecasesunwindinghiringspreesfrom2021.Thepullbackcomesashighinflationandrisinginterestratesaredampeningconsumerspending.Homeandautosalesneardecadelowsin2022.Householdsavingsratesfellto3.4%,downfrom7.5%ayearago,a
30、ndconsumerconfidenceishoveringneartherecordlowreachedinJune2022.Whileinflationisfinallyabating,astrongerthanexpectedJanuaryjobsreportmayconvincetheFederalReservetokeepraisingrates.However,itsnotalldoomandgloom.Consumersarebetterpreparedtoweatherarecessiont
31、odaythanpriortopastdownturns.Householdsoffloadeddebt1andsaved2duringthepandemic,andemploymentremainshighfactorsthatcouldbuoyarecovery.SelectConsumerTechStockReturns3Q42020Q42021Q42022BasisPointIncrease2021to2022InflationandUSPersonalExpendituresbyProductType5Dur
32、ableGoodsNon-DurableGoodsServicesInflationRecessionDurableGoodsNon-DurableGoodsServicesFederalFundsRateMortgage(30yr.)Auto(60mo.)Personal(24mo.)CreditCardEducationHealthcareGroceriesHousingHotelsGas/fuelHomeFurnishingsRestaurantsApparelAlcoholAutoPaymentsPersonalCareServicesAirfare40236
33、1188214456-8%-7%-6%-4%-3%WomensClothingStationeryMensClothingShoesCosmeticsFurnitureJewelryNewVehiclesRVsBicyclesUsedVehiclesSmallAppliancesHomeDcorComputersMajorAppliancesTVsFlooringBoatsDishwareMotorcyclesToolsOutdoorEquipmentAircraftCoffeeandTeaWomensClothingMensClothingFoodatRestau
34、rantsShoesSodasCosmeticsAlcoholatRestarauntsFreshProduceBeerPrescriptiondrugsStationeryWineCleaningProductsGamesandHobbiesPersonalCareProductsSpiritsMovieTicketsHealthInsurancePackageDeliveryRetailBankingStudentHousingLiveShowsDoctorVisitsHotelsMuseumsandLibrariesInternetChildcareT
35、VServiceMovingandStorageDrycleaningTailoringandAlterationsComputerSoftwareHospitalsHouseholdRepairsHigherEdStateofConsumerInternet20237Yachtdealersmaybeinforaroughyear.Whentimesaretough,luxuriesarethefirsttogo.DuringtheGFC,AmericansboughtfewerRVs,motorcycles,TVs,furn
36、iture,andevennewcarpet.Ifitcouldwait,itdid.Newvehicles,usedvehicles,jewelry,clothing,vacationshouseholdsslashedbig-ticketpurchasesacrosstheboard.Fortechfounders,thisshiftinconsumerbehaviorpresentedanopportunity.Whilelargeincumbentsstruggletoadaptquicklytochange,start
37、upscancreatestrongfootholdsinthemarginsofadownturn.In2008,BrianCheskyandhisroommatesrecognizedthattravelerswerelookingforanaffordablealternativetohotelrooms.TheystartedbyrentinganairmattressintheirSanFranciscoapartment.Today,Airbnbisoneofmanysuccessfultech
38、startupstoemergefromtheGFC.Downturnscannotonlybeagreatfoundationfromwhichnewcompaniesarespawned,buttheycanalsoserveasacceleratorsforexistingstartups.Shopify,forexample,wasatwo-year-oldcompanystrugglingtoscalein2008.Thesurgeinsmallbusinessesthatarosefromsi
39、dehustlesduringtherecessiongaveShopifyacriticalboost.Consumercompaniescanalsoleanintogrowthtrendsduringdownturnsasnoteveryspendingcategorydeclines.Consumersmaywaitonbig-ticketitems,butsplurgeonsmallerpleasureslikecoffee,restaurantsandmovies.Uberrodethiswaveby
40、offeringaffordabletransportationatatimewhenautosalesweredown.Groupondidthesamewithdiscountsonrestaurantsandentertainment.Essentialserviceslikehealthcareandeducationareresilientwhentheeconomyisstressed.Highereducationisboostedwhenunemployedworkersgobacktoscho
41、olorseekupskillingprograms.IftheUSdoesenterarecessioninthenearfuture,itsprobablethatanewroundofdisruptiveconsumertechcompanieswillbeseeded.Thatsaid,notallmarketdownturnsarethesame.Savingsfromthepandemichaveinfusedhouseholdswithmorecashthan2008.Itsreasona
42、bletoexpectthatspendingcutsmaynotbeaspronouncedthistimearound.IndexofSelectUSPersonalExpendituresDuringtheGlobalFinancialCrisis1DurableGoodsNon-DurableGoodsServicesNotes:1)Selectexpendituresplottedasanormalizeddistributionofthepercentchangeinspendingfrom2007to
43、2009onthex-axisandthetotalexpenditurein2009onthey-axis.2)Notablecompaniesarethosethatwereeitherfoundedorreceivedtheirfirstfinancingbetween2007-2009.Source:BureauofEconomicAnalysis,PitchBookandSVBanalysis.DecreaseIncreaseSmallerLargerPhoneServiceMarketSizein2009Ch
44、angeinConsumerSpending2007to2009FinanceandPayments-41%-25%-25%-21%-14%RVsBoatsNewCarsFurnitureTVs-17%-17%-10%-9%-5%HouseholdRepairsMovingandStorageRetailBankingTailoringandAlterationsHotelsNotableConsumerTechCompaniesFormed:2007-092TransportationHomeImprovementRetailandeCommerc
45、eHotelsandTravelHealthcareandFitnessEdTechRecession-ProofMass-MarketGoodsandServicesRecession-VulnerableMass-MarketGoodsandServicesOpportunityforDisruptionOpportunityforGrowthExpectedTwo-YearChangeinMarketingBudgetDuetoShiftAgainstCookies1Notes:1)Basedona2022surveyof
46、morethan175Fortune500marketingleaders.2)Shareofconsumertechcompanies,asdefinedbySVBproprietarytaxonomy,utilizingselectadplatforms.3)CPM=CostPerThousandImpressions.4)Companieswithatleast$100ofmarketingspendperquarter.Revenuebucketsarebasedon2022annualizedrevenue.So
47、urce:LoyaltyResearch/RepData,VaynerMedia,VogueBusiness,SensorTower,FinancialTimes,SVBproprietarydataandSVBanalysis.ShareofUSConsumerTechCompanieswithDecreasingMarketingSpendYoY4StateofConsumerInternet20239ShareofConsumerTechCompaniesUtilizingSelectAdPlatforms2Third-p
48、artycookieshavecrumbled.WhatstartedwithaniOSprivacyupdateinMay2021hasfundamentallychangedhowconsumercompaniesmarkettheirproductsonline.Third-partyadvertisersarenowlimitedinwhattheycanseeaboutiPhoneusersactivity.AlphabetplanstoimplementsimilarrestrictionstoAn
49、droidusersnextyear.Thenewrestrictionsimpacttheadvertisersabilitytotargetadsaswellasmeasureperformanceandattribution.Subsequently,paidsocialandsearchhavetakenahit,withmanybrandscitingincreasedcostsforlesseffectivetargetingasaresult.Butthesetwostrategiesarent
50、outoftheringjustyet.Ina2022surveyofFortune500marketingleaders,53%and47%expecttoslightlyincreasesocialmediaandpaidsearch,respectively,despitetheshiftagainstcookies.1Ascostscomesundermorescrutiny,companiesareprioritizingacquiringfewer,higher-qualitycustomers.Thissh
51、ifthasaccompaniedageneralpullbackinmarketingspend.Amongconsumertechcompanies,nearly60%aredecreasingtheirmarketingspendYoYasofQ42022upfromanaverage39%inQ12022.Lookingahead,tensionsbetweenbrandswantingtoacquirecustomersandconsumerswantingprivacycanbepartlymed
52、iatedbyofferingvalueinexchangefordata.Brandscanofferdiscountsforfriendreferralsorrewardsthroughaloyaltyprogram.Thesetechniqueshelpbrandscapturezero-partydatadataacustomerintentionallyshares.Whenitcomestoreachingconsumers,alleyesareonTikTok,literally.Theservice
53、becamethemostdownloadedappintheworldin2022.TikTokusersspendtwiceasmuchtimeperdayontheappastheydoonFacebookandInstagram,accordingtoSensorTower.Sincelaunchingtheiradplatformin2020,morecompanieshaveturnedtoTikTokdespiteanumberofinstitutionsseekingtoban
54、it.BasedonSVBproprietarydata,in2022,thenumberofconsumertechcompaniesspendingonTikTokadvertisingincreased57%YoY,whileTwitter,AlphabetandFacebooksawslightdeclines.2%8%16%12%4%14%20%27%41%35%30%24%28%23%32%41%44%43%43%32%47%53%24%17%13%12%11%9%2%4%1%1%0%PodcastsOfflineAds/Direct
55、MailProgrammaticAdNetworksOver-the-Top-AdvertisingPartnershipMarketingInfluencerMarketingEventsEmailMarketingOrganicSearchPaidSearchSocialMediaSignificantIncreaseSlightIncreaseDecreaseQ12022Q22022Q32022Q42022RevenueBand40%42%31%40%58%48%51%45%58%54%52%58%59%61%61%56%$0-$1M$1M-$15M$15M
56、-$50M$50M+0%10%20%30%40%50%60%70%80%90%100%Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4202020212022Between2021and2022,thenumberofcompaniesspendingonTikTokincreased57%.1.4xCPMasaproportionofTikTok31.1x1.8x2.6xSearchenginefore-commercewebsitesSalesJourneyAI-poweredvisualsearchAI-enabledconversatio
57、nalsalesforexistingcustomersCustomerloyaltyplatformPurchaseRetentionAdvocacyFulfillmentAwarenessConsiderationCommerceEnablementHypeCurveCustomerJourneyCommerceEnablementSelectExamplesMulticarriershippingplatformfore-commerceSubscriptionmanagementTurnsShopifystoresintoamobi
58、leappWhensupplychainswereatastandstillanddemandforgoodssurgedduringthepandemic,commerceenablementcompaniesseemedtohavetheMidastouch.Frommobilecommercetofulfillmentanddelivery,enablementcompanieshelpingretailersconnecttocustomersonanypointalongthecustomerjour
59、neywereinhighdemand.Fast-forwardtonowandthelandscapehaschanged.Commerceenablementcompaniesarefeelingthestrainofweakeningconsumerspending.Whilethesecompaniesaremainlybusinesstobusiness(B2B)andarethereforeshieldedfromsomevolatility,theyarefeelingthecrunchfromcos
60、t-cuttingasclientsscrutinizeeverylineitem,downtoindividualsoftwarecontracts.Giventheseheadwinds,andthebroadermarketslowdown,VCdealsforselectcommerceenablementsubsectorsdeclinedin2022,withreverselogisticsasoneofthefewbrightspots.Areassuchaslivestreaming,headlessc
61、ommerceandfulfillmentanddeliverysawsteepdeclinesamidthedrawbackinconsumerspending.However,promisingtechnologyiscreatingoptimismforthefuture.ChatGPT1tooktheinternetbystorminQ42022.OpenAIspublicchatbotreleasedafloodgateofenthusiasmandspeculationforhowgenerativeAI
62、coulddisruptcommerceenablement.ThisincludeseverythingfromwritingdescriptionsandSEOtitles,tocustomersupport,toadcopy.Emphasiswasalsoplacedinareassuchasinventorymanagement,asmanyretailersmisjudgedconsumerdemandinQ32022.Thiswasevidentbytheadjustedapparelsales-to-
63、inventoryspread,whichflippedfrompositive16%inQ32021tonegative16%inQ32022,indicatingsalesarelessthaninventorylevels.2Tohelpitscustomersbettermanageinventorycomplexity,Shopifysoughttobolsteritsinventorymanagementtoolsthroughthe$2.1BacquisitionofDeliverr.Thedealbo
64、ostsShopifyslogisticscapabilitiesaddingpredictivefeaturesandcombiningmultiplesaleschannelstogether.StateofConsumerInternet202310PointinCustomerJourneyAwarenessConsiderationPurchaseFulfillmentRetentionMultistageBackEndCustomerFacingAdvocacyOnShopifyAppStoreChangeinVentureCa
65、pitalDealCountsforSelectCommerceEnablementSubcategoriesBrandedRecommerceReachingtheplateauThisiswhenmainstreamadoptionofthetechnologystarts.Associatedrisksarereducedandbenefitfromthetechnologyisbroadlyaccepted.Marketsharegrows.ExpectationsBNPLHeadlessCommerceChatGPTIn
66、novationTriggerPeakExpectationsDisillusionmentSlopeofEnlightenmentPlateauofProductivityShoppableMediaLoyaltyandIncentivesLivestreamandSocialCommerceImmersiveCommercePersonalizationMobileCommerceAnalyticsandCDPs3PaymentInfluencerMarketingDigitalTwinAffiliateMarketingSubscriptionsRe
67、verseLogisticsInventoryManagementEnablementAlongtheCustomerJourneyE-commercecompaniesrelyonanecosystemofenablementtoolsthataddvalueandstreamlineoperationsalongthecustomerjourney.-41%-35%-33%-33%-31%-26%-26%-15%-14%-12%57%20212022ReverseLogisticsAnalyticsandCDPsMobileComm
68、erceOverallVCLoyaltyandIncentivesBNPLFulfillmentandDeliveryHeadlessCommercePersonalizationPaymentLivestreamandSocialCommerceNotes:1)GPT=GenerativePre-trainedTransformer,alanguagemodelthatusesdeeplearningtoproducehuman-liketext.2)Bloombergarticle.3)CDP=CustomerDataProfile.Sour
69、ce:PitchBook,AlphabetTrends,Shopify,BloombergandSVBanalysis.FulfillmentandDelivery$16B$17B$19B$21B$18B$21B$23B$26B$28B$30B$31B$2B$3B$5B$7B$9B$14B$20B$28B$37B$46B$51B6%7%8%9%9%11%14%16%19%21%22%20162017201820192020202120222023202420252026StartupsPracticingCircularStrategies7Notes:1)Rentthe
70、RunwayviaWallStreetJournal.2)Accordingtoa2015UKBarnardossurvey.3)TheNewYorkTimes.4)thredUP.5)Statista.6)Publiclyavailableinformationonbrandssellingtheirownpre-ownedproductsonlinetoUSshoppers.7)Konietzkoetal.2020.Source:TheCircularityGapReport,GlobalData,thredUpRecomm
71、erce100,Statista,TheWallStreetJournal,Barnardos,andSVBanalysis.ReverseLogisticsPowerRecommerceBrandsAdoptingRecommerce6StateofConsumerInternet202311USSecondhandApparelMarketRevenue4ReturntoStockLiquidateForecastWave1:P2PmarketplacesfilledthegapbeforebrandedrecommerceWave
72、2:BrandedRecommerce42009-1820192020202120225935121SelectExamplesIn-storeorDigitalTrade-InforCreditAI-AssistedInspectionSenttoRecommerceProviderResaleRepairRecycleDonateSelectExamples:TheUSapparelindustryhasbecomeahotspotforcirculartransformation.Onaverage,USshopperspurchase
73、68garments1peryearanddiscardanitemafterwearingitonlyseventimes.2Asaresultofthisconsumptionpattern,andtheincreasingpublicconcernovertheenvironmentalimpactofapparelwaste,thedemandforsecondhandclothinghassurgedinthelastdecade.Secondhandclothingsalesgrewfrom
74、6%oftotalapparelsalesin2016to11%in2021andisexpectedtoreach22%by2026.Corporationsaremovingtocapitalizeonthisshiftinconsumerpreferencesbyutilizingsecondhandmarketsoftheirowntocaptureresalerevenueaswellascontrolthenarrativesurroundingtheirbrand.Therehavebe
75、entwodistinctwavesoftech-enabledsecondhandapparel.Thefirstwavecenteredaroundpeer-to-peermarketplaces(P2P).AftertheGFC,consumerswantedtomonetizetheirclosets,andsavemoneywhilehavingaseamlesse-commerceexperience.3Twonotableresalemarketplaces,PoshmarkandthredUP,raiseda
76、combined$400Minventurefunding.Bothendedupgoingpublicatvaluationsover$1B.Thesecondwaveiscenteredaroundbrandedrecommerce.Bycontrollingtheirownsecondhandmarkets,brandsgetdoublebenefitofbrandprotectionandnewstreamsofrevenuewithminimaladditionalcosts.Consumersareloo
77、kingtobemoresustainable,butalso,inaninflationaryenvironment,remaincost-conscious.Thisispossiblethankstothird-partyreverselogisticsprovidersspecializedinrecommerce.AIcanbeusedtoidentifyagarmentandassignitattributes,setapriceusingthosegarmentsattributesandavailab
78、leresaledata,andrelistanitemforsaleswithminimallabor.QueueanotherusecaseforgenerativeAI.ThriftandDonationRecommerceSecondhandasaPercentofTotalUSApparelMarket5Brandssellingtheirownpre-ownedproductsonlinetoUSshoppers202020172021201720222022YearLaunched20172022202220
79、1120092011200920132013YearFounded200920152011IdentifyPriceClose:RecyclingMaterialsTextileRecycling$60MSlow:ProductLongevityandLifeExtensionRecommerceEnablement$130MRegenerate:Renewables+ImprovingNaturalEnvironmentMushroomLeather$256MNarrow:MinimizeResourcesperProduct3DScanned-to-FitDe
80、nim$11MStrategySelectExample,TotalRaisedandSelectInvestors2%vs.17%AveragerevenuegrowthofUSapparelmarketYoYvs.thesecondhandapparelmarket2016-2026actualandforecasted.$0B$50B$100B$150B$200B$250B20122013201420152016201720182019202020212022E$10.2B$4.4B$31.4B$6.3B$4.6B$3.2B$9.4B$34.9B$
81、27.3B$68.7B1161171511351601641843402432014201520162017201820192020202120222023*Thegamingindustryhasevolvedfromone-timepurchasesofcartridgesandconsolestoGames-as-a-Service(GaaS),anevolvingproductsupportedbysubscriptionsandin-gamepurchases.Revenuegrowthandaccesstoanincreas
82、inguserbaseattractedbigtechcompanies,whoveacquiredstudiosfortheirintellectualpropertyandbuiltstreamingplatformsAmazonLuna,NvidiaGeForceNOW,NetflixGames,andXboxCloud(Microsoft).MicrosoftsdecisiontopursueActivisionBlizzardthelargestgamingcompanybymarketcapitalization
83、ispredicatedonexpandingtheirlibraryoftitlesandbuildingastrongermobilegamesfootprint.Despitetheoptimism,someambitiousbetshavestruggled.AlphabetshutdownitscloudgamingserviceStadiainJanuary,andMetalost$13.7BonitsRealityLabsdivisionin2022.Mobilegamesrevenuehasbe
84、enlargerthanPCandconsolecombinedsince2017.Lastyear,abouthalfofrevenueformobilegamescamefromads,withtherestcomingfromin-apppurchases(IAP).1Fortniteenteredthemobilespacein2018butwaskickedoffApplesappstorein2020forcircumventingApples30%cutonIAPs.Thishasfue
85、leddebateoverthepowerthird-partyappstoreshaveoverdevelopers.InFebruary2023,theDepartmentofCommerceissuedacallforpolicychange.GamingisviewedasausecaseforWeb3andcryptoasgamerswerealreadyfamiliarwithbuyingandsellingdigitalgoods.In-gameeconomieshavelongexist
86、edEveOnline,SecondLife,Fortnite,RobloxwithoutnotablecryptoorWeb3connections.Whencryptoexplodedinpopularityin2020,therewasariseinplay-to-earngameswhereplayerscouldwincryptoornon-fungibletokens(NFTs).Asthethoselostvalue,payersloggedout.Web3sroleingamingisstillb
87、eingdefinednewblockchainbasedgamesstudiosarestillpoppingupbutimmersivein-gameeconomiesareheretostay.Notes:1)Percentageofdailyplayerswhoreturnedeachmonth,UnityGamingReport2022.2)YoYnumbersaggregatedfromNewZoo.3)GlobalTheatricalandHome/MobileEntertainmentMarket.4)I
88、FPIGlobalMusicReport.5)UnityGamingReport2022.6)BasedonpubliclydisclosedcompletedacquisitionsforcompanieswithinthePitchBookvertical“Gaming.”Source:NewZoo,TheMotionPictureAssociation,PitchBook,KonvoyVC,IFPI,UnityandSVBanalysis.GlobalGamingM&AMultiplatform5GamesReleasedbyYe
89、arperPlatformStateofConsumerInternet202312GlobalGamingRevenueperDeviceandTimeline2TotaldealsumM&A$BUSDM&AdealcountEstimateforMicrosoftsacquisitionofActivisionBlizzardannouncedin2022notyetcomplete.ConsolePCMobileAcquirerAcquisitions627112010101019161012NotableGamingAcq
90、uirers2014-2022PokmonGoreaches500Mdownloadsinoneyear.NintendoreleasesSwitch.$92B$40B$51BMicrosoft,announcesintenttoacquireActivisionBlizzardfor$68.7B.XboxlaunchesGamePass.Microsoft,Nvidia,GoogleandAmazonlaunchcloudgaming.MetaacquiresOculusfor$2B.PlayStationNowlaunchesbe
91、ta.Nvidialaunchesbetaoftheircloudgamingservice.Dota2introducesaseasonpassmodelforthefirsttime.CandyCrushSagaformobilepopularizesin-appmonetization.Fortnite,aPCandconsolegame,isportedtomobile.Itgenerates$2.4Brevenuethatyeararecordyettobebroken.ApplelaunchesA
92、ppleArcade.Netflixlaunchesgamingdivision.$185BGlobalfilmindustry3Globalmusicindustry4$100B$26BGlobalgamesrevenue202040608010020142015201620172018201920202021Growth113%MultiplatformStrategiesPersistentAccountsPCPlayStation4XboxOneMobileXboxSeriesX/SPlayStation5NintendoSwitchT
93、hedeclineinpublicmarkets,risinginterestrates,andreversalofpandemic-fueledconsumertrendsmade2022adifficultfundraisingyearformanyconsumertechfounders.Capitalinvestedfellfrom2021highsacrossmostsubsectors,withcommerceenablementandgamingandesportsbeingtheonlyexcept
94、ionstotherule.Eventhesesectorshitawallinthebackhalfoftheyear,astheprolongedslowdowncausedinvestorstopumpthebrakesandshifttoearlier,lesscapital-intensivedeals.Themoredifficultfundingenvironmentcausedvaluationstorebase.Later-stagedeals,whicharemoresusceptible
95、topublicmarketvaluationmovements,weremoreimpactedbythevaluationadjustments.Valuationsfortheselater-stagedealspeakedat2.5xtheirpre-COVID-19levelsandhavefallenbacktotheir2020levels.Furtherupthefundingfunnel,seed-stagedealsplateauedbutremainelevated.Investorsunders
96、tandearlier-stagecompanieshaveyearsaheadbeforeapotentialexit,andVCshaveshiftedpreferencetotheseearlier-stagedealsasanalternativetoriskatthelater-stage.Thisthesisisconfirmedwhenanalyzingvaluationstep-upsbetweenrounds.In2022,SeriesAcompaniesincreasedtheirvaluati
97、onsbyamedianof4.3xtheirseedroundvaluations,aslightdipfromthe2021step-upbutstillwellaheadofthe2020level,anindicationdemandstillexistsforVCdealsthatareleastexposedtopublicmarketfluctuations.SeriesBtoSeriesCstep-ups,ontheotherhand,sawadecelerationinthe
98、step-upamount,fallingbackto2020levels.Forexample,aSeriesBcompanyvaluedat$100MwouldhavebeenpricedforaSeriesCdealat$360Maccordingto2021smedianstep-up.Thesamecompanydoingthesamedealwouldhavea$250Mvaluationin2022.USVCInvestmentinConsumerTech1Notes:1)Dataasof
99、2/8/2023.VCdefinedasallseries,stagesandroundsforUS-headquarteredconsumercompanies.ConsumertechcompaniesdefinedusingSVBproprietarytaxonomy.2)Dataasof2/2/2023.ConsumertechsubsectorsbasedonSVBproprietarytaxonomy.3)Valuationstep-upsarethemedianchangeinvaluationforcomp
100、aniesgoinguparound.Doesnotincludeadd-onorextensionrounds.Source:PitchBook,SVBproprietarydataandSVBanalysis.14StateofConsumerInternet20230100200300Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4202020212022Indexedto100Later-stagevaluationshavefallentopre-COVID-19levelswhileseedstagevaluations
101、haveheldstrong.SeedRoundEarly-StageVCLate-StageVCIndexof180-DayTrailingMedianValuationforConsumerTechCompaniesMedianValuationStep-UpsforConsumerTechCompaniesbyRound3TotalVC2022$21.3B$20.5B$19.2B$45.9B$30.2B1,5481,8021,6712,4062,01620182019202020212022VCInvestmentYoYChang
102、eVCinH2202254%2%-7%-26%-40%-41%-44%-45%-54%-57%$2.7B$4.7B$2.8B$7.9B$3.6B$1.1B$0.8B$1.8B$2.6B$2.1BCommerceEnablementGamingandEsportsE-commerceManagedMarketplacesDigitalNativeVerticalBrandAdTechPeer-to-PeerSocialNetworksandMessagingMediaandEntertainmentEdTechUSVCInvestmentbySubsec
103、tor2$10.8B$11.0B$4.9B$3.5B662551423380Q1Q2Q3Q42022CapitalInvestedDealCountMiddle50%Median2.8x4.7x4.3x3.1x3.7x3.9x2.5x3.6x2.5x202020212022202020212022202020212022SeedtoSeriesASeriesAtoSeriesBSeriesBtoSeriesCThesimplestwaytowinmarketshareinadownturnistosurvivethedownturn.As
104、theeconomicslowdownpersists,consumertechfoundersaredoingwhattheycantoconservefundsandextendcashrunway.Thisincludespivotingbothsidesofthefinancialequationbycuttingcostsandmaximizingrevenue.However,fallingconsumersentimentanddecreasedconsumerspendingiscreatingh
105、eadwinds.Revenueisdownacrossmostconsumersubsectors,with61%ofVC-backedconsumercompaniespostingquarter-over-quarter(QoQ)revenuegainsinQ42022,downfrom75%lastyear.Consumercompaniesarescramblingtoaddnewincomestreams.Netflix,forexample,hasaddedad-supportedplansforthefirst
106、timeandiscrackingdownonpassword-sharing.Thechangeshelpedreverseatrendofdecliningsubscribers.Subscriptionmodelsarebecomingmorecommonascompaniesofferpremiumservicestoenticepaidusers.Twitter,underElonMusk,hasleanedintothisstrategywithapaidTwitterBluemodelofferi
107、ngspecialfeaturestosubscribers.Tocompensateforthesofterrevenue,companiesarecuttingspendtothegreatestdegreesincetheCOVID-19pandemicbegan.Thebulkofcutsarecomingfromareasliketalent.LooknofurtherthanTwitter.SincebuyingthecompanyinOctober,Muskhasaggressivelycutc
108、osts,includingdownsizingmorethanhalfthestaff.Whilecutshelpstartupsmaintainliquidity,overallrunwayisshortening.Anotherfactoreatingawayatrunwayiselevatedinflationanelementfounderscantcontrol.Astimebetweenroundscontinuestolengthen,foundersmayconsideranadd-onroundw
109、ithpreviousinvestors,explorealternativefinancingtoolssuchasventuredebtortakeadownround.PercentofConsumerTechCompanies1withIncreasingRevenue2bySubsectorNotes:1)ConsumertechcompaniesdefinedusingSVBproprietarytaxonomy.2)Basedoncurrent12-monthrevenuerun-rate.3)Basedonn
110、etcashburnand12-monthrevenuerun-rate.4)Analysisdoesnotincludeanyadd-onorextensionrounds.Source:PitchBook,SVBproprietarydataandSVBanalysis.MedianMonthsofCashRunway3forUSVC-backedConsumerTechCompanies15StateofConsumerInternet2023MedianRevenueGrowthRateYoYforUSVC-
111、backedCompaniesbySector10.415.215.915.715.014.214.414.112.911.812.911.405101520253035Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4202020212022MedianMonthsBetweenEquityRoundsforConsumerTechCompanies4Middle50%16191915162117161514151805101520253035202020212022202020212022202020212022202020212022SeedtoSeriesAS
112、eriesAtoSeriesBSeriesBtoSeriesCSeriesCtoSeriesDMedianMiddle50%Median42.2%31.6%22.9%19.8%0%20%40%60%80%100%120%Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q42019202020212022ConsumerFintechFrontierTechEnterpriseSoftwareQ42021Q4202264%79%71%80%69%49%50%54%59%75%MarketplacesAdTechCommerc
113、eDigitalContentEdTechIndexedMedianConsumerTechBurnRate1andMentionsofCost-Cutting2Thegrowth-at-all-costsmentalityof2021hasbeenreplacedbytheneedtoconservecashandgrowefficiently.Consumertechcompaniesarefocusingonuniteconomicstogetthebiggestbangfortheirbuck.Metri
114、cslikeLifetimeValue(LTV)andCustomerAcquisitionCost(CAC)areundergreaterscrutinybyinvestorswhowanttoknowthatthetheirinvestmentwillbeputefficientlytowork.Thispriorityshiftshowsupinburnmultiples,whicharetrendingdownascompaniesattempttopivottowardprofitability.Bu
115、rnmultiplemeasurestheamountofnetspendittakestobringinnetnewrecurringrevenue.Forexample,a3xburnmultiplemeansacompanyisburning$3toearn$1ofnetnewrevenue.Whencapitalisplentiful,burnmultiplestendtoexpandascompaniesspendmoretochasehighergrowthmultiplesametr
116、icthatwasrewardedduringtheboomtimesof2021.Thetrendreversesduringadownturnasinvestorshoneinonmargins.Theresultofthismorecarefulspendingisimprovingoperatingmargins.Operatingmarginsimprovedacrossconsumertechsubsectorsandrevenuescalesin2022.InQ12022,attheheig
117、htofthegrowth-firstmentality,only22%ofconsumercompaniesexperiencedimprovingtheirearningsbeforeinterest,taxes,depreciation,andamortization(EBITDA)QoQ.ByQ42022,47%ofconsumertechcompanieshadbettermargins.The25percentagepoint(pp)jumpseenin2022intheshareconsumertechcompa
118、nieswithimprovingmarginsmirrorsasimilarjumpseenduringthepandemic.Theshareconsumertechcompanieswithimprovingmarginsjumpednearly28percentagepointsfromQ12020attheonsetofthepandemictoQ32020.Notes:1)Burnrateandcallmentionsareindexedto100atthepeak.Burnratede
119、finedasnetburndividedbynetnewrevenue.2)Callmentionsofcostcuttingbasedonaggregatedatafromproprietarycalllogs.Calllogsareintheformofwrittennotes,notrecordedconversations.3)Burnmultipledefinedasnetburnovernetnewrevenue.4)Revenuecalculatedusing12-monthrevenuer
120、unrate.5)Changeinquarter-over-quarterEBITDAmargin.Source:PitchBook,SVBproprietarydataandSVBanalysis.MedianEBITDAMarginforVC-backedConsumerTechCompaniesbyRevenue4PercentageofUSVC-BackedTechCompanieswithImprovingEBITDAMargin516StateofConsumerInternet202363%22%47%0%10%20
121、%30%40%50%60%70%Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q42019202020212022ConsumerAllOtherSectorsMedianBurnMultiples3forVC-BackedConsumerTechCompaniesbyRevenue4CompaniescutcostsamidCOVID-19lockdowns.Growthisdeprioritized.Costsfall.02040608010020182019202020212022BurnRateCall
122、MentionsofCost-CuttingCompaniesconservecashamidCOVID-19lockdowns.Burnincreasesduring2020-21fundingfrenzy.Growthatallcosts.Growthisdeprioritized.Burnfalls.Q1Q120212022Q3Q3Q1Q120212022Q3Q3Q1Q120212022Q3Q3$0-$10MRevenue$10M-$50MRevenue$50M+Revenue-225%-200%-175%-150%-125%-100%-75%-5
123、0%-25%0%EBITDAmarginsareimprovingcomparedtothepeakofgrowth.34ppimprovement6ppimprovement9ppimprovement$0-$10MRevenue$10M-$50MRevenue$50M+Revenue0.0x0.5x1.0x1.5x2.0x2.5x3.0x3.5xQ1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q42019202020212022BurnpeakedinQ12022andhasdeclinedas
124、companiesfocusonprofitability.3.1x1.5xthredUPAllbirdsWarbyParkerRenttheRunwayBigCommerceUdemyCourseraDuolingoRobloxDoorDashNerdWalletPinterest1x1x3x1x3x2x2x8x9x3x1x6x18x11x13x11x6x15x10x7x17x8x3x9x1,8002,3002,8003,3003,8004,3004,800RevenueMultiples2forRecentIPOUSConsumerTechCompaniesIt
125、wasthebestoftimes.TheIPOwindowof2020-2021waslikenothingconsumertechhasseensincetheDot-Comera.OverthirtyUSVC-backedconsumertechcompanieswentpublicviaIPOinaspanof18monthsachievingrecordrevenuemultiplesandvaluationsintheprocess.InDecember2020,DoorDashsIPO
126、raised$3.4B.Twomonthslater,Bumbleraised$2.2B.Theimmersiveworld-buildinggameRobloxraised$13.8BdirectlistinginMarch2021.InSeptember,eyewearbrandWarbyParkertookin$3.1B.Inall,consumertechIPOsraised$30Bintheyear-and-a-halfperiodendinginJanuary2022,3.5xmorethantheprevio
127、usfouryearscombined.Withpublicmarketsindecline,thewindowonpublictechexitshasremainedfirmlyshutforoverayear.Redditscrubbedplanstolistata$15BvaluationinDecember2021.Nowtheyreoneofmanycompanieswaitingforanexit.Instacartalsoannouncedplanstogopublicattheear
128、liestopportunity.Astheslowdowndragsonandvaluationsdrop,late-stagecompaniesarefeelingthepressuretorepayinvestors.ThebacklogmeansthatasinglelargeIPOmightclearapathforotherstofollow.Somecompaniesarentwaiting.WhileM&Aactivitywasdownin2022,anumberoflargedealsd
129、idbubbleup.InJanuary,TheNewYorkTimesacquiredsportsnewssiteTheAthleticfor$550M.InJuly,ShopifyacquiredthecommercefulfillmentcompanyDeliverrfor$2.1B.ElonMuskstake-privateofTwittermaybetheexceptiontotherule.Leveragedbuyoutsarelesslikelytooccurwithinterestratescl
130、imbing.Instead,companiesmayusecashreserves,stockpiledduringtherecentbullrun,tomakestrategicacquisitions.M&Adealscouldrampupasrunwaydwindles,forcingcompaniestosellunderunfavorableconditions.Notes:1)ConsumertechcompaniesdefinedusingSVBproprietarytaxonomy.2)Revenuemulti
131、pleistheannualizedrevenuedividedbypost-valuationatthetimeoftheIPOwithcurrentrevenuedefinedastheannualizedrevenuedividedbytheenterprisevalue.Source:PitchBook,S&PCapitalIQ,SVBproprietarydataandSVBanalysis.USM&ADealsforVC-backedConsumerTechCompaniesUSVC-BackedC
132、onsumer1TechIPOsandTake-Privates17StateofConsumerInternet2023$4.9B$5.9B$4.9B$9.3B$12.1B$5.3B100116151132207146201720182019202020212022-56%$2.1B$550M$525M$400MDealSizeDealCountNotableM&Adealsin2022$0B$10B$20B$30B$40B$50B$60B$70B20162017201820192020202120222023in18monthsin31monthsJan
133、2023AtIPOS&P500IndexIPOCompletedIPODelayedTake-PrivateCompleted(Buyouts)ValuationS&P500IndexLevelStateofConsumerInternet202318AliciaFullerSeniorMarketManagerConsumerIDennisRapoportManagingDirectorConsumerILizCahillSeniorResearcherMarketIJoeWernerManagingDirectorConsumerIJos
134、hPherigoSeniorResearcherMarketINicoleHawkeyDirectorConsumerIMelinaBergkampDirectorInvestorC1.TheviewsexpressedinthisreportaresolelythoseoftheauthorsanddonotreflecttheviewsofSVBFinancialGroup,orSiliconValleyBank,oranyofitsaffiliates.Thematerialcontainedinthisdo
135、cument,includingwithoutlimitationthestatisticalinformationherein,isprovidedforinformationalpurposesonly.Thematerialisbasedinpartuponinformationfromthird-partysourcesthatwebelievetobereliable,butwhichhasnotbeenindependentlyverifiedbyusand,assuch,wedonotrepresent
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