More than half of American adults are now fully vaccinated, and with that millions of people are leaving the confines of their homes to once again dine out, meet new people, celebrate weddings and take road trips after more than a year of social distancing.
For tech startups, many of which have been beneficiaries of lockdown life, the impacts of the economic reopening aren’t entirely straightforward. Some companies, including dating apps, expect a boom as vaccinated singles kick their romantic pursuits back into gear. Ditto for wedding planning platforms helping couples plot out COVID-postponed nuptials.
Other startups, including home-fitness platforms, face a double-edged sword: While many people are eager to get into shape as they step out from behind their Zoom screens and into the real world, they may want to do that at the gym rather than the garage.
Here’s a closer look at what the economic reopening means for startups in dating, gaming and entertainment, fitness, wedding planning, restaurants and retail, and car rentals and purchases.
Let the gaming continue
While the pandemic changed many people’s behavior regarding work, dining and even health, it may have only accelerated changes already underway in how we keep ourselves entertained.
“Be it telemedicine, remote work or whatever, a lot of things rose during the pandemic,” said Rich Grant, co-founder and managing director of Touchdown Ventures. “What you have to ask is: Is this a false positive or is this a structural change? But I think in things like gaming and streaming you are seeing a structural change. While activity levels may decline post-pandemic, some of these new users are bound to remain gamers or streamers to some degree.”
Research from Nielsen during the height of the pandemic last year found 82 percent of global consumers played video games and watched video game content. With that, investment poured into the space. According to Crunchbase numbers, venture capital for gaming more than doubled last year, growing from about $1.5 billion in 2019 to $3.6 billion last year. Already this year, $3.2 billion has flowed into the gaming industry, led by Epic Games’ epic $1 billion round in April.
“From my perspective, we basically have seen the gaming and the esports industries accelerated by four years in terms of mass consumer adoption,” said Yash Patel, a general partner at Telstra Ventures, which invested in companies including Skillz and Mobile Premier League.
“When we made some of these bets, you know, three, four years ago … we knew this was sort of an inevitable consumer trend that was going to grow as mobile gaming became more ubiquitous,” Patel said.
According to Patel, some company’s numbers show 50 percent of the most active — and monetized — users remained on a specific gaming platform even after 30 days, which is tremendous retention for a gaming company.
While some casual users may drop off, Patel said he sees the pandemic leading to more “hybrid behaviors” — people doing some of the things they did pre-COVID combined with what they did during lockdown. That’s similar to the hybrid remote and in-office work model many expect to keep even when the pandemic ends.
Touchdown’s Grant added that even more traditional media players are tapping into gaming as a way to transform their business models. He said his firm helped T-Mobile Ventures invest in Drone Racing League — which recently launched its racing simulator on consoles and laid the foundation for real-money wagering via a partnership with DraftKings.
“As we reopen, I expect gaming to remain popular among consumers and investors,” he said. “I also believe that venture investors are going to expect more traditional media businesses to adapt their offerings to deliver digital experiences to fans.”
Many see the same acceleration with streaming — which already was starting to dominate as more and more millennials cut the cord. The significance of streaming was again noticeable just a couple weeks ago, when Amazon announced it would acquire MGM Studios for $8.45 billion.
“That wasn’t just some whim by Amazon,” Patel said.
Neil Sirni, co-founder and president of Arrive, Jay-Z’s Roc Nation’s VC arm, which has several music and entertainment investments, said COVID-19 only accelerated the prevalence of things such as in-home movie premieres.
“I think theaters will continue to evolve to create more premium experiences, and the large action films will always have a meaningful place at the box office, but the streaming services have deep pockets and distribution, and consumers want the convenience and option to decide,” he said.
— Chris Metinko
Couples say ‘I do’ to weddings again
Weddings and special events are back, according to event planners.
Joy, an app for planning anything wedding-related, is seeing huge demand for weddings as couples resume both plans and actual events, co-founder and CEO Vishal Joshi said via email.
In March, the San Francisco-based company saw more than double the number of U.S. weddings created on Joy compared to the previous year. In April, that increased to 400 percent, and Joshi expects that trend to continue.
“The demand for wedding travel is returning strongly as weddings resume and guests feel comfortable traveling again,” he said. “We’ve already seen an over 200 percent increase in wedding travel bookings year-over-year, and we expect that number to continue growing as 2021 and 2022 will be banner years for weddings.”
Wedding, baby and bachelorette shower events are picking back up on Fêtefully’s platform, according to GiGi McDowell, founder of the Dallas-based company, which has an online platform that provides users with affordable and personalized wedding and event planning services from planners.
“With wedding planning, we offer a directory of vendors and build in artificial intelligence on the back end, so you no longer have to call around and schedule a vendor,” McDowell told Crunchbase News. “The entire supply chain is automated.”
The company went through Techstars late last year, and launched its platform last October. It now has 1,300 people on its waiting list, she said in an interview. When the global pandemic hit, the Fêtefully staff stopped going to events, but still continued to book them.
In fact, the company shifted to offering planning services for grooms wanting to surprise their brides with at-home events, such as date nights. McDowell was also putting together packages for Valentine’s Day, New Year’s Eve, girls nights in, and even children’s sleepovers.
“As everything reopens we see weddings as an entry point to get to know people and own their future event planning needs,” she added.
Over at Zola, the New York-based wedding company also sees the reopening leading to a boom in weddings starting this summer, a spokesperson told Crunchbase News.
Drivers of this include the vaccine rollout, which the spokesperson said is instilling confidence in couples and vendors that events can be safe.
A report released in May by Zola surveyed 468 vendors across the country and showed that many vendors were fully booked, or at least feeling very secure in the number of bookings they have, heading into the season. In addition, vendors surveyed said they were not seeing couples with June through December dates rescheduling.
Although the Centers for Disease Control and Prevention say vaccinated people can congregate indoors without a mask, Zola still expects online wedding planning to increase, and that more intimate weddings — those under 100 people — will take place this year. There will also be more outdoor weddings and those with virtual/streaming components.
“We are heading back toward an era of predictability where there is more excitement, meaning and intention surrounding weddings than ever before,” the spokesperson said via email. “We see very strong indicators for the return given our strong visibility into wedding dates. There are other indicators such as active search around wedding planning which started to tick way up beginning in March, which indicates the pent-up demand of couples who are finally ready to move forward.”
Hands-off dining experiences
The next time you dine out at a restaurant, you may see more touchscreens, ordering kiosks and contactless experiences as the restaurant industry tries to reopen amid labor shortages, experts say.
The unemployment rate for leisure and hospitality workers was at a staggering 16.7 percent in December 2020, up from 5 percent in December 2019, according to data from the U.S. Bureau of Labor Statistics — representing 1.3 million fewer workers in places such as restaurants and bars than a year earlier.
Amid that staffing shortage, many restaurants are turning to more automation in the kitchen and dining areas to get food to customers. That includes technology like ordering apps and kiosks, and food-making robots.
“Exposure to the virus has changed restaurants and retailers,” Domm Holland, co-founder and CEO of San Francisco-based Fast, recently told Crunchbase News. His company makes technology for a more secure online shopping experience and has raised $124.5 million in funding to date.
“Restaurants use QR codes so they don’t have to hand out menus,” he said. “Stores are rolling out digital ordering, and checkout and payments is a huge piece of that.”
— Christine Hall
Fitness gets more flexible
“The pandemic shifted ‘at-home fitness’ from a suburban phenomenon to the mainstream,” said Kyle Lui, a partner at DCM Ventures and board member at Tempo, a fitness tracking company that launched its home gym product, Studios, in February 2020 just as the pandemic was unfolding.
With gyms and in-person fitness classes on hold, consumers turned en masse to online classes and fitness apps, and purchased equipment for working out at home.
Peloton, one of the leading brands in home fitness with its internet-connected indoor exercise bike, claims users averaged 26 monthly workouts in the first quarter of 2021 — up significantly from 17.7 in the first three months of 2020, per its recent earning report. The company, which went public in September 2019 at an $8 billion valuation, is now worth north of $33 billion as its stock price has come close to quadrupling since the beginning of 2020. Peloton boasts a community of 2 million members and saw its revenue climb significantly in both the last nine months and in the first quarter of 2021.
It is not surprising, in this context, that increasingly large fundings were raised in the latter half of 2020 and in early 2021 for online fitness startups in the U.S.
Among those are online fitness platform app Zwift, which transforms indoor cycling and running by connecting a bike trainer or treadmill with an app. The Long Beach, California-based company raised the largest round in the sector — a $450 million Series C funding led by KKR in late 2020. The company claims it has registered more than 2.5 million accounts since its founding in 2015.
Smart home gym company Tonal, which makes a product that attaches to your wall, also raised funding in September 2020 and then again six months later in March 2021, totaling $360 million with the most recent round led by Dragoneer. The company says its sales grew more than 8x in 2020.
“Our growth over the last year underscores the changing fitness landscape,” Tonal CEO Aly Orady said in the company’s recent funding announcement. “People want smarter, more connected ways to work out.”
Tempo, meanwhile, saw its sales grow 10x in 2020, leading to a $220 million Series C raise from SoftBank in April this year. “During 2020, Tempo members averaged four workouts per week, this is significantly higher than a typical gym membership,” Moawia Eldeeb, CEO of Tempo, said via email.
And Strava, an app and community for outdoor runners and cyclists, raised $100 million in late 2020 led by Sequoia Capital and TCV. The company claims a community of 73 million athletes globally, growing by more than 2 million athletes per month in 2020 with 1.1 billion activity uploads, up 33 percent year over year.
A recent McKinsey survey found that 68 percent of those using an online fitness program expect to continue doing so long term. Post-pandemic, Lui anticipates that “just like work moving to a hybrid model, fitness will also likely move hybrid.”
— Gené Teare
Dating apps court ‘hot vax summer’
Dating has been a touchy (or rather, touchless) subject during the pandemic. After all, how do you date new people when health officials preach social distancing and you can only mingle with the people in your own household?
But with the world reopening, new human interactions of the romantic kind are likely to heat up again, which means more business for online dating startups.
“The people who weren’t dating will be OK with dating, and the people who were going on a couple of dates, will go on more dates,” Kim Kaplan, CEO of video-based dating app Snack, said in an interview with Crunchbase News.
While people will likely spend less time online than during the pandemic, Kaplan predicts they will still be spending time on dating apps. The makeup of cities has changed, as some singles moved back to their hometowns or to work remotely from a different place. That means social circles have changed, and they will need a way to meet new people.
“You don’t have connections with people, or you don’t have the same connections when you move back home,” Kaplan said. “So even if you’re going to go back out this summer and have that ‘hot vax summer,’ who are you going to do it with?”
Dating apps could bridge the gap of meeting someone if a person isn’t used to going out in big groups or being social in the way they used to be, Kaplan said.
There’s also the matter of being vaccinated, as many people may only be interested in meeting up with others who are also vaccinated.
The White House recently partnered with major dating apps including Tinder, Bumble and Hinge to encourage users to get vaccinated by helping them locate vaccination sites through the app and display “I’m Vaccinated” stickers on their profiles.
Tinder has seen the mention of “vaccine” up 800 percent since the beginning of the pandemic, according to the company. Mentions of the word hit a high in April, when all adults in the U.S. were eligible for the shot.
Vaccine or not, Kaplan believes video is here to stay, and will replace the phone call that might happen before two people meet up.
“I think video is fundamentally going to stick around from a dating perspective,” Kaplan said. “Whether video profiles and showing yourself off on a video, or video dates.”
— Sophia Kunthara
Shopping may never be the same
One of the clearest shifts during the pandemic was the mass movement to online shopping, for everything from clothes to groceries.
That benefitted e-commerce platforms, and during the past year a number of startups in the space rode the pandemic boom all the way to the public markets, including Wish, Casper, BigCommerce, DoorDash, Poshmark, ThredUp and BarkBox.
The pandemic condensed 10 years worth of e-commerce sales growth into 13 or 14 months, according to Rob Caucci, CEO of Fillogic, a New York-based startup that helps retailers with logistics and has raised $2.5 million in venture funding to date.
But with society reopening, retailers will likely be using their physical stores to fulfill online orders, and digitally native brands will turn to brick-and-mortar as another way of customer acquisition, he said.
“Going forward our expectation … is that a lot of retailers will be better leveraging their store footprint as well as the inventory in the store to fulfill online orders,” Caucci said.
Within the clothing sector in particular, while categories like athleisure clothing — think trendy but comfortable leggings and sweatshirts — saw increases in popularity that are likely here to stay, “going out” clothes are due for a bump, according to Fillogic.
“There’s a lot of pent-up demand for dressing up and going out because people haven’t been able to do that,” said Michael McDermott, Fillogic’s chief operating officer. “I think that fast fashion is probably going to benefit from that because people are going to want to try new things and they’re going to benefit.”
While McDermott predicts consumers will make more clothing purchases again, he also expects “they’ll be more cautious about how much they spend per item.”
Expect sales for accessories like sunglasses and purses to increase, he said. Caucci, meanwhile, sees beauty as another category that will likely benefit from society reopening.
— Sophia Kunthara
Deals for wheels
Pent-up wanderlust means many Americans will be eager to travel this summer. That’s likely to translate into a lot of road trips, as many international destinations are still suffering through the pandemic.
That’s boosting demand for car-rental startups like Turo and Getaround. It could also mean more business for e-commerce car-buying startups that work with dealers or sell vehicles directly to consumers.
Between computer chip shortages and increased used-car demand and prices, the challenges this summer for automotive retail will be mostly around inventory shortages, which will lead to more online sales already taking place as a result of the global pandemic, according to Matt Weinberg, senior vice president for consumer experience at San Francisco-based Modal, which provides e-commerce to automotive dealers and brands and has raised $20.7 million in venture backing to date.
“Consumers may look at a car — and later even settle on that car — that maybe wasn’t exactly what they wanted,” Weinberg said via email. “It will also likely lead discerning consumers, who refuse to settle, to now travel farther distances to get the vehicle that is their ‘exact match,’ and may want to complete more of the process online, prior to making that lengthy journey.”
Adding additional pressure to the sector is rental cars. Rental-car companies are having a tremendous impact on inventory, according to Weinberg.
“When COVID-19 hit over a year ago, the rental-car industry was under pressure and Hertz declared bankruptcy,” he added. “At the time, the big rental companies sold off most of their fleet. With consumers now traveling more, the rental-car companies are trying to rebuild their fleets and, with new car shortages, they are hitting the auction for used cars.”
— Christine Hall
Source: https://news.crunchbase.com/news/economy-reopening-startups/
