In 2023, Headline celebrated 25 years of partnering with world-changing founders and companies. This history through cycles has provided our team with significant insights into what creates repeatable returns in every market, and we trust data to map trends and inform our investments year-over-year through exposure to nearly 100,000 startups. In our Headline Lookahead series, we map what’s on the horizon in 2024 for our firm’s four core sectors: consumer, infrastructure, B2B software, and fintech.
While some consumer VCs turned their focus to B2B in 2023, we at Headline remain bullish on the consumer sector. We are primed to grow our portfolio of standout consumer brands alongside past investments such as The Real Real, Farfetch, GoPuff, Sonos, and Bumble. Two pivotal shifts are driving change in the sector in 2024: technological advancements (particularly in AI) and significant changes in consumer behavior.
We all witnessed AI transform nearly every industry last year as consumer adoption and interest in the technology surged. AI has especially impacted content creation and consumption, enabling massive-scale production at previously unthinkable low costs. Midjourney is a prime example, boasting 15 million users monthly. Beyond AI, technologies like live digital auctions and social shopping are reshaping engagement with brands. The upcoming launch of Apple Vision Pro hints at a potential AR and VR-led transformation in consumer experiences.
On the behavioral side, as Gen Z becomes the largest cohort of consumers, the way people discover and purchase has shifted. Gen Z often starts their product searches on platforms like TikTok, bypassing conventional search engines and preferring influencer-led and community-driven recommendations over traditional advertising. Gen Z needs social proof to convert, meaning traditional customer acquisition methods are no longer as effective as they were with Millennials.
We see consumer spending continue to concentrate on 5 key areas:
- Passion Economy: People passionately invest in hobbies and consumables that bring them joy outside of work and daily necessities–from sports to gaming and crafts to gardening.
- Experiences: The experience economy is thriving, evident in the average ticket price and high demand for events like the Taylor Swift Eras tour. We see consumers continue to pay higher prices for experiences in every demographic.
- Self-Improvement: Consumers also prioritize self-improvement, fueling historic sector-wide spending from cosmetic surgery to mental health apps.
- Convenience: The desire for convenience, especially among Millennials and Gen Z, remains strong. They favor services that simplify daily tasks and make “adulting” easier.
- Combatting Loneliness: The impact of the undeniable loneliness epidemic affects teens and adults across the US and pushes people towards pets, dating apps, online communities, and even AI pals to drive connections. There's a massive opportunity here for startups and products that can weave people together in meaningful ways.
Watching these trends, we’re convinced more than ever that consumer tech startups will redefine how we interact, shop, and connect in this constantly changing world.
Are you building a consumer startup that maps to these themes? Pitch us here.