If the last decade has been a time of digital abundance--more followers, more “friends,” more apps--2019 looks to be the year of paring down. 2018 saw the first significant decline in time spent on site for Facebook. Users are deleting the app and replacing it with tools to track screen time. But our desire to find community and connection, and to leverage technology to do so in more effective and efficient ways, hasn’t changed. As a result, the coming years will likely be a time of renewed opportunity in new forms of social systems, the kind that has been difficult to come by during the major platforms’ ascension and dominance.
This is not to say the incumbent platforms are going anywhere anytime soon. But there is likely to be a splintering significant enough to create new startup entrants with the chance to own consumer needs.
This splintering seems to be happening for two central reasons:
So what now?
The next wave of social systems will likely emphasize breadth and depth differently than the last--and may not look much like social networks at all. With the current networks, the horizontal nature of the platform is the product. Users come for the community. But it may be that with the next, the community is what keeps users long term engaged but is formed around another intent. Come for an action, stay for the community.
These platforms are likely to have four core things in common:
If you are working on a business involving this new evolution of community, I’d love to learn more.
*ShopShops, Duolingo & Dia & Co are all USV portfolio companies”
Today, Dia&Co announced their Series C round, which we recently led out of our Opportunity Fund. The crux of USV’s Thesis 3.0 is about backing trusted brands that broaden access, and this is exactly what Dia is doing.
Dia is a commerce and community platform for plus size women. Their first product has been a curated box with a try-at-home model, where customers keep what they want, send back the rest, and receive increasingly personalized product over time as Dia learns their preferences and styles. But Dia is based on a customer and not a model--how they serve her will evolve; who they serve will not.
There are two core reasons that make Dia particularly exciting as an addition to the USV portfolio. First, the size and current state of the market they are focused on. Second, how well positioned this team is to tackle this problem and the ability they’ve shown to create not just a transactional business but a large, fast scaling, emotionally engaged community.
While the plus size category has been largely ignored by retailers, it has evolved into an ideal opportunity for new brands to emerge that allow high intent, passionate customers to transact in ways they are asking for. It is rare and getting rarer to find real market gaps in the commerce world. Usually, there’s opportunity to improve on the product quality or composition, user experience, or price point. But in plus size there’s a complete supply and demand imbalance.
The stats tell this market’s story cleary. Plus size is defined by size 14 or up--a category that encompasses at least 68% of American women. But a look at 25 of the country’s biggest retailers showed that only 2.3% of their assortment was plus size. It makes up about 17% of retail overall, generally tucked away in basement levels of department stores, unmoved or reimagined for decades. (Nadia, CEO of Dia, and the Gotham Gal go into some of this during this podcast, which is excellent.) Today, even with poor experience and lack of supply, that’s a big market--about $21.5B in 2016 and growing faster annually than any other segment in retail. The potential however is meaningfully bigger.
Better yet, this customer isn’t quiet--she’s high signal. She likes and posts and comments about what she’d want to buy if it was offered. Just like many straight size women, she’s passionate about fashion and trends, even if she’s rarely able to reflect that with her dollars. Nadia Boujarwah, CEO of Dia&Co, knew this well because she’d been this customer her whole life. So when she set out with her co-founder, Lydia Gilbert, to build Dia, she understood the rarity of the opportunity first-hand--a massive market with high demand, high intent, and extremely low supply.
When I first met Nadia and Lydia 3.5 years ago, Dia was in very early days. Nadia and Lydia started by buying the clothes and shipping them to customers they emailed with. It was low tech, high touch, and not yet scalable. But the deep customer desire was overwhelmingly evident. Women were asking when their next box could arrive before their previous one had even made its way back. The more boxes they got, the more they bought--Dia could gain their trust and convince them that in a retail world where they'd always been forgotten, here they were heard and celebrated.
Several years later, Dia has seen rapid growth and has built scalable infrastructure. Deep data science and algorithmic recommendations complement the army of passionate customers turned stylists. An easy to use interface has replaced email. And sophisticated inventory management, private label creation, and complex reverse logistics make the backbone of best in class merchandising and operations. But, most of all, this trust in the brand has only strengthened and remains the highest potential element of what’s now a big business. For many of their customers, Dia has become more than a commerce platform, but a much needed tribe. Recently, a group of Dia women gathered in Nashville for vacation. They had never met in person but had long been communicating on the Dia&Co Facebook group. In each other they had found commonality and friendship; in Dia, they found a community they feel a part of, and products that they not only wore but felt proud in. Whenever they receive a box in the mail, they immediately post each item to the group to solicit opinions. They are honest with each other on what to keep and what to ditch, but always supportive.
That belonging isn’t unique to the women on the trip. Its seen throughout Dia's base of customers and gives them license to increasingly deepen mind and wallet share. That ability is at the heart of the best consumer transactional businesses and the signal of a real trusted brand.
We are thrilled to welcome Nadia, Lydia, and the Dia&Co team to the USV Network.”
USV has been investing in health-related technologies for about five years. Our approach can be characterized by the notion that digital processes, made more accessible by the internet and mobile access, could over time transform the cost and delivery of medical care. In the last couple of months, our conversations around healthcare have surfaced some new investable themes, which I’ll discuss in a few posts over the next month. The first such theme is the idea that healthcare can be “unbundled” into distinct services, a pattern we have seen in other markets (where niche sub-markets develop for specific services). So, in the case of healthcare, what is there to unbundle from? For one, large hospital networks and insurance companies, where most of the control and pricing power currently reside.
The last decade has seen unbundling in the financial services industry that serves as a relevant analogy. Financial supermarkets became popular in the 80s when large banks started offering one-stop shopping for a complete package of financial services, anything from mortgages to credit cards. In this model, the sale becomes around convenience rather than value as customers buy a complete package, even though each service may not be the best in breed or meet the specific needs of an individual consumer. With this, came a lack of price transparency as each service’s individual price is obscured by the combined package. The connected Internet and later mobile services, have made it easier to manage an unbundled package as well as increase the quality and personalization of each service on its own. In finance, we’ve observed that in the broader market, as well as within our own portfolio of fintech investments, with Funding Circle (peer-to-peer lending platform for small business), Stash (personal investing), CircleUp (equity financing for consumer products), Stripe (payments), and KickStarter (crowd-funding). Technology made processes simpler so that individuals could find specific things they need easily and affordably from market-specific providers.
Perhaps healthcare is now seeing the beginning of unbundling, catalyzed by the same use of technology which allows companies to focus solely on user experience in specific verticals. Some of the first pieces of unbundled healthcare to get venture momentum were direct-to-consumer brands such as Hims, Roman, Keeps, and Nurx. These are examples of companies using technology - such as telemedicine, asynchronous chats, and structured data - to lower costs and reduce friction in various niches of healthcare via a simple subscription business model. For example, Nurx gives users control of their health at every step of the process and delivers birth control and Truvada for PrEP in a timely, cost-efficient manner. Along a similar vein, at-home testing companies such as 23andMe, Modern Fertility, and Scanwell are bringing lab-grade testing services to people’s homes at a lower price point by leveraging technology. For primary care, companies like Sherpaa are using virtual primary care, while Doctor on Demand and Teladoc started by unbundling to serve individuals through telemedicine. Now other companies such as Vera Whole Health, CareMore, and PeakMD are coming up to serve employers with their primary care needs through local care centers.
Then there are examples of unbundling in parts of primary and specialized medicine that have not received as much attention yet, perhaps because their interactions are primarily conducted offline. However, these companies are still a part of the trend towards unbundling from large hospital networks and functioning as individual nodes in the broad healthcare market. For example, Pure Cardiology is a user-centric membership plan for all cardiology-related services, the Surgery Center of Oklahoma offers a menu-style list of surgeries they perform with up-front pricing, and the East River Medical Imaging Center in New York is an independently owned and operated center for scans including MRI, CT, PET, and X-rays.
In primary care, there has been a recent increase in the number of direct care clinics around the US, or doctors that are offering traditional primary care through an independent clinic without ties to large hospital networks and insurance companies. To support these practices, companies like Hint Health (onboarding and billing platform), Spruce (patient communication), and Elation (clinical electronic health records) are building the infrastructure to power a direct-care driven healthcare system. Technology enables new user experiences for quick onboarding and communication, but other offline examples of lowering friction are walk-in urgent care centers, such as CityMD and GoHealth. These clinics provide immediate medical care for a range of acute conditions that provide underserved patients with faster response times. Walk-in urgent care clinics started popping up in the 70s but gained more traction in the 90s and now service over 160 million visits annually.
These examples suggest that healthcare is in some respects being unbundled.
Why does this matter? One lever to getting momentum in an unbundled world is that a lower price point - a common denominator across many of these companies - compared to traditional bundled options, will allow more people to access healthcare. Besides just lowering costs, unbundling can open access in other ways, including minimizing the enormous friction that exists in legacy healthcare systems. If healthcare services continue the trend of “unbundling” in some of these ways, cost-efficiency will become much more of a priority where the fastest, cheapest, and most reliable services should win. More fundamentally, unbundling could create the opportunity for each of these distinct services to become independent nodes in a larger network in a bottoms up manner (which would make room for business model innovation - the subject of my next blog post).
For now, these observations seem to indicate some unbundling of the existing large, monolithic systems in healthcare towards a more open, local, independent and transparent model, with control residing with individual users. And ultimately, this could change the way healthcare is delivered to consumers.”
Hey all, I've recently joined USV as the firm's very first Developer in Residence. Over the next year I'll be porting USV's thinking around networks into code, and writing the APIs, apps, and bots that will help folks at our 70+ portfolio companies communicate and collaborate with each other.
Having an in-house developer is still a bit rare in venture capital, but it feels like a natural fit for USV. Building on its early success investing in businesses that leverage network effects, USV brought this approach to its own network in 2010, launching an effort to facilitate interaction among network members through events and introductions. And now my job is to grow this platform online, to help reach and connect a greater share of folks in our increasingly diverse portfolio.
Helping like-minded folks discover and learn from each other was one of my favorite things in building BrooklynJS, my favorite community here in the city. To be able to do the same for USV is a great gig, and really, second only to my other gig, moonlighting as a bass for Brooklyn's favorite-slash-only barbershop quartet.
If you’re building a similar platform and/or have ideas about what kinds of interaction mechanics work well for community building, please drop me a line!”