Gen Z VCs Weigh In: Top 4 Trends We’re Watching and Our Favorite Companies

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For brief context, my name is Meagan and I’m an early-stage investor at Lerer Hippeau. It’s been about a month since I joined the team, and I recently thought about Gen Z investors (born ’95 or later) that are investing in Gen Z entrepreneurs/companies.

The tweet that started it all…

That thought became a tweet, and led to conversations with 71 young investors working in venture capital and growth equity, at accelerators/incubators and student-run VCs, and as angel investors — all born ’95 or later, aged ~18 to 25 years old.

I asked everyone four key questions that will be explored below.

  1. What trends are you interested in?
  2. What’s an unexplored area or trend you think can be served by a new company focused on Gen Z?
  3. What are your favorite “Gen Z” brands or companies?
  4. What’s your favorite mission-driven company?

Before we dive in, here’s a peek at the incredibly impressive group that’s been in VC longer than you might expect… and they’re just getting started.

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  • Some are starting their own funds to fill a gap in their local funding ecosystem, like Dani in Southern California (California Crescent Fund), Raphael in Canada (Front Row Ventures), and Edgar in Spain (Enzo Ventures).
  • Some are aiming to improve diversity in their region, like Marianne is doing in the Nordics for female founders (Wave Ventures), where <1% of all funding goes to female-led teams.
  • Some are taking gap years from university to explore VC, like Ryan who’s spending his sophomore year in Beijing at a local VC fund to become immersed in the tech ecosystem in China.
  • Some have been advising people and startups since high school, like Nik who now is running his own business/fund. Two brothers Mo and Ammar started their own fund in SF and manage 2 additional offices in Dubai and London. Zibo is doing the same in NYC, managing a family office’s VC arm.

I was surprised at just how many are not only working in VC, but also managing funds on a global stage.

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Trend #1, The Creator Economy: tools that serve independent content creators, curators, and community builders to help them monetize their skillsets/passion.

50 million people today consider themselves to be creators, and they’re finding new platforms to share their content and tools to manage their businesses.

  • “In China, there was actually a University that opened last month which offers new occupational training for the mobile Internet era (ie: majoring in how to be a podcaster, how to be a live-streaming commerce person, etc.)”Tanya ‘99
  • “One of my friends actually makes a living off of Roblox UGC. Two-thirds of all U.S. kids between 9 and 12 years old use Roblox, and it’s played by a third of all Americans under the age of 16.”Ryan ‘01

My takeaway is that people are seeing the path to becoming a creator become more institutionalized, and from a young age. Children are making money by building within their favorite gaming ecosystems (where Roblox paid out over $30m to young developers on the platform in 2017) or even by teaching, like on newer platforms like Tract. They’re watching Ryan Kaji become the highest earning creator on Youtube at just 9 years old, and peers like Charli D’Amelio and Addison Rae become household names after just a few months of creating content on TikTok. And now, Universities are catering to the creator economy as well.

Our friends with side projects or full-fledged online businesses are creators. Our idols and those we look up to online are creators. The next generation of investors are seeing this trend through a very personal lens, and see the huge potential for this space to continue to grow as more and more people create for a living.

Trend #2, EdTech: tools and services that facilitate learning — I personally like to segment into Early Childcare, K-12, Higher Ed, Continuing Education, and B2C.

Thousands of students/recent grads saw their semesters cut short this past spring, and experienced a mad dash toward digital learning. It was often messy, and students all over the world are still learning in either online or hybrid models. Many investors surveyed experienced this first-hand, and know things need to change.

  • “I’m interested in how educational content is distributed. Because of the content we have available today on Youtube and other platforms, in comparison, educational content is not as fun and engaging as it can be. The opportunity cost of attention is SO HIGH.” Paraj ‘95
  • “It’s easy to see a lot of gaps in the education system with classes moving online. Kids are fed up with paying $25–$50k to go to college and not fully be there and get the full experience. The experience was broken before COVID and is still broken.”Ben ‘98
  • “Higher education doesn’t prepare anyone for professional services… that needs to change.”Zibo ‘96

EdTech is a sector that I spend a ton of time in (see here). The distribution of educational content is changing, and there’s a higher bar for education to be gamified, personalized, or feel like “invisible learning.” From my perspective, people want more real-life experience and project-based learning from their Universities to be more prepared for recruiting and the workforce — and companies in the private sector are incentivized to get involved as well (ie: access to qualified pipeline of candidates). And considering the enormous cost of higher education, there’s an opportunity to build more flexible formats that mitigate accumulating massive student loan debt.

I also believe it’s important to caveat that this demographic, Gen Z, does not encompass the traditional learner here in the U.S. In addition to a few trends mentioned above, there remains a huge opportunity within continuing education and helping adult learners upskill.

Trend #3, Social Gaming: online games that allow for social interaction between players.

Fifty-nine percent of people in the U.S. classify themselves as gamers. For Gen Z, that number shoots up to 90%. And during the past few months when it was harder to see friends in person, the trend of social gaming was accelerated and is expected to serve as the “new social network” for our generation. It’s how we meet people, make friends, etc.

  • “The world is becoming more multi-player — I grew up playing single player games, but Fortnite changed that. Overtime any task or process as a single player thing is going to become multiplayer.”Paraj ‘95
  • “Traditionally when you think of gaming, you think shooting games or Xbox games. Roblox is a diverse set of games that are really social — hanging out, making friends. There’s also a vibrant item economy with limited items — a virtual world where people can interact in a really normal way. This is where social media is heading.”Ryan ‘01
  • “I’ve been following the digital persona — the blending of online and offline world with social and gaming, and COVID has accelerated this trend. Like when Animal Crossing first came out, there was an explosion in interest in Nintendo Switch. And with Animal Crossing, you see the UGC help drive engagement. You have people creating clothing or items that you can purchase or acquire, and many Instagram accounts were created that post about fashion trends on Animal Crossing. It really highlights the potential for a virtual social network that combines social and gaming elements. Even on Discord, you see people are gathering around similar interests, finding online friends, sharing photos with each other, etc.. Gaming is really bringing people together.”Michelle ‘95

I believe that social networks and gaming are becoming increasingly intertwined, and I am excited about platforms that provide gamers with the agency to create and build (in addition to just playing) and share those experiences with friends (both existing/offline, and with opportunities in-game to meet and develop friendships and sub-communities over time).

Trend #4, Prosumer / Consumerization of Enterprise Software: our first enterprise software category! Loosely defined as companies adopting consumer-like solutions for business use.

There were a number of people who emailed me saying that they focused on enterprise software, and weren’t sure if their responses would be a fit for observing Gen Z trends — I thought this was really interesting. Yes, a ton of Gen Z content out there today is focused on consumer behavior and spend. However, Gen Z is also entering the workforce and becoming the next generation of knowledge workers! I believe this perspective is just as important, and clearly a theme that many of us are pursuing.

“Gen Z has incredibly high UI/UX standards. Those same standards should and will be applied more to “boring” B2B software. There is a ton of opportunity to reach feature parity with older B2B software, but provide a delightful UX.” — Cavan ‘96

We’ve seen this play out with next-gen tools like Notion and Airtable for productivity, Figma for design, Air for digital assets, etc. As next-gen knowledge workers enter a largely remote workforce, collaboration-first tools continue to be exciting, and I believe there remains a large opportunity to build beautiful, functional software catering to this demographic. I’m eager to see collaboration-first finance tools that help the CFO suite and finance/accounting organizations.

For all the entrepreneurs tuning in — this one’s for you ;)

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These responses ranged from college/internship crossovers, financial literacy and democratizing access to investing, mental health and holistic healthcare for Gen Z (mind, diet, habits, etc.), live social commerce, and new ways to bring people together in online settings or through other avenues (like building wealth in groups — there were a good amount of folks I spoke to that are launching syndicates to do angel investing).

We’re all excited to see the next generation of companies that will be building software and products for Gen Z… and we’ll likely be your first customers!

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Next-Gen = founded post-2008 recession, Legacy = founded pre-2008

I purposely made these questions very open-ended. When people think “Gen Z brands,” they typically think newer startups being hand-made and tailored for the next generation. But there are still a ton of legacy companies doing a great job serving the needs of Gen Z… like Apple for instance, which was the most-loved company listed in the survey. I’m writing this article on my Mac and will never give up my iPhone — so I get it.

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Shout out to Paige for the suggestion of this question!

Gen Z is full of socially-conscious consumers who care about things like environmental impact, sustainability, positive and inclusive messaging, and being value-driven.

I believe that Gen Z’s “favorite companies” and “favorite mission-driven companies” are very intertwined, and the data above supports that as well. Patagonia, Allbirds, Parade, and Warby Parker (three of which are Lerer Hippeau portco’s!) were all featured as popular responses in the previous question as well. A trend we’ll see in the coming years is that Gen Z’s favorite companies/brands will continue to be mission-driven in nature, and their $$$ will follow suit as well.

A huge thank you to all of my new friends from all over the world who helped me put this together — 30 phone calls later (+50 others who filled out the form!) — because this wouldn’t have been possible without them. ❤

What trends are you seeing with Gen Z? Comment below or tweet at me (https://twitter.com/meaganloyst)! And if you’re building a company catering to Gen Z consumers or knowledge workers (B2B), shoot me an email at meagan@lererhippeau.com. Let’s chat!

Oh, and I put together a Slack community — if you’re a Gen Z VC, come check it out here!

Written by

VC @ Lerer Hippeau | Advisory Board @ Girls Who Invest

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