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1、2023 and BeyondDisruptors Emerge in the Face of ChangeThe Slowdown Speeds UpState of Consumer Internet 20232Startups Shift Focus as Exit Plans Are Put on HoldStepping into 2023,a tougher market environment persists:Elevated inflation,continued interest rate hikes,rising geopolitical risk,and falling
2、 consumer sentiment dot the map.Once-pandemic-related tailwinds have now become headwinds,causing economic growth to slow,public markets to fall,capital to become scarce and consumers to scale back on spending.Yet while the current landscape remains challenging,this is precisely when disruptors are
3、born.Today,founders have time to slow down,focus on product market fit and develop long-lasting innovations.Furthermore,recent tech industry layoffs will provide a greater availability of talent to found new companies given falling opportunity costs,fueling the next wave of innovation.The key for co
4、nsumer startups will be twofold.First,companies will need to be agile and nimble;the ability to quickly cut burn and extend cash runway will be paramount.Companies will need to become grittier and stretch every dollar.This will ultimately force them to be more efficient,better equipped for long-term
5、 growth and better prepared to meet the demands of exit markets.Second,startups will need to capitalize on shifting consumer trends.For example,consumers increasingly want a more personalized experience,yet they expect more privacy(look no further than the demise of cookies and cross-app tracking).T
6、he ongoing proliferation of gaming has led to greater demand for multiplatform and on-demand games.Core values are continuing to shift amongst consumers,especially as the demographic of the modern-day consumer changes as younger generations make up a greater piece of the pie.Factors such as sustaina
7、bility and environmental impact have notched up the priority list.These are just some of the challenges and opportunities staring down consumer startups.Only companies with the best technology,ideas and go-to-market strategy will clear the hurdles.Luckily,there is no shortage of innovative ideas.Thr
8、oughout this report,we highlight a few examples of niches disrupting the consumer space,from reverse logistics companies specializing in branded recommerce to emerging subsectors within commerce enablement.With careful navigation,consumer startups can take advantage of leaner times and shifting cons
9、umer preferences to build better businesses.This is the moment when startups can capitalize on the opportunity presented and turn themselves from market players to a market leaders.We believe in these companies,and we believe in the innovation economy.Senior Market Manager,Consumer InternetState of
10、Consumer Internet 20233State of Consumer Internet 20234Brick and Mortar RevivalConsumers are back out in the physical world,but the commercial spaces of old need reinventing,given reduced downtown office footprints and pandemic closures.This,coupled with the need to cut through increasingly noisy on
11、line channels,poses an opportunity for companies looking to reach consumers the analog way.Offering customers an experience increases loyalty.Notable Companies Formed during the GFC(2007-10)Entrepreneur EnablementThe reshuffling of the workforce coupled with inflationary pressures places greater imp
12、ortance on the side hustle,and on tools that can help individual entrepreneurs and creators efficiently monetize their output and products both in physical and digital worlds.A Prescription for SubscriptionsMore companies are leaning into paid subscriptions as a predictable source of revenue.Followi
13、ng Amazons Prime membership model,Walmart,Best Buy and Barnes&Noble now offer paid annual memberships.We expect others to follow suit.The model resonates with investors and companies who favor the reliability of subscription revenue and the benefits it can have on retention.CAC on TrackWith profitab
14、ility in the crosshairs,consumer tech companies are prioritizing acquiring fewer,higher-quality customers.Customer acquisition costs(CAC)are under scrutiny as investors want the biggest bang for their buck.This has led to a drawback in spending with around 60%of consumer tech companies decreasing th
15、eir marketing spend YoY as of Q4 2022.1Vertical Communities As social media migrates toward content for entertainment,users are seeking new channels for connection based on shared interests.Its a natural extension that these more curated spaces would invite commerce opportunities.We expect brands an
16、d creators to monetize these emerging social spaces.After all,more engaged users are more engaged customers.M&A ManiaValuations are beginning to reset after reaching high marks in 2021.As the backlog of late-stage companies builds amid a closed IPO market,pressure may grow for founders to achieve an
17、 exit.With some public,and more scaled private companies flush with cash from the recent bull market,we expect strategic acquisitions to spike in 2023.The question is at what valuation?It may not be pretty.AI for E-commerceArtificial Intelligence(AI)took a leap forward in the last six months.E-comme
18、rce presents an ideal space for these new technologies to take root.Writing tasks such as ad copy,product descriptions,and marketing emails can be sped up.The tech could also improve customer support and enable more personalized marketing and shopping.Even reports about,say,Consumer Internet,could b
19、e written with AI.Was this one?Well never tell.2Streaming Gets In The GameGaming with streaming and subscription services will likely continue to grow more robust thanks to an increase in games that are available cross-platform and improved internet speeds.There may always be a segment of gamers tha
20、t prefer the performance of PC and consoles,but the accessibility streaming offers continues to add value for gamers.Recommerce RisingMore brands will likely reclaim their secondhand supply chain.Third-party logistics providers are enabling any brand to establish and or white-label a resale program.
21、This offers brands a new source of revenue and brand protection.Consumers can both save money and shop more sustainably.Notes:1)See page 9.2)It wasnt.4.1%6.7%6.6%11.2%19.1%-4.8%-8%27%-10%0%10%20%30%200420062008200022YoY changeNotes:1)Debt payments averaged 9.7%of disposable inc
22、ome in Q3 2022 down from 13.2%in Q4 2007.2)Personal savings averaged 14.3%of disposable income in 2020-21,up from 3.5%in 2006-07.3)Average monthly returns indexed to the settlement price on Jan 3,2022.4)Rates and year-over-year(YoY)change based on the December(or latest)reading for each year.Federal
23、 Funds Rate is the default lending rate to banks.5)Spending and inflation data expressed as average annual percentage change.Inflation is the YoY change in the Consumer Price Index(CPI).Source:St.Louis Fed,Morning Consult,Bureau of Economic Analysis,S&P Capital IQ and SVB analysis.Average US Interes
24、t Rates by Type4State of Consumer Internet 20236S&P 500NASDAQ-90%-80%-70%-60%-50%-40%-30%-20%-10%0%Jan 22Mar 22 May 22Jul 22Sep 22Nov 22Jan 23GFCPandemic21%8%5%1%0%-1%-9%-10%-10%-12%-14%-19%-22%During the GFC,spending on durable goods plunged as consumers postponed big-ticket purchases.Stimulus spen
25、ding COVID-19 lockdownYoY change in Nov 2022For all its intensity,the current economic slowdown has failed to deliver widespread damage(yet).Yes,economic growth has slowed and public markets have been pummeled,especially tech stocks.However,unlike the GFC,which was marred by sweeping job losses,fore
26、closures and bankruptcies,the current downturn has largely been absorbed by shareholders.Profits from the pandemic-fueled bull run have largely shielded the broader economy,as fundamentals like employment and wage growth remain positive.Yet the prevailing outlook is getting more negative.A January p
27、oll by The Wall Street Journal found that 61%of economists expect the US to enter a recession in the next 12 months,up from 18%a year ago.Consumer tech has not been immune to the impacts of the downturn.A reversal of pandemic trends like online shopping and remote work caught companies flat-footed l
28、ast year.In June,Shopify laid off 1,000 employees,roughly 10%of its workforce.CEO Tobias Ltke said the company overestimated the permanence of online shopping shifts in growing too rapidly.“Its now clear that bet didnt pay off,”Mr.Ltke said.Other big consumer tech companies including Meta,Alphabet,T
29、witter and Snap followed with layoffs in H2 2022,in some cases unwinding hiring sprees from 2021.The pullback comes as high inflation and rising interest rates are dampening consumer spending.Home and auto sales near decade lows in 2022.Household savings rates fell to 3.4%,down from 7.5%a year ago,a
30、nd consumer confidence is hovering near the record low reached in June 2022.While inflation is finally abating,a stronger than expected January jobs report may convince the Federal Reserve to keep raising rates.However,its not all doom and gloom.Consumers are better prepared to weather a recession t
31、oday than prior to past downturns.Households offloaded debt1and saved2during the pandemic,and employment remains high factors that could buoy a recovery.Select Consumer Tech Stock Returns3Q4 2020Q4 2021Q4 2022Basis Point Increase 2021 to 2022Inflation and US Personal Expenditures by Product Type5Dur
32、able GoodsNon-Durable GoodsServicesInflationRecessionDurable GoodsNon-Durable GoodsServicesFederal FundsRateMortgage(30 yr.)Auto(60 mo.)Personal(24 mo.)Credit CardEducationHealthcareGroceriesHousingHotelsGas/fuelHome FurnishingsRestaurantsApparelAlcoholAuto PaymentsPersonal Care ServicesAirfare40236
33、1188214456-8%-7%-6%-4%-3%Womens ClothingStationeryMens ClothingShoesCosmeticsFurnitureJewelryNew VehiclesRVsBicyclesUsed VehiclesSmall AppliancesHome DcorComputersMajor AppliancesTVsFlooringBoatsDishwareMotorcyclesToolsOutdoor EquipmentAircraftCoffee and TeaWomens ClothingMens ClothingFood at Restau
34、rantsShoesSodasCosmeticsAlcohol at RestarauntsFresh ProduceBeerPrescription drugsStationeryWineCleaning ProductsGames and HobbiesPersonal Care ProductsSpiritsMovie TicketsHealth InsurancePackage DeliveryRetail BankingStudent HousingLive ShowsDoctor VisitsHotelsMuseums and LibrariesInternetChildcareT
35、V ServiceMoving and StorageDrycleaningTailoring and AlterationsComputer SoftwareHospitalsHousehold RepairsHigher EdState of Consumer Internet 20237Yacht dealers may be in for a rough year.When times are tough,luxuries are the first to go.During the GFC,Americans bought fewer RVs,motorcycles,TVs,furn
36、iture,and even new carpet.If it could wait,it did.New vehicles,used vehicles,jewelry,clothing,vacations households slashed big-ticket purchases across the board.For tech founders,this shift in consumer behavior presented an opportunity.While large incumbents struggle to adapt quickly to change,start
37、ups can create strong footholds in the margins of a downturn.In 2008,Brian Chesky and his roommates recognized that travelers were looking for an affordable alternative to hotel rooms.They started by renting an air mattress in their San Francisco apartment.Today,Airbnb is one of many successful tech
38、 startups to emerge from the GFC.Downturns can not only be a great foundation from which new companies are spawned,but they can also serve as accelerators for existing startups.Shopify,for example,was a two-year-old company struggling to scale in 2008.The surge in small businesses that arose from si
39、de hustles during the recession gave Shopify a critical boost.Consumer companies can also lean into growth trends during downturns as not every spending category declines.Consumers may wait on big-ticket items,but splurge on smaller pleasures like coffee,restaurants and movies.Uber rode this wave by
40、 offering affordable transportation at a time when auto sales were down.Groupon did the same with discounts on restaurants and entertainment.Essential services like healthcare and education are resilient when the economy is stressed.Higher education is boosted when unemployed workers go back to scho
41、ol or seek upskilling programs.If the US does enter a recession in the near future,its probable that a new round of disruptive consumer tech companies will be seeded.That said,not all market downturns are the same.Savings from the pandemic have infused households with more cash than 2008.Its reasona
42、ble to expect that spending cuts may not be as pronounced this time around.Index of Select US Personal Expenditures During the Global Financial Crisis1Durable GoodsNon-Durable GoodsServicesNotes:1)Select expenditures plotted as a normalized distribution of the percent change in spending from 2007 to
43、 2009 on the x-axis and the total expenditure in 2009 on the y-axis.2)Notable companies are those that were either founded or received their first financing between 2007-2009.Source:Bureau of Economic Analysis,PitchBook and SVB analysis.DecreaseIncreaseSmallerLargerPhone ServiceMarket Size in 2009Ch
44、ange in Consumer Spending 2007 to 2009Finance and Payments-41%-25%-25%-21%-14%RVsBoatsNew CarsFurnitureTVs-17%-17%-10%-9%-5%Household RepairsMoving and StorageRetail BankingTailoring and AlterationsHotelsNotable Consumer Tech Companies Formed:2007-092TransportationHome ImprovementRetail and eCommerc
45、eHotels and TravelHealthcare and FitnessEdTechRecession-Proof Mass-Market Goods and Services Recession-Vulnerable Mass-Market Goods and ServicesOpportunity for DisruptionOpportunity for GrowthExpected Two-Year Change in Marketing Budget Due to Shift Against Cookies1Notes:1)Based on a 2022 survey of
46、more than 175 Fortune 500 marketing leaders.2)Share of consumer tech companies,as defined by SVB proprietary taxonomy,utilizing select ad platforms.3)CPM=Cost Per Thousand Impressions.4)Companies with at least$100 of marketing spend per quarter.Revenue buckets are based on 2022 annualized revenue.So
47、urce:Loyalty Research/Rep Data,Vayner Media,Vogue Business,Sensor Tower,Financial Times,SVB proprietary data and SVB analysis.Share of US Consumer Tech Companies with Decreasing Marketing Spend YoY4State of Consumer Internet 20239Share of Consumer Tech Companies Utilizing Select Ad Platforms2Third-p
48、arty cookies have crumbled.What started with an iOS privacy update in May 2021 has fundamentally changed how consumer companies market their products online.Third-party advertisers are now limited in what they can see about iPhone users activity.Alphabet plans to implement similar restrictions to An
49、droid users next year.The new restrictions impact the advertisers ability to target ads as well as measure performance and attribution.Subsequently,paid social and search have taken a hit,with many brands citing increased costs for less effective targeting as a result.But these two strategies arent
50、out of the ring just yet.In a 2022 survey of Fortune 500 marketing leaders,53%and 47%expect to slightly increase social media and paid search,respectively,despite the shift against cookies.1As costs comes under more scrutiny,companies are prioritizing acquiring fewer,higher-quality customers.This sh
51、ift has accompanied a general pullback in marketing spend.Among consumer tech companies,nearly 60%are decreasing their marketing spend YoY as of Q4 2022 up from an average 39%in Q1 2022.Looking ahead,tensions between brands wanting to acquire customers and consumers wanting privacy can be partly med
52、iated by offering value in exchange for data.Brands can offer discounts for friend referrals or rewards through a loyalty program.These techniques help brands capture zero-party data data a customer intentionally shares.When it comes to reaching consumers,all eyes are on TikTok,literally.The service
53、 became the most downloaded app in the world in 2022.TikTok users spend twice as much time per day on the app as they do on Facebook and Instagram,according to Sensor Tower.Since launching their ad platform in 2020,more companies have turned to TikTok despite a number of institutions seeking to ban
54、it.Based on SVB proprietary data,in 2022,the number of consumer tech companies spending on TikTok advertising increased 57%YoY,while Twitter,Alphabet and Facebook saw slight declines.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%PodcastsOffline Ads/Direct
55、MailProgrammatic Ad NetworksOver-the-Top-AdvertisingPartnership MarketingInfluencer MarketingEventsEmail MarketingOrganic SearchPaid SearchSocial MediaSignificant IncreaseSlight IncreaseDecreaseQ1 2022Q2 2022Q3 2022Q4 2022Revenue Band40%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%Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4202020212022Between 2021 and 2022,the number of companies spending on TikTok increased 57%.1.4xCPM as a proportion of TikTok31.1x1.8x2.6xSearch engine for e-commerce websitesSales JourneyAI-powered visual searchAI-enabled conversatio
57、nal sales for existing customers Customer loyalty platform PurchaseRetentionAdvocacyFulfillmentAwarenessConsiderationCommerce Enablement Hype Curve Customer JourneyCommerce Enablement Select ExamplesMulticarrier shipping platform for e-commerceSubscription management Turns Shopify stores into a mobi
58、le appWhen supply chains were at a standstill and demand for goods surged during the pandemic,commerce enablement companies seemed to have the Midas touch.From mobile commerce to fulfillment and delivery,enablement companies helping retailers connect to customers on any point along the customer jour
59、ney were in high demand.Fast-forward to now and the landscape has changed.Commerce enablement companies are feeling the strain of weakening consumer spending.While these companies are mainly business to business(B2B)and are therefore shielded from some volatility,they are feeling the crunch from cos
60、t-cutting as clients scrutinize every line item,down to individual software contracts.Given these headwinds,and the broader market slowdown,VC deals for select commerce enablement subsectors declined in 2022,with reverse logistics as one of the few bright spots.Areas such as livestreaming,headless c
61、ommerce and fulfillment and delivery saw steep declines amid the drawback in consumer spending.However,promising technology is creating optimism for the future.ChatGPT1took the internet by storm in Q4 2022.OpenAIspublic chatbot released a floodgate of enthusiasm and speculation for how generative AI
62、 could disrupt commerce enablement.This includes everything from writing descriptions and SEO titles,to customer support,to ad copy.Emphasis was also placed in areas such as inventory management,as many retailers misjudged consumer demand in Q3 2022.This was evident by the adjusted apparel sales-to-
63、inventory spread,which flipped from positive 16%in Q3 2021 to negative 16%in Q3 2022,indicating sales are less than inventory levels.2To help its customers better manage inventory complexity,Shopify sought to bolster its inventory management tools through the$2.1B acquisition of Deliverr.The deal bo
64、osts Shopifys logistics capabilities adding predictive features and combining multiple sales channels together.State of Consumer Internet 202310Point in Customer JourneyAwarenessConsiderationPurchaseFulfillmentRetentionMultistageBack EndCustomer FacingAdvocacyOn Shopify App StoreChange in Venture Ca
65、pital Deal Counts for Select Commerce Enablement SubcategoriesBranded RecommerceReaching the plateauThis is when mainstream adoption of the technology starts.Associated risks are reduced and benefit from the technology is broadly accepted.Market share grows.ExpectationsBNPLHeadless CommerceChatGPTIn
66、novation TriggerPeak ExpectationsDisillusionmentSlope of EnlightenmentPlateau of ProductivityShoppable MediaLoyalty and IncentivesLivestream and Social CommerceImmersive CommercePersonalizationMobile CommerceAnalytics and CDPs3PaymentInfluencer MarketingDigital TwinAffiliate MarketingSubscriptionsRe
67、verse LogisticsInventory ManagementEnablement Along the Customer JourneyE-commerce companies rely on an ecosystem of enablement tools that add value and streamline operations along the customer journey.-41%-35%-33%-33%-31%-26%-26%-15%-14%-12%57%2021 2022Reverse LogisticsAnalytics and CDPsMobile Comm
68、erceOverall VCLoyalty and IncentivesBNPLFulfillment and DeliveryHeadless CommercePersonalizationPaymentLivestream and Social CommerceNotes:1)GPT=Generative Pre-trained Transformer,a language model that uses deep learning to produce human-like text.2)Bloomberg article.3)CDP=Customer Data Profile.Sour
69、ce:PitchBook,Alphabet Trends,Shopify,Bloomberg and SVB analysis.Fulfillment and Delivery$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%2000222023202420252026Startups Practicing Circular Strategies7Notes:1)Rent the
70、Runway via Wall Street Journal.2)According to a 2015 UK Barnardos survey.3)The New York Times.4)thredUP.5)Statista.6)Publicly available information on brands selling their own pre-owned products online to US shoppers.7)Konietzko et al.2020.Source:The Circularity Gap Report,Global Data,thredUp Recomm
71、erce 100,Statista,The Wall Street Journal,Barnardos,and SVB analysis.Reverse Logistics Power RecommerceBrands Adopting Recommerce6State of Consumer Internet 202311US Secondhand Apparel Market Revenue4Return to StockLiquidateForecastWave 1:P2P marketplaces filled the gap before branded recommerceWave
72、 2:Branded Recommerce2021Select ExamplesIn-store or Digital Trade-In for CreditAI-Assisted InspectionSent to Recommerce ProviderResaleRepairRecycleDonateSelect Examples:The US apparel industry has become a hotspot for circular transformation.On average,US shoppers purchase
73、 68 garments1per year and discard an item after wearing it only seven times.2 As a result of this consumption pattern,and the increasing public concern over the environmental impact of apparel waste,the demand for secondhand clothing has surged in the last decade.Secondhand clothing sales grew from
74、6%of total apparel sales in 2016 to 11%in 2021 and is expected to reach 22%by 2026.Corporations are moving to capitalize on this shift in consumer preferences by utilizing secondhand markets of their own to capture resale revenue as well as control the narrative surrounding their brand.There have be
75、en two distinct waves of tech-enabled secondhand apparel.The first wave centered around peer-to-peer marketplaces(P2P).After the GFC,consumers wanted to monetize their closets,and save money while having a seamless e-commerce experience.3Two notable resale marketplaces,Poshmark and thredUP,raised a
76、combined$400M in venture funding.Both ended up going public at valuations over$1B.The second wave is centered around branded recommerce.By controlling their own secondhand markets,brands get double benefit of brand protection and new streams of revenue with minimal additional costs.Consumers are loo
77、king to be more sustainable,but also,in an inflationary environment,remain cost-conscious.This is possible thanks to third-party reverse logistics providers specialized in recommerce.AI can be used to identify a garment and assign it attributes,set a price using those garments attributes and availab
78、le resale data,and relist an item for sales with minimal labor.Queue another use case for generative AI.Thrift and DonationRecommerceSecondhand as a Percent of Total US Apparel Market5Brands selling their own pre-owned products online to US shoppers2020200222022Year Launched200
79、00920132013Year Founded200920152011IdentifyPriceClose:RecyclingMaterialsTextile Recycling$60MSlow:Product Longevity and Life ExtensionRecommerce Enablement$130MRegenerate:Renewables+Improving Natural EnvironmentMushroom Leather$256MNarrow:Minimize Resources per Product3D Scanned-to-Fit De
80、nim$11MStrategySelect Example,Total Raised and Select Investors2%vs.17%Average revenue growth of US apparel market YoY vs.the secondhand apparel market 2016-2026 actual and forecasted.$0B$50B$100B$150B$200B$250B20000212022E$10.2B$4.4B$31.4B$6.3B$4.6B$3.2B$9.4B$34.9B$
81、27.3B$68.7B116 0 3200020202120222023*The gaming industry has evolved from one-time purchases of cartridges and consoles to Games-as-a-Service(GaaS),an evolving product supported by subscriptions and in-game purchases.Revenue growth and access to an increas
82、ing userbase attracted big tech companies,whove acquired studios for their intellectual property and built streaming platforms Amazon Luna,Nvidia GeForce NOW,Netflix Games,and Xbox Cloud(Microsoft).Microsofts decision to pursue Activision Blizzard the largest gaming company by market capitalization
83、is predicated on expanding their library of titles and building a stronger mobile games footprint.Despite the optimism,some ambitious bets have struggled.Alphabet shut down its cloud gaming service Stadia in January,and Meta lost$13.7B on its Reality Labs division in 2022.Mobile games revenue has be
84、en larger than PC and console combined since 2017.Last year,about half of revenue for mobile games came from ads,with the rest coming from in-app purchases(IAP).1Fortnite entered the mobile space in 2018 but was kicked off Apples app store in 2020 for circumventing Apples 30%cut on IAPs.This has fue
85、led debate over the power third-party app stores have over developers.In February 2023,the Department of Commerce issued a call for policy change.Gaming is viewed as a use case for Web3 and crypto as gamers were already familiar with buying and selling digital goods.In-game economies have long exist
86、ed Eve Online,Second Life,Fortnite,Roblox without notable crypto or Web3 connections.When crypto exploded in popularity in 2020,there was a rise in play-to-earn games where players could win crypto or non-fungible tokens(NFTs).As the those lost value,payers logged out.Web3s role in gaming is still b
87、eing defined new blockchain based games studios are still popping up but immersive in-game economies are here to stay.Notes:1)Percentage of daily players who returned each month,Unity Gaming Report 2022.2)YoY numbers aggregated from NewZoo.3)Global Theatrical and Home/Mobile Entertainment Market.4)I
88、FPI Global Music Report.5)Unity Gaming Report 2022.6)Based on publicly disclosed completed acquisitions for companies within the PitchBook vertical“Gaming.”Source:NewZoo,The Motion Picture Association,PitchBook,Konvoy VC,IFPI,Unity and SVB analysis.Global Gaming M&AMultiplatform5Games Released by Ye
89、ar per PlatformState of Consumer Internet 202312Global Gaming Revenue per Device and Timeline2Total deal sum M&A$B USDM&A deal countEstimate for Microsofts acquisition of Activision Blizzard announced in 2022 not yet complete.ConsolePCMobileAcquirerAcquisitions6279161012Notable Gaming Acq
90、uirers 2014-2022Pokmon Go reaches 500M downloads in one year.Nintendo releases Switch.$92B$40B$51BMicrosoft,announces intent to acquire Activision Blizzard for$68.7B.Xbox launches Game Pass.Microsoft,Nvidia,Google and Amazon launch cloud gaming.Meta acquires Oculus for$2B.PlayStation Now launches be
91、ta.Nvidia launches beta of their cloud gaming service.Dota 2 introduces a season pass model for the first time.Candy Crush Saga for mobile popularizes in-app monetization.Fortnite,a PC and console game,is ported to mobile.It generates$2.4B revenue that year a record yet to be broken.Apple launches A
92、pple Arcade.Netflix launches gaming division.$185BGlobal film industry3Global music industry4$100B$26BGlobal games revenue20204060801002014 2015 2016 2017 2018 2019 2020 2021Growth113%Multiplatform StrategiesPersistent AccountsPCPlayStation 4Xbox OneMobileXbox Series X/SPlayStation 5Nintendo SwitchT
93、he decline in public markets,rising interest rates,and reversal of pandemic-fueled consumer trends made 2022 a difficult fundraising year for many consumer tech founders.Capital invested fell from 2021 highs across most subsectors,with commerce enablement and gaming and esports being the only except
94、ions to the rule.Even these sectors hit a wall in the back half of the year,as the prolonged slowdown caused investors to pump the brakes and shift to earlier,less capital-intensive deals.The more difficult funding environment caused valuations to rebase.Later-stage deals,which are more susceptible
95、to public market valuation movements,were more impacted by the valuation adjustments.Valuations for these later-stage deals peaked at 2.5x their pre-COVID-19 levels and have fallen back to their 2020 levels.Further up the funding funnel,seed-stage deals plateaued but remain elevated.Investors unders
96、tand earlier-stage companies have years ahead before a potential exit,and VCs have shifted preference to these earlier-stage deals as an alternative to risk at the later-stage.This thesis is confirmed when analyzing valuation step-ups between rounds.In 2022,Series A companies increased their valuati
97、ons by a median of 4.3x their seed round valuations,a slight dip from the 2021 step-up but still well ahead of the 2020 level,an indication demand still exists for VC deals that are least exposed to public market fluctuations.Series B to Series C step-ups,on the other hand,saw a deceleration in the
98、step-up amount,falling back to 2020 levels.For example,a Series B company valued at$100M would have been priced for a Series C deal at$360M according to 2021s median step-up.The same company doing the same deal would have a$250M valuation in 2022.US VC Investment in Consumer Tech1Notes:1)Data as of
99、2/8/2023.VC defined as all series,stages and rounds for US-headquartered consumer companies.Consumer tech companies defined using SVB proprietary taxonomy.2)Data as of 2/2/2023.Consumer tech subsectors based on SVB proprietary taxonomy.3)Valuation step-ups are the median change in valuation for comp
100、anies going up a round.Does not include add-on or extension rounds.Source:PitchBook,SVB proprietary data and SVB analysis.14State of Consumer Internet 20230100200300Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4202020212022Indexed to 100Later-stage valuations have fallen to pre-COVID-19 levels while seed stage valuations
101、 have held strong.Seed RoundEarly-Stage VCLate-Stage VCIndex of 180-Day Trailing Median Valuation for Consumer Tech Companies Median Valuation Step-Ups for Consumer Tech Companies by Round3Total VC 2022$21.3B$20.5B$19.2B$45.9B$30.2B1,5481,8021,6712,4062,002020212022VC Investment YoY Chang
102、eVC in H2 202254%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$2.1BCommerce EnablementGaming and EsportsE-commerceManaged MarketplacesDigital Native Vertical BrandAd TechPeer-to-PeerSocial Networks and MessagingMedia and EntertainmentEd TechUS VC Investment by Subsec
103、tor2$10.8B$11.0B$4.9B$3.5B662551423380Q1Q2Q3Q42022Capital InvestedDeal CountMiddle 50%Median2.8x4.7x4.3x3.1x3.7x3.9x2.5x3.6x2.5x20202022212022Seed to Series ASeries A to Series BSeries B to Series CThe simplest way to win market share in a downturn is to survive the downturn.As
104、 the economic slowdown persists,consumer tech founders are doing what they can to conserve funds and extend cash runway.This includes pivoting both sides of the financial equation by cutting costs and maximizing revenue.However,falling consumer sentiment and decreased consumer spending is creating h
105、eadwinds.Revenue is down across most consumer subsectors,with 61%of VC-backed consumer companies posting quarter-over-quarter(QoQ)revenue gains in Q4 2022,down from 75%last year.Consumer companies are scrambling to add new income streams.Netflix,for example,has added ad-supported plans for the first
106、 time and is cracking down on password-sharing.The changes helped reverse a trend of declining subscribers.Subscription models are becoming more common as companies offer premium services to entice paid users.Twitter,under Elon Musk,has leaned into this strategy with a paid Twitter Blue model offeri
107、ng special features to subscribers.To compensate for the softer revenue,companies are cutting spend to the greatest degree since the COVID-19 pandemic began.The bulk of cuts are coming from areas like talent.Look no further than Twitter.Since buying the company in October,Musk has aggressively cut c
108、osts,including downsizing more than half the staff.While cuts help startups maintain liquidity,overall runway is shortening.Another factor eating away at runway is elevated inflation an element founders cant control.As time between rounds continues to lengthen,founders may consider an add-on round w
109、ith previous investors,explore alternative financing tools such as venture debt or take a down round.Percent of Consumer Tech Companies1with Increasing Revenue2by SubsectorNotes:1)Consumer tech companies defined using SVB proprietary taxonomy.2)Based on current 12-month revenue run-rate.3)Based on n
110、et cash burn and 12-month revenue run-rate.4)Analysis does not include any add-on or extension rounds.Source:PitchBook,SVB proprietary data and SVB analysis.Median Months of Cash Runway3for US VC-backed Consumer Tech Companies15State of Consumer Internet 2023Median Revenue Growth Rate YoY for US VC-
111、backed Companies by Sector10.415.215.915.715.014.214.414.112.911.812.911.4055Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4202020212022Median Months Between Equity Rounds for Consumer Tech Companies4Middle 50%53035202020222212022Seed toSeries AS
112、eries A toSeries BSeries B toSeries CSeries C toSeries DMedianMiddle 50%Median42.2%31.6%22.9%19.8%0%20%40%60%80%100%120%Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q420022ConsumerFintechFrontier TechEnterprise SoftwareQ4 2021Q4 202264%79%71%80%69%49%50%54%59%75%MarketplacesAd TechCommerc
113、eDigital ContentEd TechIndexed Median Consumer Tech Burn Rate1and Mentions of Cost-Cutting2The growth-at-all-costs mentality of 2021 has been replaced by the need to conserve cash and grow efficiently.Consumer tech companies are focusing on unit economics to get the biggest bang for their buck.Metri
114、cs like Lifetime Value(LTV)and Customer Acquisition Cost(CAC)are under greater scrutiny by investors who want to know that the their investment will be put efficiently to work.This priority shift shows up in burn multiples,which are trending down as companies attempt to pivot toward profitability.Bu
115、rn multiple measures the amount of net spend it takes to bring in net new recurring revenue.For example,a 3x burn multiple means a company is burning$3 to earn$1 of net new revenue.When capital is plentiful,burn multiples tend to expand as companies spend more to chase higher growth multiples a metr
116、ic that was rewarded during the boom times of 2021.The trend reverses during a downturn as investors hone in on margins.The result of this more careful spending is improving operating margins.Operating margins improved across consumer tech subsectors and revenue scales in 2022.In Q1 2022,at the heig
117、ht of the growth-first mentality,only 22%of consumer companies experienced improving their earnings before interest,taxes,depreciation,and amortization(EBITDA)QoQ.By Q4 2022,47%of consumer tech companies had better margins.The 25 percentage point(pp)jump seen in 2022 in the share consumer tech compa
118、nies with improving margins mirrors a similar jump seen during the pandemic.The share consumer tech companies with improving margins jumped nearly 28 percentage points from Q1 2020 at the onset of the pandemic to Q3 2020.Notes:1)Burn rate and call mentions are indexed to 100 at the peak.Burn rate de
119、fined as net burn divided by net new revenue.2)Call mentions of cost cutting based on aggregate data from proprietary call logs.Call logs are in the form of written notes,not recorded conversations.3)Burn multiple defined as net burn over net new revenue.4)Revenue calculated using 12-month revenue r
120、un rate.5)Change in quarter-over-quarter EBITDA margin.Source:PitchBook,SVB proprietary data and SVB analysis.Median EBITDA Margin for VC-backed Consumer Tech Companies by Revenue4Percentage of US VC-Backed Tech Companies with Improving EBITDA Margin516State of Consumer Internet 202363%22%47%0%10%20
121、%30%40%50%60%70%Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q420022ConsumerAll Other SectorsMedian Burn Multiples3for VC-Backed Consumer Tech Companies by Revenue4Companies cut costs amid COVID-19 lockdowns.Growth is deprioritized.Costs fall.020406080202020212022Burn RateCall
122、Mentions of Cost-CuttingCompanies conserve cash amid COVID-19 lockdowns.Burn increases during 2020-21 funding frenzy.Growth at all costs.Growth is deprioritized.Burn falls.Q1Q120212022Q3Q3Q1Q120212022Q3Q3Q1Q120212022Q3Q3$0-$10M Revenue$10M-$50M Revenue$50M+Revenue-225%-200%-175%-150%-125%-100%-75%-5
123、0%-25%0%EBITDA margins are improving compared to the peak of growth.34 ppimprovement6 ppimprovement9 ppimprovement$0-$10M Revenue$10M-$50M Revenue$50M+Revenue0.0 x0.5x1.0 x1.5x2.0 x2.5x3.0 x3.5xQ1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q420022Burn peaked in Q1 2022 and has declined as
124、companies focus on profitability.3.1x1.5xthredUPAllbirdsWarby ParkerRent the RunwayBigCommerceUdemyCourseraDuolingoRobloxDoorDashNerdWalletPinterest1x1x3x1x3x2x2x8x9x3x1x6x18x11x13x11x6x15x10 x7x17x8x3x9x1,8002,3002,8003,3003,8004,3004,800Revenue Multiples2for Recent IPO US Consumer Tech CompaniesIt
125、 was the best of times.The IPO window of 2020-2021 was like nothing consumer tech has seen since the Dot-Com era.Over thirty US VC-backed consumer tech companies went public via IPO in a span of 18 months achieving record revenue multiples and valuations in the process.In December 2020,DoorDashs IPO
126、 raised$3.4B.Two months later,Bumble raised$2.2B.The immersive world-building game Roblox raised$13.8B direct listing in March 2021.In September,eyewear brand Warby Parker took in$3.1B.In all,consumer tech IPOs raised$30B in the year-and-a-half period ending in January 2022,3.5x more than the previo
127、us four years combined.With public markets in decline,the window on public tech exits has remained firmly shut for over a year.Reddit scrubbed plans to list at a$15B valuation in December 2021.Now theyre one of many companies waiting for an exit.Instacart also announced plans to go public at the ear
128、liest opportunity.As the slowdown drags on and valuations drop,late-stage companies are feeling the pressure to repay investors.The backlog means that a single large IPO might clear a path for others to follow.Some companies arent waiting.While M&A activity was down in 2022,a number of large deals d
129、id bubble up.In January,The New York Times acquired sports news site The Athletic for$550M.In July,Shopify acquired the commerce fulfillment company Deliverr for$2.1B.Elon Musks take-private of Twitter may be the exception to the rule.Leveraged buyouts are less likely to occur with interest rates cl
130、imbing.Instead,companies may use cash reserves,stockpiled during the recent bull run,to make strategic acquisitions.M&A deals could ramp up as runway dwindles,forcing companies to sell under unfavorable conditions.Notes:1)Consumer tech companies defined using SVB proprietary taxonomy.2)Revenue multi
131、ple is the annualized revenue divided by post-valuation at the time of the IPO with current revenue defined as the annualized revenue divided by the enterprise value.Source:PitchBook,S&P Capital IQ,SVB proprietary data and SVB analysis.US M&A Deals for VC-backed Consumer Tech CompaniesUS VC-Backed C
132、onsumer1Tech IPOs and Take-Privates17State of Consumer Internet 2023$4.9B$5.9B$4.9B$9.3B$12.1B$5.3B220720022-56%$2.1B$550M$525M$400MDeal SizeDeal CountNotable M&A deals in 2022$0B$10B$20B$30B$40B$50B$60B$70B2000222023in 18 monthsin 31 monthsJan
133、2023At IPOS&P 500 IndexIPO CompletedIPO DelayedTake-Private Completed(Buyouts)ValuationS&P 500 Index LevelState of Consumer Internet 202318Alicia FullerSenior Market ManagerConsumer IDennis RapoportManaging DirectorConsumer ILiz CahillSenior ResearcherMarket IJoe WernerManaging DirectorConsumer IJos
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