A shake-up is happening in social media, with dozens of new apps and wide-eyed entrepreneurs hoping to fix the loneliness epidemic affecting Americans.
From apps like Retro, which wants to bring back a photo-sharing experience more akin to olden-day Instagram, to platforms aimed at bringing people with similar interests together in real life, founders hope to create slower environments that put the “social” back in social media.
At the same time, investors — specifically venture capitalists — have been largely turned off by the current market for consumer-focused startups and products. In January, for instance, Connie Chan, who spent 12 years at A16z investing in consumer tech, departed the firm, signaling its focus on B2B startups and AI. The Information reported that same month that VCs were ‘”giving up” on betting their careers on consumer investments, like social media.
However, there are still several investors who would disagree.
“We remain more bullish than ever,” Maitree Mervana Parekh, a principal at Acrew Capital, told Business Insider. “We’re entering this new wave of social where people are trying to revert back to what people really use these platforms for to begin with — which is connection.”
And Peter Boyce II, founder and managing partner of Stellation Capital, is writing off the trend of VCs turning their heads at consumer investments as part of a broader “ebb and flow” in the space.
It is tougher, though, for investors and startups alike in consumer social.
MaC Venture Capital’s Marlon Nichols explained that it is “hard to underwrite anything on the consumer side these days just because of the lack of visibility into revenue and everything else that flows underneath that.”
However, there are “definitely some gaps” in the broader market that can be opportunities for VCs, he said.
Several new social companies are securing funding, albeit smaller than in years past.
222, an IRL social app, announced a $2.5 million seed round in February with participants including 1517 Fund, General Catalyst, Best Nights VC, and more. Seam Social, a Web3 social-media platform, also announced a $2.5 million seed at the end of 2023 led by Web3 and crypto investment firm 1kx. And Kndrd, another IRL social startup still in beta, recently raised its first $10,000 check from the Stanford University BASES Startup Challenge.
Here are seven VCs you should know who are still investing in new and emerging social startups:
-
1kx. Peter, known online as @pet3rpan, is the designated consumer-tech investor at 1kx, an early-stage crypto- and Web3-focused VC fund with offices around the world, including San Francisco, New York, and Lisbon. The company has invested in startups like Joke Race, Pudgy Penguins, and Seam. The size of the fund is undisclosed.
-
Acrew Capital. Mervana Parekh is a principal at Acrew and has invested in social startups like Diem, Afterparty, and Anything World. The firm is based in San Francisco and has a fund size of $1 billion AUM, per the company.
-
Best Nights VC. Lorrain de Silva is the managing director of Best Nights, the VC unit of liquor company Jägermeister, which has invested in startups like 222, Lex, and Thursday. The Berlin-based company has not disclosed the size of its fund. It writes checks between $300,000 and $1 million.
-
Crush Ventures. Andrew Kahn leads Crush Ventures, the VC firm launched by global talent-management company Crush Music, with clients including music giants Miley Cyrus, Lorde, and Fall Out Boy. Kahn has invested in startups like Rythm and Cove, along with investors Aaron Matusow and Dan Kruchkow. The firm is based in Los Angeles and New York, and its fund has a size of $30 million, the company said.
-
MaC Venture Capital. Nichols is a founding managing partner at MaC, which recently invested in social startups like Spill and Swsh. While the firm has made some plays in the social market recently, Nichols emphasizes that MaC is not solely targeting social as a category. The firm is based in Los Angeles, and its Fund II is $203 million, per the company.
-
Scribble Ventures. Scribble has three core investors who are eyeing consumer social companies like the photo-sharing app Retro: Elizabeth Weil (founder and partner), Kevin Weil (operator in residence), and John Smothers (partner). The firm is based in San Francisco and is investing out of two funds, a $56 million core early-stage fund and a $30 million opportunity fund, per the company.
-
Stellation Capital. Founded by Boyce, who spent eight years as a partner at VC firm General Catalyst investing in consumer startups, Stellation is a New York-based pre-seed and seed-stage firm. Boyce has backed a slew of new social startups, including Diem, Lex, Koodos Labs, and Swsh, alongside associate Rhian Horton. Stellation’s current fund is $90 million AUM, per the company.
What makes a social startup appealing to VCs in 2024
The founders behind many of the latest, buzziest social networks tend to be former Big Tech staffers, Gen Z, and much more diverse than the generation of founders that built Facebook, Snapchat, or Twitter.
“What defines the communication modes and behaviors for the next 10 years is being invented now and it’s being invented by the young people for themselves,” Boyce said.
Andrew Kahn, who heads up Crush Ventures, said the company considers which founders have “the right unfair advantages around them to go to market in a big way.”
“The future of social media is in closed, collaborative, and interactive spaces,” Kahn said. “It isn’t necessarily broadcasting one-to-many. It’s in these places where you’re interacting around shared experiences, co-creating, co-playing, co-listening.”
For example, Crush Ventures invested in 2022 in Rythm, a music-streaming platform that allows users to listen and share music online.
The ability to use tech to craft compelling IRL experiences is the guiding principle for Best Nights — which aims to fund startups that can give users “their best night.” Best Nights has invested in 222; Lex, an app for queer communities to connect; and Thursday, a dating app that invites its users to meet at events that happen on Thursdays.
“We look for consumer-tech scalable startups that follow an online-to-offline approach,” said de Silva of Best Nights. “This means first you have to onboard the people online, you have to bring them together online, but they meet offline and attend something that’s tech-enabled.”
In 2024, Best Nights is looking to invest in companies that facilitate travel experiences after hearing people say their best nights have happened during trips or vacations, said de Silva.
“There’s going to be a real ongoing, post-pandemic appreciation and recognition of just how cherished in-person time is with other people,” Boyce echoed, which is why he is investing in startups like Diem and Lex.
Acrew is also looking for startups that can effectively bridge online and offline experiences at scale, Mervana Parekh said.
For other firms, like MaC, a promising social investment must show signs that it can fill gaps in the product marketplace and become a winner in its respective corners of the internet.
“Founders have to be honest with themselves,” Nichols said. “Some of them aren’t really venture-scale or venture-type investments. We’re looking for the next big thing, the next category leader.”
Read the full article here