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Venture capital is inherently about risk and timing. The nature of our industry is continually changing. And over the past few years, it’s become exceedingly clear that where you fall on those risk and timing continua is directly tied to the biggest technology shifts, the most impactful companies and the biggest financial successes - and that is true both within startups and for the VCs that fund them.
As our industry seeks to nail down the next platform shift beyond mobile, something else is clear: younger, non-white consumers will be in the driver’s seat. Gen Z will make up 25% of the US population within three years; 48% of whom identify as non-white. Millennials currently have the largest purchasing power of any generation as they transition into head of household roles. Both generations are digitally native and have fundamentally different preferences.
Who is building products for these consumers - and, as VCs, how can we find them early, before they are already seeing hockey stick growth? Turns out these entrepreneurs look a lot like us and the consumers they are trying to reach.
So, we’re excited to be launching Canaan Beta, Canaan’s new $20 million seed program that aims to invest in the next wave of consumer technologies across social, eCommerce, gaming, and even sectors that haven’t yet been imagined. Housed within our current $800 million fund (Canaan XI), Canaan Beta enables us to move nimbly and quickly, which is essential to success in consumer investing today. With a $250-500k investment, Canaan Beta’s goal is to radically transform the way people live, communicate, and work by helping advise, refine, and fuel the entrepreneur’s passion at the time of inception.
With new business infrastructure tools and a voracious appetite among young tech consumers, the barriers to starting and scaling a consumer tech company are lower than ever before. Younger entrepreneurs have the tools to build earlier and with less capital. That’s a good thing! Founders can be more efficient at nailing product-market fit.
In parallel, we are seeing the successful companies reach similar milestones earlier in their lifetime - the growth of companies is accelerating. We believe that’s because of who entrepreneurs are building for, not what they are building. Entrepreneurs are building for the younger generations, who are learning, socializing, and purchasing in radically different ways than generations of the past.
As two twenty-somethings ourselves, we intuitively understand what types of brand personalities and products appeal to younger consumers. 95% of teens today have access to a smartphone - that’s even more than the percentage that have access to a laptop or desktop. As former operators from hyper growth companies, we understand the sweat equity that goes into company building and we want to roll up our sleeves and build alongside the entrepreneurs we partner with.
Canaan has a track record of investing in behavior shifting consumer companies. Home delivery of groceries seemed unnecessary when Hrach co-led the seed round for Instacart. The online loan and banking industry was entrenched when Dan led the Series A for LendingClub. And people certainly weren’t renting cars from their peers or dating online when Deepak believed in Turo and Match.com. Technology is moving faster than ever.
And so - we’re moving earlier in the time continuum and also taking more risk in new areas. It’s exhilarating, challenging, and a hell of a lot of fun. And we’re pumped that the Canaan partnership - so practiced at mentorship and evolution over its 30 year and $5 billion history - has empowered us to hunt for what’s next.
Whether you’re an entrepreneur working on a seed-stage B2C startup, or someone who just wants to chat, we would love to hear from you! Reach out to us at beta@canaan.com. No idea is too early and we’re always looking to help.