From Kansas City to Kuala Lumpur, there is now a palpable sense that much of the world, with some unfortunate exceptions in India, Japan and elsewhere, is slowly returning to a pre-March 2020 normalcy.
As of this writing, more than 50% of U.S. citizens are fully vaccinated. Mask mandates have either been entirely rescinded in states where they were once in effect or there are plans to drop them in the coming weeks. While there will likely be friction here and there as businesses and governments determine how best to manage the transition back to a pre-pandemic, mask-less reality, there is now broad consensus that summer 2021 will, mercifully, look much more like summer 2019 than last summer.
Consumer, Unshackled
Consumers, thankfully, are not waiting for guidance from governments or local municipalities to resume their social activities and spending. Fifteen months without live concerts, sporting events or much in the way of a vacation have created a level of pent-up consumer demand that economists haven’t seen in nearly a half-century. Airbnb’s Brian Chesky stated recently that the vacation rental juggernaut now needs thousands of additional hosts on its platform to meet the surge in demand. Even cruise ship operators are reporting that they are fully booked for most of their excursions well into 2022.
To be sure, a robust stock market, which demonstrated surprising resilience over the last year, and government largesse has fueled some of this. Flush stock portfolios have encouraged many home-bound consumers, laptops at the ready, to splurge on luxury goods as a way to assuage the loneliness and monotony of months of lockdowns. Record-shattering sales in every category from fine art to designer handbags to collector cars are a testament to that.
Revenue delayed is not necessarily revenue denied
For many startups, this anticipated surge in consumer spend is not coming a moment too soon. As we’ve discussed in previous posts, after the pandemic hit there emerged a clear ‘tale of two cities’ of companies that were obvious Covid beneficiaries and those that were being disproportionately impacted. Fortunately, even within industries that were particularly sensitive to the demand shock of a black swan event like the pandemic, there were nuances; and those nuances now indicate that the long-term financial impact on many of those business may not be as severe as feared.
An example of this can be seen in our own portfolio in the form of Joy Wedding. Joy is an end-to-end wedding planning, gifting and event management platform. At first blush, one would expect that any business reliant upon in-person events as a central part of its revenue model would take a severe hit during the pandemic; and initially, that was true in Joy’s case. Weddings in 2020 were indeed summarily cancelled as the pandemic took hold; and, the company took evasive maneuvers and innovated on new ways to generate revenue to adapt to this new reality. But unlike other event-based businesses, Joy has been able to recapture much of the deferred 2020 revenue, albeit a year later.
People intent on getting married are still going to get married. Whether that event gets pushed out a year or so is not terribly significant. Joy was able to rationalize its business during 2020 and is now exiting the pandemic leaner, more efficient and with a flush pipeline of weddings to manage — both the anticipated 2021 season of weddings as well as all the weddings slated for 2020 that were postponed. Joy might be an edge case, but there are similarities across a number of startups.
The case of Joy, however, does not minimize the losses of many consumer businesses whose revenue cannot be so readily recaptured. Obviously, a hotel cannot rebook a cancelled reservation for a room that went vacant the previous night. That revenue is gone forever. Similarly, a musical artist whose 2020 summer tour was cancelled cannot simply book two summer tours in 2021 to make up for the cancelled 2020 shows. Last I checked, there is only a summer per calendar year.
Post-pandemic business models emerge
As in the case of Joy Wedding, the pandemic forced many leaders, from startup teams to Fortune 500 CEOs, to reappraise their businesses, rethink how they were engaging and transacting with customers, and innovate new business models to both diversify their revenue sources and harden their service offerings against future demand shocks. Granted, like the plexiglass barriers that greeted us all at restaurants and grocery stores the past year, some of these innovations were opportunistic and ‘bolted-on’ and will disappear as the post-pandemic economy arrives in a fulsome way and businesses return to standard operating procedures. But other innovations are here to stay and will usher in cottage industries to cater to new generations of consumers that, pandemic or not, will heretofore prefer to engage with companies in ways that were altered by the past year’s events.
An obvious example is in commercial real estate as we’ve all reassessed our relationship with (and our requirements for) working and transacting in physical spaces. We are seeing a wave of new technologies and robust innovation around this theme. Another area is the broad theme of experiences — creating them, sharing them, and even re-experiencing them. Finally, we anticipate even stronger growth across new digitally native brands and experiences where products and services are created, shared and solely consumed digitally, entirely decoupled from any physical footprint. While VR and AR technologies have been focused in this arena for ages, the pandemic has somewhat legitimized these ‘digital only’ experiences, products and services and catapulted the broad VR/AR industry past its long-held perception in the mainstream, fairly or unfairly, of building trivial tech that only had gaming applications.
At Catapult, we are enormously excited by what we are seeing as the world enters a post-pandemic economic recovery, fueled heavily by consumer spending. Despite some obvious concerns at the margins around inflation and political instability in some quarters of the globe, we anticipate robust growth across a number of macroeconomic measures and a wave of post-pandemic consumer demand that will fuel the next few years of technology innovation. We’re excited to share it with you.