Consumer Startups Are a Better Bet Than Enterprise Startups

We live in a consumer-driven economy—consumer spending accounts for two-thirds of the U.S. GDP.   Yet Carta recently reported that just 7% of seed capital raised on the site last year went to consumer companies, the smallest share since 2018. Andreessen Horowitz meaningfully cut its consumer investing team and folded it under its finance investing lead partner. Lerer Hippeau, another venture firm once focused on consumer companies, is investing more in enterprise firms. In our own day-to-day activity and conversations with peers, it is clear that investing in consumer companies has come under greater scrutiny.

At a high level, the bearish sentiment makes sense. Inconsistent consumer sentiment and dwindling savings accounts prompt fears that spending will slow, customer acquisition costs have been rising, inventory and supply chain challenges are material and the shift toward generative artificial intelligence has emphasized infrastructure to date.