The temporary death of digital consumer startups

A friend and I scrolled through the top 110-120 downloaded apps in the Swedish iOS App Store a few days ago. Among the 120 we found big social media services, the apps of established companies (banks etc), companion apps for physical services (delivery, parking, food delivery) and a few simpler/wrapper AI apps. What I missed, with the exception of BeReal, was new consumer mobile apps that are or could have been venture capital backed.

This supported my sense that there hasn’t been many new consumer startups that have reached scale in the last few years. I think that is partly due to the timing of founders building new products, partly to the fact that established companies (Instagram, Snap, TikTok et al) have executed well, and partly due to the environment for scaling consumer apps have become worse.

I believe a great environment to scale a consumer product (and just building a great product is really hard) has at least three components:

  1. a new, popular platform (to weaken incumbents’ position)
  2. open organic distribution channels (to enable low cost user acquisition)
  3. data-driven, paid advertising channels (where startups can compete with established companies)

Over the last couple of years each of the components have become less friendly to digital consumer startups. There has mainly been one big improvement in the environment, the fact that consumers have become more used to paying for for digital services.

I’m eagerly waiting for the world to change and ignite a new era of digital consumer startups. Currently my guess is that AI can be used to create great new products, rather than the environment becoming more friendly to consumer startups.