Historically, community-building solutions have been agnostic in nature, creating spaces for every-one to connect about any-thing. One-size-fits-all platforms like Facebook and Clubhouse make it possible for anyone to create and join communities that align with their interests. However, as those of us in the startup ecosystem are well aware, having a target market of “everyone” can be deadly; building for everyone often means building for no one. This is not to say that these platforms can’t and haven’t been successful. That being said, existing solutions appear to be missing the mark on fostering connectedness, as rates of loneliness have reached an all time high.
Despite the breadth of community-building tools available today, top researchers are fearing that a loneliness epidemic is on the horizon, if not already here. In a recent Harvard study, it was found that 36% of all Americans — including 61% of young adults and 51% of mothers with young children — experience “serious loneliness.” So, in a world with significant digital infrastructure for facilitating connection, why are we lonelier than ever?
We believe people are getting lost and forgotten in the Facebooks and Clubhouses of the world, where it is becoming increasingly challenging to connect with others in a meaningful way. Beyond this, trends towards digital decluttering suggest that people are becoming less willing to sift through irrelevant content before finding what truly interests them.
This is why we are taking bets on verticalized communities — membership-based businesses dedicated to fostering community within and addressing a need or set of needs for a specific market segment. We believe that in the future, rather than living the majority of our online social lives on horizontal platforms like Facebook, we will do so on a few online communities centered around things we really care about. For example, a 22-year-old dog mom who is also a career-driven accountant might be part of a community for dog owners and another one for Gen Z CPAs. By creating a space in which members all care deeply about the same thing, and have similar needs and wants, verticalized communities will be able to deliver superior experiences to their users.
Here are two verticalized communities we’ve backed:
Okay, so verticalized communities trump horizontal communities when it comes to user experience. But can these businesses achieve venture scale (aka>$100M ARR)?
One of the ways verticalized communities can become venture scale is through a business model that compensates for the smaller addressable market by capturing more revenue per user. If verticalized communities are able to hone in on the needs of a specific market, they will theoretically be able to build a better product that they can charge premium prices for. For instance, despite the fact that there are only ~450K sneakerheads worldwide (conservatively estimated using StockX data), SoleSavy is able to surpass 100M ARR by charging their users $33/month.
That being said, investing in verticalized communities doesn’t always mean a compromise on TAM. From our work with Koble, we learned that there are a lot of women’s and family health companies that focus on one segment of the healthcare journey which, in turn, solve massive problems for those afflicted populations. We bet on Koble because they are taking a horizontal approach to a verticalized community, threading together the healthcare needs of women and families, from child-planning stage, through to infant care, thus having greater momentum towards venture-scale.
Paul Graham famously said, “Make something people want.” Verticalized communities are able to do this much better than horizontal ones given that they can create hyper-targeted products for a specific segment of the market that users are willing to pay for. Beyond this, the fact that users on these platforms are able to connect deeply on a particular shared journey or interest enables these platforms to foster and facilitate meaningful connections between like minded individuals. We are bullish on verticalized communities, not only because they have the potential to become venture-scale, but also because they address an unmet need: a way for people to connect in a meaningful way and consume content about topics that are core to their identity.