Why Gen Z Will Make The Startup Ecosystem Thrive

By Jonathan Greechan

By 2030, Gen Z will become the largest demographic in the world economy, earning $33 trillion, or 27 percent of global income. Members of this generation are already putting their money to good use, starting companies and new funds, with over 20 percent and 19 percent of the 18- to 24-year-olds investing in stocks and real estate, respectively.

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I’ve seen multiple generations transform companies and tech investing over my years in the industry. At Founder Institute we’ve been mentoring an upcoming generation of Gen Z entrepreneurs, and some of the greatest interest in startups has come from people in this age group.

Gen Z is eager to find meaningful work beyond money, while still being ambitious and tuned in to the most powerful trends driving today’s world.

Here’s why Gen Z will transform the startup ecosystem for the better.

Gen Z’s instincts are trained to find the next best thing

Gen Z isn’t just observing today’s most consequential trends, it’s creating them. For example, young adults are gravitating toward emerging opportunities like crypto, more so than their elders. In addition to creating companies in this space, 40 percent of Gen Z and millennial investors hold stock in high tech or emerging tech.

Having that finger on the pulse means they’re primed to detect and create the next tech darling and groundbreaking app.

From the meme-stock revolution birthed on Reddit’s r/WallStreetBets to vloggers happy to share their experience, Gen Z is keenly aware of what is most likely to pop up next.

Gen Z is boosted by college innovation

Gen Z is the closest in age to attending college and reaping the benefits of their increasing spending in R&D: currently over $80 billion a year. That exposure to the realities of developing cutting-edge technology will better inform their decision-making once they decide to found a company themselves.

This has led many funds to realize they’re not as looped in as they should be to the tech world, so they’re hiring students to scout out the best tech companies. This primes their skills early on, which will be highly beneficial to any firm they join later in life.

Indeed, funds are already being created specifically for college students, such as Rough Draft Ventures and Dorm Room Fund.

Gen Z is informed like no other generation

More than 90 percent of tech investment partners are over 35 years old, putting the leadership at a disadvantage when it comes to emerging trends, from hype over a social media channel to the latest emerging trend. But Gen Z was born into the internet. This means Gen Z startup founders know implicitly how to tap into a wealth of information that previous generations could only have dreamed of.

Because 56 percent of Gen Z and millennials get their financial advice online and on social media, young founders are primarily interested in companies which function as digitally native brands. Take for instance, TRUFF. The luxury hot sauce brand that started off as “@sauce” on Instagram and didn’t even sell a product. In April, they partnered with Yum! Brands’ Taco Bell restaurants.

As such, young adults with smartphones and money are interested individuals that are equipped to turn online buzz into a funding vehicle.

Diversifying the pool

In a Deloitte survey of 200 U.S. tech funds, the 22 to 35 age range had the greatest diversity in partners, with almost 40 percent non-white. That trend will continue as Gen Z moves into the industry. As founders become more diverse, their impact will be greater when it comes to funding minority-run, women-run, and LGBTQ-run companies.

Doing meaningful work is a high priority for Gen Z—more so than for millennials, which will likely translate to more capital pouring into startups with a purpose.

We believe this next generation will forge long-term change to the startup ecosystem, finally bringing in more diversity, open mindedness and alignment with the United Nations SDGs.

Jonathan Greechan is co-founder of the global pre-seed accelerator Founder Institute, which runs programs in 180-plus cities across the world. He previously wrote about startups finding a moral compass and mental health for Crunchbase News.

Illustration: Li-Anne Dias