Startups That Solve Pain Points Of Ordinary Americans Are Poised For Success

Illustration of wallet filled with greens.

By Chirag Chotalia

Eight years ago, two Los Angeles entrepreneurs formed a company to solve the decidedly un-sexy problem of online coupon shopping. The solution they came up with was straightforward: A browser plug-in that crawls the web for discount codes.

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Today, Honey has over 17 million users. It’s a hit because it saves shoppers time and reduces cart abandonment for retailers. PayPal saw enough potential in the company that it snapped it up—for $4 billion. Honey isn’t the only startup that’s breaching unicorn territory by focusing on the needs of budget-conscious consumers.

A slew of such companies have emerged in the last decade, but they tend to stay under the radar since they lack the pizzazz of self-driving cars or instantly popular apps. Instead, these startups hammer away at solutions to everyday issues, like health care for underserved populations and remittance payments to families overseas.

Headline grabbing companies often target the wealthy — the top 10 percent who have plenty of disposable income. Those folks tend to be early adopters. They’re willing to roll the dice on new products and services, and they’re happy to pay a premium for things that make their lives easier and more pleasant. The Instacarts and Postmates of the last decade all emerged to serve them.

Chirag Chotalia is a partner at Threshold, an early-stage VC firm.

This new swath of startups, however, is developing services for the other 90 percent. They’re finding huge markets in serving middle- and working-class consumers. Many are poised to become multibillion-dollar companies (some already are), and they’re often doing so by challenging some of Silicon Valley’s most fundamental assumptions.

Wish, for example, is an e-commerce site that has grown into an $11 billion behemoth. While Amazon has staked its future on features like ever-shorter delivery times, Wish realized there were a ton of bargain shoppers who would happily forgo instant gratification in return for rock-bottom prices.

Most of the products on Wish are produced in China. Manufacturers take advantage of the ease of drop shipping to send their goods directly to consumers. In the process, they are cutting out reams of middlemen and shrinking costs accordingly. The company has expanded to Europe, and it’s so successful that retail giants like Amazon, eBay and Alibaba have reportedly sought to acquire it.

Original thinkers consider real people

Founders in this space are original thinkers who have figured out that there are big companies to be made by serving the underserved. Collectively, they’re already worth in the hundreds of billions of dollars. That figure will likely grow higher in the decade to come.

Dozens of startups are tackling comparably large markets, and they’re doing so by displacing legacy institutions with products and services that are both better than what’s currently available and cheaper.

For example, Remitly is disrupting the remittance industry. Historically, consumers have had to physically go to a Western Union office to send money overseas.

Remitly1 offers an online solution that consumers can use in the comfort of their own homes — and that’s less expensive than the old method.

These new companies are emerging in every area of consumers’ lives. In health care, Cityblock has developed a tech-driven health care service that focuses on underserved populations, and Papa is tackling the needs of senior adults.

In investing, Acorns, Stash and Robinhood are inventing ways for people of more modest means to get a piece of the stock market at lower price points than previously available. In childcare, Vivvi, WeeCare and MyVillage are architecting new preschool and day care services.

Even in criminal justice and child welfare, the founders of companies like Promise, Pigeonly and Binti are developing innovative solutions that tackle entrenched issues, like the exorbitant cost of inmate phone calls.

Many of these companies could not have been possible before now. Technologies like smartphones first needed to become commonplace among the 90 percent and they, like their more affluent peers, needed to get comfortable transacting online. Platforms like Facebook, Instagram and Snap have also played a role, making it cheaper to reach these consumers than the TV ads or billboards that would have been required even just 10 years ago.

If the last decade was focused on the growth of lifestyle-enablers for the wealthy, the next decade will see the rise of founders who have figured out how to leverage new technologies to solve the pain points of ordinary Americans. Investors looking for the next unicorn will want to get up to speed on this new sector and start betting on these innovative founders.

Chirag Chotalia is a partner at Threshold, an early-stage venture capital firm that focuses on conviction investment strategy. Chotalia invests in vertical software, real estate and marketplace companies. He is on the board of directors of AutoLeap, BentoBox, and Loftium; and he is closely involved with Threshold’s investments in Front, LaunchDarkly, and Divvy. Prior to Threshold, Chirag was based in Los Angeles and was instrumental in establishing Pritzker Group’s West Coast consumer practice.

Illustration: Dom Guzman

  1. Disclosure: Remitly is a Threshold portfolio company.

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