Why is Capital Investment in the “longevity Economy” so “Anemic”? - Silver Moonshots
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Why is Capital Investment in the “longevity Economy” so “Anemic”?

Why is Capital Investment in the “longevity Economy” so “Anemic”?

Before we consider the lack of investment side of this question, let’s define what we mean by the “longevity economy”. This is a relatively new term, which applies to people who are 50 years of age or more. By the end of 2017, there were more than 1.7 billion people in the world who were part of the 50-plus cohort. By 2050, this number is projected to be 3.2 billion people. Throughout the world the growth of this age group is having a massive impact, economically and socially. The US alone is home to 115 million in the 50-plus or longevity cohort and they alone fostered almost $8 trillion in economic activity-a little more than the $7.5 trillion spent in the under 50 economy. In other words Americans have more wealth and money to deploy in the last 29 years of life on average (to 79) than they do in the first 50.

So, to get back to the question posed here, if this sector and capacity to spend is so great, why is venture investment in this area so negligible compared to the under 50 economy? Put another way, total venture capital dollars in the US in 2017 were just over $60 billion and yet less than $2 Billion (or 3%) was spent on startups and later stage companies focused on the older adult market-this appears to be highly strange or irrational (or both) and we need to therefore see why this is happening.

There are perhaps four primary underlying reasons why VC firms underinvest in the longevity economy.

1.    It is relatively invisible: Aging is not something that any of us thinks about until we experience it directly (not something that either much younger VC’s do unless they have a parent or grandparent and they “stumble” into pain point they had not appreciated). This makes this sector almost invisible, especially when there is so little press or media focused on it and its needs.

2.    It is misunderstood: The older adult sector tends to be treated as one single mainly undifferentiated monolithic group with a stereotypical average age of perhaps 70 or 75 when the guess is that retirement from work (and active life) is the norm. This is to greatly misunderstand the complexity of the sector and all of its demographic and psychographic diversity at many levels (meaning that there are often many interesting niches or sub-markets that are completely missed or unaddressed).

3.    It is perceived to be unattractive: Childhood, Youth and early adulthood target customers are by far the most attractive markets for start up investments, partly because they are perceived to have very highly differentiable needs and wants. The older adult market, by contrast, is perceived to be unattractive because it is seen as overly predictable, dull and even boring, with little demand for creativity or innovation in terms of new products or services. Even worse, this sector can be seen as “needy” and not easily satisfied, meaning that ideation is not seen to be valued.

4.    It is technology and innovation resistant: The older adult stereotype is that most people are not up to date when it comes to technology and struggle to adapt and change. As a result, the perception is that either older products and services can remain unchanged and still satisfy or that innovations should be kept simple or “dumbed-down” (and take up should be expected to be slow (so it is a waste of time spending too much by way of marketing or patient market building dollars).

Although there are other reasons that could be listed as contributory, these four combine to make venture investors wary of spending time thinking about this sector and much more interested in younger generational cohorts that they perceive will have many years ahead of them (and therefore deliver much long-term customer value).

So, how might the above situation change in the near future? Again there are perhaps four primary reasons:

1.    Research will get better and deeper: The longevity sector is huge in size, even in the US alone, and needs much more research to be devoted to it, both in terms of specific unmet needs and how this changes from one age bracket to the next (people 50-55 can very different in terms of needs than people who are 55-60 (let alone much older). In addition, research needs to focus on both the possible “pains” and “gains” that people are looking for.

2.    We need to engage in more/wider education: Not only venture capitalists, but ideators and entrepreneurs need to have access to training and education about the 50+ sector. This can be based both on the deeper research about possible pains and gains and how to deal with this cohort in much more nuanced and granular ways (much as we might do in say the teenage marketplace as one example).

3.    There should be greater publicity about the sector: The so-called “silent generation” (people born before 1945) were prone to accept their older age with little comment and shun publicity about their needs. However, this did nothing to help investor understanding and this needs to change. Older adults should communicate widely about their experiences and use every modern medium available to reach as broad an audience as possible.

4.    We need much more entrepreneurial focus/attention: Low levels of investment are not just a function of VC distraction but also reflect many fewer entrepreneurs focusing on this space. This is partly because they are typically young and have little direct experience of older adults. However, it is also because of the lack of research, education and publicity about the many pains and gains out there (and therefore the often very good returns that can be achieved versus other sectors).

In the final analysis, it is the “Boomer” generation (54 to 73 years of age) that will drive change in all four of the above areas – This generation is more tech savvy and unwilling to go into their later years as quietly as the prior generation. And as the average VC is reported to be 49 years old in 2017 watch out for changes there too-they will belong to the longevity economy very soon too!

Longevity Economics
Leveraging the Advantages of an Aging Society