Our Post COVID-19 World: A Request for Startups
By: Justine Humenansky
Tags: Investment, Founders, Venture Capital, Entrepreneurship, Covid 19

The more we need social distancing, the more we need better tools to expand our social networks. Maintaining existing relationships, both personal and professional, is easy enough using the existing digital tools at our disposal. Plenty of products have emerged focused on enhancing the spontaneity of these interactions, but what about the serendipity of forming new connections? While some are optimistic that our entirely digital existence will break down barriers to network-based access, instead I think we’ll see more creative ways to create positional scarcity, digitally (ie. clubhouse) and therefore new expansion or deepening of personal networks will prove challenging while we’re all stuck at home. How are we to establish relationships with people that aren’t already on our radar or within our network? How can we still form pseudo-random connections? Companies like lunchclub begin to fill this void but more are needed. Perhaps even more importantly (if hiring and funding decisions are to be made online), we’ll need creative ways to recreate the environmental cues that spark dynamic conversations with new acquaintances that are lacking within the constraint of static, face-to-face video chats. We’ll need to design solutions to help us gain insight into the ways in which our counterparts interact with others without the small cues we’re used to perceiving while spending in-person time with others in casual or social settings.

When we’re forced to spend so much time in our digital world, it’s two-dimensionality becomes frustratingly apparent. Over the past two years, there has been a lot of focus on creating digital communities and hanging out in shared, digital spaces. While some such digital communities or spaces result in more social online experiences, most of them are frustratingly two-dimensional. Personally, the lack of three-dimensional space is perhaps the most noticeable difference between our old way of life and the new one we must temporarily inhabit. Some think the answer may be virtual reality, but that still requires users to overcome a large obstacles (hardware purchase, for example) and may make users feel even more isolated (1:1 relationship with headset.) Instead, I think we’re going to see more innovation in spatial software. Spatial software is characterized by the ability to orient bodies and objects in space, in a parallel to the real world. It reorients software logic around our perception of space as it exists in the physical world rather than orienting it around recency (WhatsApp) or popularity (Facebook.) Spacial software begins to restore our perception of the relationships between us and others, between our location and our surroundings, between our thoughts and our environment, and between time and place, all of which are important orientations that have fallen away as we’ve shifted into our two-dimensional online world. All credit for articulating this concept goes to John Palmer.

Touchless technology becomes a necessity. I think the current preference for touchless transactions is likely to persist and will ultimately render touchscreens and physical artifacts (cash and cards) as antiquated as handshakes post-virus. This could lead to an accelerated shift towards voice, haptic technology, more flexible and capable robotics, digital payments, and, perhaps, central bank digital currencies. I will focus on the last three.

To begin, the shocking fragility of our global supply chains⁶ has revealed a heightened necessity to shorten supply chains. A recessionary environment will force companies to do so while controlling any incremental costs (offsetting a potentially higher relative cost of labor), which will likely require more flexible and capable robotics. Additionally, the newly required distancing between humans, and between human and machine³ in instances in which a manager cannot physically visit a plant but needs to inspect its output, is a non-trivial shift that is not likely to be reversed after the virus is under control. According to Anna Shedletsky, CEO of Instrumental, a firm which uses machine learning to help manufacturers improve their processes, electronics manufacturing is “ going to do five years of innovating in the next 18 months” in order to accommodate these shifts.³

Focusing now on digital payments and currencies, while some economies are already nearly cashless, the US has lagged in adoption of digital payments. As more people become reluctant to use physical cash,¹ adoption of contactless solutions - like Apple Pay — will increase. Since onboarding is a one time hassle while the ongoing user experience is frictionless, users that transition to digital payments are likely to be sticky. However, while pay-ins or peer-to-peer transfers work well enough on traditional payment rails, recent challenges in distributing fiscal stimulus demonstrate that payouts remain difficult. Mailing out physical checks to citizens is a very inefficient way to distribute funds. While a large portion of the population can receive these funds via direct deposit, there is a sizable unbanked population that cannot.⁷ Original drafts of stimulus bills included proposals for a “digital dollar” operated and maintained by the Federal Reserve. The draft mentions “digital dollar wallets” which would essentially serve as free bank accounts through which users could receive money, make payments, and take out cash, in an attempt to ensure that everyone who is entitled to COVID-19 related relief, would receive their funds quickly and inexpensively. Later proposals, expanded scope to include debit cards with prepaid “digital cash” balances, which would help distribute funding to those without bank accounts.

At the same time, FinTech companies, such as Cash App and Venmo, are also providing ways for their users to receive stimulus funds digitally, even if they don’t have a bank account. The government’s new willingness to partner with FinTechs may diminish the need for a central bank digital currency (CBDC) to aid in wide-spread payouts. The focus on CBDC in stimulus bill proposals may be motivated by the recent pilot launch of China’s digital Yuan (the DCEP) across four regions.² In this context, it’s still worth considering the impact that the introduction of central bank digital currencies could have on other parts of the monetary and payment ecosystems, long after the virus is contained.

The need to assess risk and prevent fraud in the distribution of government stimulus could accelerate the transition to digital IDs. As the government passes legislation allowing for unprecedented levels of fiscal stimulus, it is calling upon established FinTech companies to aid in the digital delivery of funds to SMBs. A lending practice that requires loan officers, in-person identification processes, and faxes was not functional before the crisis and I don’t see how it remains in place afterwards. FinTech companies — like Toast, Brex, and Mindbody, among others — have high frequency, comprehensive relationships with SMBs, allowing them to have a real-time financial picture of many of the small businesses applying for Paycheck Protection Program loans.⁴ The fact that they’ve also already performed Know Your Customer (KYC) checks on these merchants should help to reduce fraud. If this dynamic spurs the U.S. government to embrace digital processes, perhaps it also more quickly paves the way for digital IDs. With more reliable digital IDs, a whole host of paper-based, in-person processes could be digitized and made more efficient.

Privacy suddenly becomes tangible. I believe the rapid escalation of widespread citizen surveillance (a necessary measure to contain the virus) will lead to an increased desire for anonymity, pseudonymity, and privacy. Until now, violations of privacy were mostly abstract, because they occurred indirectly and online, whereas now they are concrete and apparent. If users didn’t care about privacy before, they just might after this pandemic. I still don’t think privacy will work as a product per se (since it generally still involves corresponding tradeoffs that outweigh the perceived benefit), but I do think that people will seek refuge in platforms that allow them to use an avatar or pseudonym and that grant them the option to communicate and transact anonymously as their offline lives become increasingly tracked and traced. Masks may finally be de-stigmatized in western culture, and maybe they even become a pro-health, pro-privacy fashion statement.

The importance of securing edge devices is underscored by the coordinated shift to remote work. Yes, as companies shift to remote work, we need video conferencing solutions and collaboration and communication tools to enable productivity, but we also need cybersecurity solutions that secure the millions of edge devices now accessing corporate networks and confidential files. Pre-virus, most security fell on IT departments, but now it is up to employees to ensure their personal computing devices are secure. This will require widespread adoption of better authentication measures, stronger end point security, and techniques to ensure data integrity.

Media for the people, by the people. While the trend towards user-generated content has been growing gradually for several years, shelter in place orders may force users to generate their own content en masse. While Hollywood and recording studios are shutdown and sports are on hiatus, users are turning to TikTok and Patreon in droves. As Twitter becomes a place for rapid, scientific research exchange and an avenue for first-hand reporting, the contrast in the quality of reporting relative to traditional media outlets is stark. Information exchange regarding the virus may just change the face of journalism; if not, it probably at least changes perception about who the purveyors of trusted information are.

While this is not the first time we’ve experienced a breakdown in mainstream media reporting (The 2016 U.S. election, for example), it is the first time this breakdown has occurred on a global scale, impacting everyone at the same time, and on a personal level. Furthermore, given the corresponding economic impact, the media industry is likely to consolidate as local news outlets and smaller publications struggle to remain afloat. This will increase the level of centralization in editorial decisions at the same time that advertising-based revenues are pressured. That sounds like a recipe for an environment in which it’s even harder to produce content devoid of politics and sensationalism, further driving users to get their news direct-from-experts and their entertainment direct-from-creators.