Garrett Black July 16, 2014
A few weeks ago, we took a look at how demographics will affect the healthcare industry and how PE and VC firms may be changing investment strategies as a result. But apart from healthcare, what other sectors will benefit directly from aging consumers?
As workforce levels decrease even more in developed nations, productivity will have to increase to compensate; as software steadily munches away at every industry in the world, productivity has made impressive gains in the past few decades, but there’s still a ways to go. Since PE and VC investment in automation and productivity software has already boomed from 230 deals in 2008 to 495 and $14 billion invested last year, according to PitchBook Data, it’s clear that investors think even larger gains are possible. And workplace productivity could use it, as productivity gains have averaged less than 1% each year since 2011.
Another savvy investment strategy may be to target older consumers with tailored leisure products. For example, gadgets and tools that are cutting-edge yet slightly tweaked to be more easily handled could capture more senior market share—think “Good Grips” kitchen items made by Oxo. A related sector that could be a benefit to PE and VC firms trying to take advantage of shifting demographics is specialized construction, particularly with regards to smart homes. As the population gets older, smart homes can provide vital safety, access and information for elderly home owners. And who better to snatch up smart homes than older, more affluent consumers who can afford an easier life?
What else will fill smart homes? Interactive, immersive gaming is the next step to capture the attention and dollars of adults who made Wii Sports and other casual games so popular. PE and VC deals in entertainment software peaked in 2012 at 148, according to PitchBook data, declined to 101 last year (still above historical averages), and is on pace to maintain that same range in 2014, with 52 deals recorded so far. However, the issue with gaming companies is that even though developers of mobile games such as Angry Birds can boast millions of users, it’s difficult to monetize that model. Gaming currently is split between the world of free, simple and mobile, and corporate behemoths such as Microsoft and Electronic Arts. The divide may be bridged eventually, and it’ll be interesting to see which companies grabbing VC funds today will successfully capture the attention of the growing senior market.
Those are just a few of the sectors that will most likely benefit from demographic shifts. But to tease out trends for yourself, explore the PitchBook Platform, or look back over past coverage of what’s going on in PE and VC.