Cleo Capital Thesis: Complicated Consumer
Cleo Capital is a thesis-driven fund, focused on 3 key areas: The Future of Income, Complicated Consumer, and Decentralized Enterprise. We primarily lead rounds at Pre-Seed, working with amazing founders from day zero. This article is part of a series explaining our thesis areas and the specific markets we are interested in.
Let’s improve life outcomes by meeting the core needs of all consumers.
What do today’s consumers need most? While it may seem that consumers are looking for the latest gadgets or tools, they in fact require the basics more than ever before: a roof over their heads, the security of a good job, the ability to pay back their student loans. Cleo Capital is interested in supporting the complicated consumer to ensure their core needs are met.
Americans are having difficulty meeting their core needs
The needs of human beings have been categorized in many ways, one of the most common being Maslow’s Hierarchy of Needs. The bottom tier is all about physiological needs — things people require to survive, such as shelter, food, water, warmth, and rest. The second tier is about safety, or what humans need to feel comfortable and secure in their place in the world. Once those basic needs are met, people can move upwards towards psychological and self-fullminent needs.
However, it is clear that in the present United States, the bottom tiers of Maslow’s Hierarchy are not being met for millions of people. Some of the causes of these negative effects on basic physiological and safety needs are:
Housing costs: Buying a home is a part of the American dream, but it is simply not a reality for many individuals. The Atlantic notes that the gap between income and home value is increasing, meaning that more and more people will never be able to afford their own home. In some cities, such as Los Angeles, it can take 43 years to save for a down payment. Not having a space to call your own and constantly having to move burdens individuals with unnecessary stress. Rents keep rising, with 91 of the 100 biggest cities seeing rent increases in 2021.
Student loan debt: In the United States, the cost of higher education can be a burden for many individuals. A four-year education at a private college costs an average of $48,510. As a result, 75% of graduates from private colleges have high student loan debts (at an average of $32,300), while 66% of graduates from public colleges leave with a student loan debt of $25,550 on average. The average individual takes 18.5 years to pay off their student loan debts, ending at around age 45. A platform like Snowball Wealth enables people to analyze their loans, make a repayment plan, and save thousands of dollars by reviewing interest rates.
Arrest rates: Arrest rates vary considerably by gender and race. For example, half of all black males are arrested by age 23, while 38% of white males are arrested, according to a study in the journal Crime & Delinquency. Having an arrest on your record affects future employment prospects negatively and even excludes individuals from certain professions. A product like Easy Expunctions helps eligible individuals to clear their records — which can make a lasting difference in their lives.
Medical bills: Over 32% of American workers are in debt as a result of their medical bills, and over half of them have defaulted on their debt. Not only that, the majority of respondents to this study by Salary Finance stated they feel worried when thinking about how they’re going to pay their medical bills. According to a study in the American Journal of Medicine, 62.1% of people who filed for bankruptcy stated that medical bills were a direct factor in their financial status. A company like Levels Health can help individuals keep better track of their health — which may lead to fewer healthcare visits and associated costs.
Divorce rates: Almost half of all American marriages end in divorce, and the cost of actually getting divorced can be crippling for many people. In fact, the average cost of a divorce is $15,000 per person in the United States. However, a number of factors increase this price tag considerably. Geography, children, and income can affect the cost of the divorce, as well as how long the couple is willing to fight for what they want to get out of it.
We seek to improve life outcomes for all Americans
Our aim is to invest in businesses that help individuals to meet the very basic needs they lack. Other investors focus on the top of Maslow’s Hierarchy — we are fully centered on establishing an equitable foundation for all people on which they can build their lives.
When people’s most basic needs are not met, the result is often bad life outcomes: bankruptcy, homelessness, long-term illnesses, and lowered quality of life. These are horizontal problems that can affect any individual — but are more likely to affect those who do not have access to foundational elements like homes, income, and healthcare.
The dream of being a middle class American is becoming less and less a likely possibility. Even having a steady job with an average income sometimes isn’t enough to pay for healthcare bills, student loan debt, mortgage payments, and car payments. Vox notes that the basics — the bottom of Maslow’s Hierarchy — are taking up more and more of the individual’s paycheck. As a result, consumers actually have less money leftover to spend on discretionary items or anything from the top of the Hierarchy.
A tool like PocketNest educates users with actionable data and insights so that young people can make better financial decisions to improve the outcome of their lives. Similarly, Brigit can help people keep better track of their spending and budget in order to meet their financial goals.
Cleo Capital: Request for startups
Our aim is to support people with the basic needs they require to live a comfortable and secure life. We are focused on the bottom of Maslow’s Hierarchy in order to ensure Americans can improve their own life outcomes with equitable resources that offer support in the areas they need them. We are interested in companies in sectors including FinTech, InsurTech, Digital Health, Real Estate Tech, and Legal Tech.
We are looking for tools and platforms that guide and support individuals around these key areas:
● Purchasing life’s necessities: Helping users make big purchases like homes, education and cars.
● Making access equitable: We want to ensure individuals have access to insurance, debt consolidation, financial planning, healthcare services, and related services & products.
● Meeting major life milestones: Can your business improve the process of major life events such as marriage, having children, divorce, retirement, and death?
● The used goods economy: Making the process of participating in the used goods or closed loop economy easier so individuals can save on costs and be more eco-friendly.
● Helping parents with the basics: Meeting the needs of children is increasingly difficult, especially for working parents.
Join us in enabling the complicated consumer. Get in touch at Cleocap.com.
Byline: Anam Ahmed
