Cleo Capital Thesis: The Future of Income

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.

We invest in startups that make it easier for people to earn and have sources of income.

The way people earn money is changing

W2-only income represents a shrinking part of US earnings. The Monday-to-Friday 9-to-5 grind is no longer the main source of income for most Americans — and it’s likely this trend will continue to rise over the next few years. It’s no secret why: the quality of jobs has been declining over the last 40 years. In many cases, a full-time job doesn’t pay a livable wage, and people are forced to pick up additional jobs in order to make up their income.

The current full-time job setup doesn’t work for millions of Americans for a number of reasons:

• Lack of network: Many industries are word-of-mouth focused when it comes down to hiring, and individuals require a large professional network in order to land a job. Those who don’t have this network are pushed to the sidelines.
• Geographical barriers: It’s no secret that jobs tend to be more plentiful in big cities as compared to smaller towns. A McKinsey Global Institute study shows that this gap will only widen, with rural areas losing even more jobs. If you don’t live in a big city, your chances of finding a meaningful full-time job are about to decrease even further.
• Need for flexibility: The majority of individuals no longer want the strict 5-day structure that comes with many full-time jobs. In fact, Forbes notes that 80% of women and 52% of men need flexibility in their jobs.

We seek a solution to the income problem

Cleo Capital’s aim is to create economic opportunities for individuals by unlocking new forms of income generation. Everyone needs money to live — but not everyone needs to earn that money in the same way. Our fund looks to raise the economic floor so that all individuals can earn an income in a way of their choosing in order to make a livable wage in a meaningful and rewarding way.

The labor market is already changing, and has been changing for the last decade. If only 1 in 3 Americans work full time, what are the other 2 up to? The gig economy, which includes temp workers, on-call workers, freelancers, and independent contractors, includes about 36% of US workers. If the gig economy continues its growth trend, it will include over 50% of the American workforce by 2027.

Those involved in the gig economy are finding it an effective way to earn an income. In fact, according to Upwork’s comprehensive Freelancing in America survey, 90% of freelancers believe that the outlook for the gig economy will only improve as time goes on. Not only are freelancers and contractors making the kind of income they seek, they are also living the lifestyle they want. A McKinsey study notes that freelancers are the most satisfied group within the workforce.

Related and overlapping with the gig economy is the creator economy — individuals that make things to be sold, in the simplest terms. Their products can range from YouTube videos to infographic content to influencer posts on social media. Over 50 million people are part of the creator economy worldwide; however, only about 2 million of those people earn the equivalent of a full-time income from their pursuits. The creator economy needs a middle class, as the Harvard Business Review investigates. In order for more creators to earn a sizable income from their efforts, they need solutions to create more work, share their work, find their audience, and discover passive forms of income.

What do people need to earn an income without having a full-time job?

In order to support non-W2 workers as they grow in number and income potential, we seek to create platforms and tools that provide support to the individual as opposed to the enterprise.

How can a solution enable individuals to produce work, find work, connect with those who offer work, or share their work with their target audience?

Rent the Backyard, for example, enables individuals to earn a passive income by using space they already have. Using this platform, people who have outdoor space can build a small, sustainable home, rent it out, and earn an income. Rent the Backyard provides full support and guidance through the building process so individuals do not need to have any construction or home-building experience.

On the other hand, Lunch Club is an AI-powered professional network that helps people make important contacts. Users add in their background and professional goals, and the platform checks in each week to see if they are interested in making new connections. If they are, the AI sets up 45-minute one-on-one conversations with others who appear to be valuable connections.

Some solutions, on the other hand, enable individuals to complete specific tasks in a streamlined and efficient way. They can be sector specific or function specific. StyleSeat, for example, is a tool specific to the beauty industry. It makes it easy for potential customers to discover salons and book appointments. Tools that ease the burden of everyday business processes, such as incorporation, invoicing, bookkeeping, scheduling, communication, and collaboration are what workers in the gig economy require in order to earn income in a way that works for them.

Another example is SoleVenture. Workers can manage back-office tasks that are integral to running their own business, such as managing savings and tracking money, through a series of tools and services, all from one single platform.

Cleo Capital: Request for startups

In order to fuel the future of income and the many ways individuals can earn a wage, we are looking for the following types of startups. However, if your startup doesn’t fit into any of the categories listed below but can still support the gig economy and other non-traditional ways of earning an income, we are interested in learning more.

• Work marketplaces: Connecting workers with those looking to hire them or buy from them. How can a marketplace solve the bootstrap problem and provide value to workers?
• Products utilizing existing assets: We are looking for ways to enable individuals to earn incomes using assets, capabilities, and resources they already have available to them.
• Used goods economy: Can your product help connect sellers and buyers of used cars, clothes, jewelry, real estate, furniture, appliances, and more?
• Creator economy: We are looking for community-building applications or new monetization models that benefit creators of all kinds.
• New income opportunities: How can a product better align incentives with an employer in order to create additional channels of income?

Join us in supporting the changing future of income. Get in touch at cleocap.com.

Byline: Anam Ahmed