By Claire Biernacki & Cindy Fan, BBG Ventures

The first wave of AI adoption was centered on knowledge work. Now, AI is opening doors in legacy industries, enabling new ways to work in sectors long resistant to change. Construction, a $13T industry that makes up ~5% of US GDP yet remains one of the least digitized, is proving to be ripe for reinvention. At BBGV, we believe the biggest wins happen when AI meets founders with deep domain expertise — founders who are from the field, speak the language of their customers, and solve unglamorous but critical pain points others overlook.

Earlier this month, we shared lessons from Adaptive’s Matt Calvano on bringing AI into construction finance, automating areas like billing, receipt capture, budgets, and reporting. This week, we’re moving from the books to the blueprints: fresh off of raising her $40M Series B led by Insight Partners, Dr. Sarah Buchner from Trunk Tools shared insights with us for founders building in tough-to-crack foundation industries.

Given the complexity of documents and siloed systems across the construction build process, Trunk Tools is tackling the other side of the construction equation: the job site itself. Trunk Tools deploys AI agents that operate in the thick of construction’s daily grind, automating time-consuming and error-prone workflows like document review, drawing analysis, conflict detection, and site communication.

Sarah’s story is also a masterclass in earning trust in a category that didn’t exist when she started, driving AI adoption, and scaling trust in one of the most complex verticals out there. Below is a summary of the insights she shared with us:

1. From Job Sites to Startups: The Importance of Deep Customer Immersion

Sarah started working as a carpenter with her dad when she was 12. She worked her way up in the industry to a group leader, built a construction safety app, and then completed her PhD in civil engineering and data science. Growing up on job sites gave Sarah firsthand insight into the inefficiencies that slow builders down, like paperwork, compliance, and fragmented communication. Her first product, TrunkPerform, aligned incentives and boosted field team productivity (e.g., texting carpenters extra tasks to complete for a bonus). Though that has now been phased out, it built credibility with crews and superintendents, paving the way for them to tackle bigger pain around documentation and communication.

“Entrepreneurship is not about knowing it all, but consistently figuring it out faster and better than anyone else.” But at the same time, she cautions founders to be honest about whether they really have an advantage compared to anyone in YC; without it, breaking into a legacy industry is hard.

Sarah is continuing to learn with her customers though — even today, Sarah spends time in the field every month. As she put it, “You either need to be your customer or be next to your customer deeply. That’s the only way you’ll build something people love.”

2. Why Now: AI Adoption in Construction is Accelerating

Despite construction’s importance to the economy, it has historically lagged in digitization and behavioral change. Sarah sees AI as the unlock: “People are using AI in their everyday lives, whether it’s ChatGPT or image generation, so naturally they start thinking about how to bring those tools to work.”

Trunk Tools frames this as “intelligent augmentation”: it doesn’t mean that “AI is going to take your job, but people who use AI will outperform those who don’t.” AI handles roughly 80% of repetitive tasks, like conflict detection, drafting responses, and pulling context, but relies on humans in the loop for judgment. This balance helps drive adoption while still respecting the complexity of construction and reality that everything can’t be automated end to end.

3. Building in Legacy Industries: Education and Trust as GTM Levers

When Trunk Tools launched, “construction AI” wasn’t even a category. Much of the early GTM was education and trust-building. Sarah and her team ran live workflows side-by-side with field teams, showing value in real time instead of relying solely on demos.

She also made a deliberate choice to hire customer-facing employees with construction backgrounds. “Every hire who interacts with customers has walked in their shoes,” she says. This credibility was key to building trust in an industry where relationships and reputation matter as much as results. That trust has only been further buoyed by their impact on the field: Trunk Tools answers critical spec questions in under 30 seconds, saves project managers 25 hours a week on admin, and avoids 100K in monthly rework cost.

4. Establishing an Advantage: Technical Moat and the Power of Brand

In construction, understanding drawings takes an enormous amount of effort — Trunk Tools spent 3 years building a proprietary vision stack and a construction-specific ontology to parse complex plans and job-site context. That combination of models, ontology, and processes around them is the core technical moat, reflective of lived experience, hard-won datasets, and domain expertise. A modular architecture helps the system flex to different jobsite realities without breaking.

But Sarah argues that brand matters too, especially in a “small world” industry like construction. Credibility in the field helps to compound reputation and further embed technically defensible products.

5. Scaling and Fundraising: From Vision to Proof

Sarah emphasized how proof points for fundraising evolve as you scale — Series A was about vision and early traction: proving the problem was real and the wedge worked. Series B raised the bar to proof at scale: revenue growth, expansion, usage, and a repeatable sales motion.

“The bar is undoubtedly higher,” says Sarah, “we had to show that what we’ve built actually works, can scale, and has staying power in the market. I also love that all of the investors who tried to get in the round did their due diligence with our customers way before they even spoke to us.” In vertical markets, happy customers become the strongest validation signal.

Takeaways for Founders

• Credibility starts with time spent with the customers — it compounds when you ship against what you learn in the field
• AI as a teammate beats AI as a replacement, especially in change-resistant sectors
• Trust is a feature in relationship-driven markets, and your team is part of the product
• Your brand should amplify your defensible technical spine once it’s field-proven
• Treat customer love as your data room: retention, expansion, and referenceability are the proof points that close the gap from story to scale

What We’re Excited About at BBG

At BBGV, we’re excited to back underrepresented founders leveraging AI in legacy and overlooked industries, helping their customers automate workflows end to end. If you’re building in this space — or you are an investor exploring the impact of AI on industry-specific innovation — we’d love to connect. Reach out: claire@bbgv.com and susan@bbgv.com.

About BBGV:

BBG Ventures is a pre-seed and seed fund investing in underestimated founders building solutions for our polycultural future. Our founders are tackling the biggest arenas of the economy that require reinvention: health and wellbeing, work and education, financial security, energy resiliency and overlooked consumers. We look for founders who want to move the world forward, and whose unique combination of lived and learned experiences give them a competitive advantage.

By Claire Biernacki, Susan Lyne & Cindy Fan, BBG Ventures

Legacy industries like manufacturing, agriculture and construction are the quiet giants of the U.S. economy, making up over half of GDP, but many still run on paper trails, phone calls, and spreadsheets. At BBG Ventures, we’re excited to back the next wave of companies building for foundational industries disrupting the “this is how we’ve always done it” mentality. We teamed up with Construct, Avid Ventures, and NVP to host a breakfast conversation with Matt Calvano, founder and CEO of Adaptive to dive into tactical strategies for disrupting the status quo in legacy industries.

Adaptive is an AI-powered financial management platform for construction. The product automates finance end-to-end — across billing, receipt capture, budgets, reporting, and more — all of which fully integrate with Quickbooks, Procore, and other systems that builders actually use. What started as a simple accounts payable tool is now a full-stack accounting system used by 600+ contractors.

We unpack how Matt and his team took a customer-led approach to identifying the problem, how they got distribution in a trust-based industry, and how automation done right can create an undeniable wedge into legacy workflows.

From Real Estate to Construction Bookkeeping

Though Matt started off his career in banking and real estate private equity, his first taste of legacy industries and entrepreneurship came from running a painting business in college. He began exploring founding more seriously during his time at Stanford’s Graduate School of Business.

Matt’s original plan wasn’t to tackle construction bookkeeping. Given his background in real estate, he initially raised a pre-seed to build software for real estate developers — building a data model for rezoning — and spending six months on the idea. But every developer he talked to pointed to the same problem — bookkeeping. This led them to a pivot to focus on serving builders.

Instead of building a product right away, Matt and his team needed to better understand the painpoints, and decided to do this first-hand — by operating as bookkeepers. For three months, they ran the books for a handful of builders in Austin, learning the hard way that “clean reporting” was less about analytics; reporting software like Quickbook and Procore already existed and they still didn’t know how their projects were performing. The real problem was messy, slow, and error-prone inputs — the many daily transactions comprising bills, expenses, and labor counts that had to be approved by multiple people before hitting the books.

This insight flipped their approach. Instead of starting with pretty outputs, they started by fixing the workflows that feed them. Their first product was automated accounts payable — which has since evolved into labor tracking, receivables, and approvals: a full-stack accounting system tied directly to jobsite operations. Today, Adaptive integrates with Procore, QuickBooks, and other core systems, supporting builders from input through reconciliation.

Takeaway: Stay nimble in customer discovery. A boots-on-the -ground approach and time in-person is the fastest path to understanding the real problems — watch what’s broken in their current process and start there.

GTM: Win the “Cool Kids” First

Matt knew Adaptive wasn’t going to spread through product-led growth and viral signups — construction is a trust-based industry that relies on recommendations from peers. Builders aren’t browsing Product Hunt — they’re on-site, racing against deadlines. But as Matt said, “They’re also not tech resistant. They just want software that fits into their workflow.” The initial go-to-market motion was primarily outbound and focused on SMBs — getting in front of them in person. “It’s like being the new kid at school. You go to the cool kids” (or the key construction players in this case) and try to win them over.

Once those early wins were in place, Adaptive was able to establish partnerships that included large CPA firms eager to expand beyond tax and audit into CFO services. For example, a deal with one of the largest accounting firms in the US brought access to thousands of new builders through a trusted referral loop.

As they honed in on PMF, the sales pitch evolved. These partnerships, growing brand recognition, and an increase in inbound enterprise interest gave the team confidence to go after larger enterprise customers.

While selling to SMBs was more about trust and reliability over ROI, enterprise buyers wanted ROI proof — for which Adaptive had already built with data from their SMB customers. With dozens of project managers, each with an admin entering data into Procore, enterprises were receptive to an AI product with obvious workflow automation gains. This was about improved invoice accuracy, faster close cycles, and measurable cost savings.

Takeaway: The sales motion changes as you move upmarket — from building trust to concrete ROI. Even though your customers may not be ROI focused in the earliest days, establish an understanding of how you’ll position ROI as you evolve.

Building With an Eye Towards the Big Vision

From the start, Matt knew they weren’t building a point solution — the accounts payable tool was just the wedge into a platform solution. Adaptive’s early goal and vision was to own the full accounting workflow for construction. There are certain elements of the product roadmap that customers may not be asking for yet — but are logical extensions. Tactically, they structure the engineering team to handle fixes with the current product while also having time for more strategic projects that align with the long-term vision.

Matt’s advice to founders: you don’t have to call yourself a platform, but you should know if you’re building one, even if your customers can’t see the whole roadmap yet. That intentionality informs everything from how you hire to how you prioritize features and position the product.

Takeaway: Continue to serve your customer more deeply through a deliberate product roadmap. Part of the roadmap will come from listening to your customers, but founders should also intentionally think through natural product extensions.

Leveling Up with AI; But Product Experience and GTM is the Real Moat

Adaptive’s core value proposition has always been about automation, but LLMs have taken the vision to the next level, enabling them to meet customers where they are by pulling data out of their email inbox.

When we asked how Matt positions AI in an industry famous for the “this is how we’ve always done it” mindset, we learned that AI is actually part of the pitch — there’s always a subset of builders curious about bringing AI into their workflows. For the skeptics, Matt frames Adaptive like an analyst: it preps everything a project manager or controller needs, and they review it. Multiple layers of approval remain. “It’s like hiring someone new,” Matt explained. “At first you check all their work. Eventually, you don’t need to.” AI has helped Adaptive automate more, experiment faster, and deepen workflow integration — but trust still builds over time.

On the technical side, the team built an in-house evaluation system to continuously test and improve LLM performance. In just two months, they dramatically boosted invoice-matching accuracy — another example of removing the low-value, manual work that keeps builders from making decisions quickly.

But Adaptive’s long-term moat isn’t about the underlying model. For tech-resistant customers, simply unlocking a repeatable sales motion is a huge advantage. The stickiness comes from how seamlessly the product fits into daily workflows, and the depth of its integration into core operations — Adaptive’s product is hard to rip out.

“We didn’t win because we had the best AI,” Matt said. “We won because we fit into the way they already work and made their lives easier.”

Takeaway: The moat isn’t just the tech, but also the user experience, speed, and how central your product becomes to real work.

Playbooks for a High-Performance Team

As the team grew, structure became just as important as speed. Matt realized the “figure it out” ethos that worked for an early team of generalists wouldn’t scale as he needed to hire specialists. The team needed playbooks that enabled individual team members’ strengths, not just hustle. Hiring people from industry (especially in areas where the team doesn’t already have expertise) can also be quite valuable and level up the team. For example, on the sales side, Adaptive’s first sales hire came from a well-known company in construction software, who brought industry know-how and relationships to the team. In closing candidates, they’ve also leveraged their top customers, who were advocates of the business to pitch the value proposition and potential of the company.

Takeaway: As you hire more specialists, implement structure to amplify their strengths. Use customers as your advocates in selling candidates coming from “hotter” sectors.

Raising a Series A

Adaptive was fortunate enough to get pre-empted for Series A from an investor who had been wanting to make a bet in construction finance for 10 years (talk about having a thesis!). Matt’s advice was to spend time with investors who already have a thesis in the space — so you don’t spend your time educating them. We also asked the Series A investors in the room about their advice, which focused on:

• Timing the raise with a clear unlock for the business: Don’t raise with the story of “this is what I need to go do” but when you’re ready to scale. Show evidence that GTM is starting to work and adding more capital will unlock and supercharge growth. Have data to support that this is repeatable.
• PMF: Wait to raise until you have real evidence of product-market-fit — these sectors are slow to adopt new technology, so it can take time.
• Credibility and trust: In legacy industries, customer confidence and referenceability matter. You need customers that love your product for a successful raise.

Takeaway: Unlocking PMF in categories where trust is key is critical to raising a Series A. Investors want to invest when GTM is starting to work and adding more capital will unlock the next phase of growth.

What We’re Excited About at BBGV

At BBGV, we’re excited to back underrepresented founders leveraging AI in legacy and overlooked industries, helping their customers automate workflows end to end. If you’re building in this space — or you are an investor exploring the impact of AI on industry-specific innovation — we’d love to connect. Reach out: claire@bbgv.com and susan@bbgv.com.

About BBGV:

BBG Ventures is a pre-seed and seed fund investing in underestimated founders building solutions for our polycultural future. Our founders are tackling the biggest arenas of the economy that require reinvention: health and wellbeing, work and education, financial security, energy resiliency and overlooked consumers. We look for founders who want to move the world forward, and whose unique combination of lived and learned experiences give them a competitive advantage.

Congratulations to Nick Ornitz, Shannon Kay and the Topline Pro team on their $27 million Series B raise!

At BBG Ventures, we’ve long been interested in companies bringing technology to underserved sectors of the workforce. Over 90% of software investment goes into solutions for knowledge workers, leaving deskless workers and solopreneurs in a software desert, operating the same way they have for decades. There are 35 million SMBs in the US, 82% of which are single-operator businesses. Serving that vast market represents a massive opportunity for investors.

We’re excited about the promise of Vertical AI solutions for unique segments of the economy. Nick and Shannon saw the promise early, using generative AI to help service pros find customers, get booked, build trust, and drive repeat business. Roofers, painters, landscapers, and electricians do skilled physical work that AI can’t replicate. But what can be automated is everything around it: quoting, scheduling, advertising, follow-ups, payments, and more. Topline’s AI-powered platform serves as a behind-the-scenes digital team so pros can focus on the work only they can do without adding headcount.

Nick and Shannon’s product offering has relied on staying close to the customer. From day one, we were so impressed by the consistency with which the Topline team reviews and welcomes customer feedback. That philosophy has paid off. To date, Topline has helped pros book over $655 million in revenue.

The latest round of funding — which we participated in alongside Northzone, Forerunner Ventures, Bonfire Ventures, TMV and Flybridge — will help Topline accelerate AI agent development, expand the engineering team and scale go-to-market efforts.

Learn more about what Topline is building here: https://www.axios.com/pro/all-deals/2025/08/14/topline-pro-27m-ai-home-services

By Susan Lyne and Nisha Dua

When we were launching BBG Ventures, there was one thing we knew for sure: we wanted to be more than a source of capital to founders, backing them with the full force of the firm, not just a single partner. In the earliest days, that meant that every investment Nisha led also got Susan; and every investment Susan led also got Nisha. Soon after our first close, we hired an associate right out of Columbia Business School: Claire Biernacki. From the day she joined us, Claire impressed us with her desire to learn, to grow, to define her own investment focus and, ultimately, to lead. She has become an indispensable part of the investment team and we could not be happier to introduce her today as BBG Ventures’ newest Partner. Her work over the past five years has made our commitment of full-firm support that much stronger, and our team dynamics that much richer.

Claire joined us in 2020, just weeks before the world shut down for COVID. During business school, she approached her career exploration with the test-and-learn tactics of a founder — doing stints in both VC and early-stage operations. This included roles with our friends at Lerer Hippeau and at Studs, supporting a nascent pre-seed team in finance and operations. By the time she joined us, she had proactively built relationships with dozens of investors and founders who had worked with BBGV to better understand our working style — a reflection of the diligence, curiosity, and rigor that now define her work as an investor. Her background in investment banking and private equity gave her the analytical foundation to build independent conviction, and she’s since translated that into an impressive ability to bring clarity to complex early-stage investment decisions. Those early instincts have evolved into a confident and nuanced point of view that has made us better fund managers and a better firm.

Over the past five years, Claire has played a key role in over 20 investments — including companies like Max Home, Climatic Health (both of which she sourced and led), Topline Pro, Supercircle, Canela Media, Millie and Icon. As with any great investor, those roles have been multi-faceted — from helping companies build their financial models and supporting the development of fundraising narratives, to advising on M&A strategy and acting as a trusted board observer. Along the way, she has sharpened our focus on key sectors, most notably in healthcare and vertical AI; and provided trusted, hands-on support to founders, leveraging her growing network of operators and VCs. Internally, Claire is known for her work ethic, positive energy, desire to grow from feedback and bias towards action — qualities that have made her an indispensable contributor to firm strategy along with portfolio construction, hiring, and fundraising efforts.

Today, Claire is a recognized leader in the early-stage ecosystem and more than ready to step into her new role. Going forward, we are confident that she will help drive the next chapter of our growth. Addison, Carol and Daniella join us in congratulating Claire on this well-deserved promotion to Partner.

By Nisha Dua, Claire Biernacki & Cindy Fan, BBG Ventures

The U.S. spends nearly $5 trillion a year on healthcare — nearly 20% of GDP and almost double the per-person spend of the next highest country. It’s also our biggest employer, with over 22 million healthcare workers. And yet, somehow…we’re still doing manual tasks, still faxing things, and still filling out intake forms and sharing our medical history at every visit.

The system is huge, messy, and deeply broken — making it ripe for disruption with AI. At BBG, we believe there’s a massive opportunity to bring in personalization across the care continuum, from doctor-led care to collaborative (e.g., disease management and routine care) to autonomous and continuous care. We can prove real ROI from both the administrative and clinical side of how care is delivered.

To dive deeper into strategies for building in healthcare AI and delivering on the promise of personalization, we partnered with our friends at Lightspeed, NEA, GV, AlleyCorp, and Next Ventures and supported by Silicon Valley Bank — for a conversation with Trey Holterman, co-founder and CEO of Tennr, which streamlines administrative workflows in healthcare.

Tennr’s product sounds deceptively simple: it processes medical documents (yes, the faxed kind), and streamlines tasks such as patient referrals, insurance checks, and appointment scheduling. But it’s now deeply embedded into workflows — integrating with EHR systems and allowing healthcare providers to adopt the tech without overhauling their current infrastructure. Today, Tennr’s proprietary learning model has been trained on 100M medical documents, 2.3B distinct data fields, and 8000 sets of criteria to interpret complex and unstructured healthcare data, including handwritten notes. This breadth of data ingestion enables Tennr to capture granular patient-level information and institutional nuances, powering highly accurate automation tailored to specific workflows. As a result, customers have reduced insurance claim denials, cut pre-visit patient processing from weeks to hours, and converted more referrals to patients — not only streamlining operations but also enabling more timely, personalized, and accurate care delivery.

Read on for some of the best insights from the discussion — covering everything from customer discovery to building a moat in this rapidly evolving and increasingly competitive market.

From Stand-Up to Start-Up

Trey joined Strava out of Stanford and was doing improv comedy on the side. He didn’t know the first thing about EHRs or prior auth, but he did know how broken the referral system was. He’d seen his mom, who works in family medicine, send patients to Bay Area imaging centers with little response or follow through. This insight led to his hypothesis for Tennr.

Trey’s outsider lens turned out to be a superpower — rare for those building in healthcare. From the beginning, Trey had a focus on building for “real problems”. While others were aiming to replace legacy systems, Tennr took a different strategy: “make it dumb and simple.” Instead of trying to fix the system, which is timely and expensive, “what if we just made the existing system work better”, working within current infrastructure?

Improv, it turns out, was great training for healthcare. You learn to listen obsessively, respond in real time, and adjust your plan based on what’s actually happening. That mindset shaped how Tennr approached the product: working within existing workflows and adapting quickly.

Referrals move through healthcare mostly via…fax. Pre-Tennr, some unlucky staffer has to manually process them: verify insurance, match the patient to an appointment slot, handle errors, etc.

The big unlock: if the receiving provider can make more money by processing faxes better, maybe they’ll actually use this software.

So the Tennr team built a document parser trained on messy, real-world data to do exactly that — starting with a single question centered on ROI: Can we reduce denials and boost conversion?

Takeaway: Don’t underestimate what your unique background brings to the table. Build for real, observed pain, especially the messy and unsexy ones others overlook.

Healthcare sales: Listening to the Customer and Driving ROI

Early on, Tennr falsely assumed that each imaging center would have similar workflows. One of the company’s first deployments failed because the customer had no IT team and highly customized processes, which made Tennr’s initial product impossible to implement.

Similar to our vertical AI conversation with Nick at Topline Pro, the turning point came from customer obsession. When Trey shifted from pure engineering and heads-down coding to obsessive customer listening — “the success of the company and the number of customer meetings on my calendar became directly correlated”. Their customer interviews showed that they needed to build a hyperconfigurable product — one that let them adapt fast to customer needs. Hyperconfigurability also created customer stickiness and high switching costs — ultimately leading to advantage and moat in an increasingly competitive space.

Healthcare is a notoriously hard market to sell-into, with risk-averse buyers, complex workflows, and a tough regulatory landscape. In the beginning, Trey primarily sold the promise and hypothesis of increasing conversion and reducing denials. Their pitch focused not just on cost cutting but the opportunity to improve topline revenue. Tennr’s sales cycle began to accelerate when they were able to lead with examples of ROI and case studies in the pitch to close customers. Perhaps controversially, Tennr has actually stripped AI from their homepage and focused on what matters: fewer denials, more patient conversions, and real revenue impact.

Takeaway: Products with built-in ROI are fundamental to success in B2B sales. Your product is only as good as your understanding of the customer. Build listening into your process, and use ROI as your north star for both product and pitch.

Moat Through Listening to the Customer

Tennr spent two years refining the approach upfront: building their own model, adapting routing logic, and managing edge cases — which for customers, seemed to be every case. This bet panned out, ultimately resulting in a better quality experience, more personalization, higher accuracy, and higher adoption. Tennr’s proprietary learning model has been trained on 100M medical documents to interpret complex and unstructured healthcare data, including handwritten notes that powers automation and personalization to the specific needs of each provider and patient interaction. Looking back, Trey noted that Tennr’s decision to build its own model was partly a reflection of the times: had GPT-3 been out or trained on a comparably large dataset, they might have taken a different path. But the custom model has become a strategic advantage — driving downstream improvements in administrative efficiency and ultimately enabling faster, more personalized care. Though this model would be difficult to replicate today, the team did not seek out a differentiated product as a moat — their moat, in fact, came from building for the needs of their customers.

When asked about moat and defensibility, Trey looks to SaaS giants like Salesforce and ServiceNow for inspiration — companies that won by becoming essential. Tennr’s long-term bet is similar: embed deeply enough into operations that switching becomes nearly impossible.

Takeaway: Sustainable advantage often comes from being deeply useful. Embedding into workflows will mean switching costs grow naturally over time. When building for healthcare, trust is critical and 99.9% accuracy is necessary.

Honing in on the Right ICP (Even if You Have to Fire Customers)

Shortly after hitting $1M in ARR, Trey made a hard call: fire 60% of Tennr’s customers, because they just weren’t aligned with Tennr’s core value prop. Serving the wrong ICP drains time, slows roadmap velocity, and muddles the story.

The decision allowed Tennr to focus. They doubled down on the customers who fit their ICP in terms of price point, use case, and configurability. As a result, they were able to land and expand ACVs dramatically, by continuing to deliver ROI over time.

As a founder, there is a balance between focus and staying informed on the market — Trey continues to talk to non-ICP potential customers to explore future revenue streams. But this is specific to founders — Trey operates his team against the focused KPIs and milestones for the near-term.

Takeaway: Don’t be afraid to hone in — a short-term dip in revenue is well worthwhile for long-term growth.

Raising a Series A (Without Losing Your Mind)

Trey’s advice to founders raising a Series A? Be honest about risks and limitations. And be clear about how you’ll fix it. Even in the earliest days (and even when things weren’t going well), Trey sent an investor update every month — which is a great way of keeping investors informed along the way so that changes to the business don’t come as a surprise.

Here’s what the investors in the room pointed to for Series A:

• Retentive ARR: Not just bookings, but renewals
• Workflow integration: Embedded products drive stickiness and adoption
• Clear ICP: Clear customer love within a more narrow group outweighs “ok” usage across a wider set of users
• Founder Expertise and Resourcefulness: Founders who are always one-step ahead. Ex: How well do you know your company’s growth and profitability levers? Who are you hiring next?

Furthermore, the difference in a successful Series A round can come down to a tight story — so upfront preparation is key.

What We’re Excited About at BBGV

At BBGV, we believe teams that move quickly, deeply understand selling to their customers, and know how to ship products that drive patient and provider adoption will win.

If you’re building in healthcare AI — focusing on using AI to provide more personalized and proactive care both for patients and providers — we want to hear from you. We’ve been thinking about healthcare on across the spectrum of:

• Dependent care: Helping providers deliver better care (provider-led)
• Collaborative care: Disease management and day-to-day care (provider and patient working together)
• Autonomous care: Patient-led, AI-optimized, always-on health management (patient-led)

If you’re excited about the opportunity to provide more personalized, data-driven and better quality care leveraging AI, reach out: hello@bbgventures.com. We’d love to learn more.

About BBGV:

BBG Ventures is a pre-seed and seed fund investing in underestimated founders building solutions for our polycultural future. Our founders are tackling the biggest arenas of the economy that require reinvention: health and wellbeing, work and education, financial security, energy resiliency and overlooked consumers. We look for founders who want to move the world forward, and whose unique combination of lived and learned experiences give them a competitive advantage.

By Nisha Dua

There’s a difference between building with AI and building because of it. That’s why we gathered 40 early-stage founders at BBGV for a breakfast last month — co-hosted with our friends at Factorial, Lightspeed, NEA, and Stellation and supported by Silicon Valley Bank — to discuss what it really means to build Consumer AI-Native products in 2025. It was the biggest turnout in our event series (and the lowest drop out rate) to date — and a clear signal that Consumer is back, baby.

As investors we were all in agreement that there’s never been a more ripe time to disrupt the current generation of consumer companies:

1. The incumbents are sleepy, with major platforms focused on embedding AI into legacy products, not creating new ones. This leaves whitespace for startups to reimagine dominant categories (shopping, health, learning, travel) from first principles.
2. Consumers are overwhelmed by choice and underwhelmed by quality. The internet has become a generic experience. What users now crave is curation, intimacy, and n=1 personalization.
3. Trust in AI is accelerating. ChatGPT and others have mainstreamed AI. Consumers are not only open to it — they’re starting to expect it.
4. Interface innovation is just beginning. Chat was only the first step. We’re seeing huge potential in multimodal, ambient, and gesture-based experiences. Your AI won’t just respond, but sense, suggest, and adapt invisibly.

We hosted two founders early in AI-native consumer products: Dennis Crowley, the co-founder of Foursquare and Dodgeball, currently the co-founder and CEO of Hopscotch Labs, a startup developing BeeBot — a location-aware, AI-powered audio app designed to enhance urban exploration through AirPods; and Anna Bofa founder and CEO of Crate, an AI-powered platform designed to help users save and organize content from across the internet. Anna was previously at Google, Dropbox, Pinterest, and Facebook.

So what does AI-native mean? It’s not about putting a wrapper on top of ChatGPT to solve a problem or create a new workflow. It’s about products that couldn’t exist without the latest capabilities of LLMs, personalized agents, multimodal interfaces, and ambient computing — read on to hear what matters in building consumer AI native today.

🔥 Newly Possible v. Newly Trivial

It’s easy to start with a question of “What’s AI Native versus AI Enabled” but Matt Hartman from Factorial presented a new framework of what’s newly possible and what’s newly trivial. In a world where anyone can layer an API on top of GPT or Stable Diffusion, the real question is: what’s meaningfully differentiated? This is a helpful way to think about what’s worth building — and what might already be too commoditized to defend.

Newly Possible: Unlocks That Didn’t Exist Before

This is the bleeding edge — the frontier. These are capabilities that weren’t feasible 12 months ago — or even 6. They often emerge from new model architectures, open-source releases, or major leaps in inference speed, latency, or multimodal functionality. They unlock new user behaviors and inspire real “wow” moments. What’s newly possible will feel magical and non-obvious. Examples include:

• Real-time voice interaction with Gemini over WebRTC without Twilio or infrastructure overhead.
• 3D object generation from a single 2D image using tools like Instant Mesh.
• Agentic behavior that auto-curates content based on implicit user interest, like Crate’s ability to pull Google Maps locations from a TikTok.

Newly Trivial: Table Stakes Capabilities Anyone Can Access

Thanks to open-source models, API wrappers, and tools like Replit, LangChain, and Hugging Face Spaces, a wide swath of AI functionality has become trivial to implement — even for solo builders. For example:

• Adding basic Q&A over PDFs: Matt basically coded this one in bed
• Virtual try-on using open-source models or Pika’s API: any VC has been pitched a bunch of virtual try-on apps but it’s important to know how easy it is. See below for an example Matt whipped up for Nisha at BBGV.
• Voiceover generation or basic summarization of content.

The takeaway? “If I can build it in a weekend, we won’t invest in it,” Matt joked. But more to the point: if it’s newly possible, stay ahead of the pack and be the first mover. Here VC funding could help find the asymmetric upside. But if it’s newly trivial, the app starts to look more like a set of features — that’s where distribution, brand, proprietary data, and UX magic will be critical accelerants; if you nail that and people are willing to pay for it go ahead and build it, but it might be better to bootstrap.

🤖 What Personalization Actually Means in 2025: It’s the Vibe.

The most oft-talked about promise of AI has to be n of 1 personalization. AI has turned personalization from a backend optimization into the core UX.

Anna Bofa, founder of Crate, broke it down like this: “Old-school personalization grouped users into buckets. Now we’re building at the agent layer — every user gets a feed tailored to them, and only them.” Crate’s UX is designed around implicit signal, not explicit onboarding. Users save content, and their agent begins learning — curating, predicting, suggesting. It’s a laid-back, non-interruptive loop that feels more like a friend than a feed. “Saving content isn’t just a feature. It’s the dataset. It’s the user story. It’s what makes the personalization work,” Anna explained.

Dennis Crowley, co-founder of Beebot, emphasized the ambient approach: “Our best users don’t even open the app. They just put their AirPods in, and Beebot gives them a whisper of what’s going on around them. It’s software that fits into the in-between moments of life.”

His point? The best personalization doesn’t just know you — it respects your time and context. And, it doesn’t have to know everything, it just needs to know you well enough to tune into you.

This conversation on personalization starts to unravel a new idea — that it’s no longer just about basic prediction, but about empathy. The product won’t just work, it will feel more right, it will understand you and anticipate you. At BBGV we’ve been coining that concept as the “vibe match.”

🤳Users Ain’t Gonna Werk, Werk, Werk

At BBGV we’ve also been thinking about how much work the user is required to do to get to the promise of personalization that feels magical — and how that shapes adoption, retention, and long-term behavior. There’s a clear spectrum emerging:

• No Effort: Products like BeeBot by Hopscotch Labs exemplify the “zero effort” model. BeeBot runs passively in your AirPods, delivering hyper-personalized, location-aware audio without requiring any input. This level of ambient, context-aware automation is frictionless — and thus more likely to become a daily habit. In the words of Dennis: “We’re trying to make an app that you don’t have to use.”
• Low Effort: Crate falls into a “lightweight lift” category. Users take one small action — saving something they’re already engaging with — and the product takes over from there, organizing, tagging, and resurfacing content via AI. Crate still requires intentionality, but it’s behavior that maps closely to existing patterns (like saving a link or screenshotting a post).
• High Effort: At the far end are products that demand substantial upfront setup, repeated inputs, or steep learning curves to unlock value. These tools might be technically powerful, but in a consumer context, effort becomes a tax — and one most users won’t keep paying. Unless the reward is immediate and unmistakable, these experiences often see steep drop-off.

The broader takeaway? Friction is the enemy of frequency. AI can enable magical experiences, but only if we reduce the user’s burden to access them. Founders should be asking: “How much work am I asking my user to do — and is it worth it? What’s the value exchange?” The best consumer AI products will feel inevitable because they demand so little. The less they have to work to use it, the more they do — and the more a start-up can make good on the personalization promise.

🧱 Moats: The Old Rules & New Layers in Consumer AI

The fundamentals of defensibility haven’t changed: great consumer companies are still built on network effects, proprietary data, economies of scale, switching costs, brand, and trust. These classic moats continue to apply in AI.

But, new layers of defensibility are emerging, including:

• User-trained models — Systems that improve specifically for each individual based on their behavior, preferences, and feedback.
• Agentic memory + context — Products that remember, personalize, and act with continuity create stickiness that’s hard to replicate.
• Invisible UX and ambient interaction — When an AI product weaves into a user’s life so seamlessly that it becomes second nature (or hard to turn off), that is a moat.
• Feedback loops as signal — Interfaces like “Accept” and “Roll back” don’t just enhance UX — they create training data, sharpening the product’s performance and accelerating differentiation.

And, if network effects were the most interesting of the traditional moats — the idea that products that get better the more you use them because of more data — then that concept is evolving because of these new layers. Look for products that get better the more you use them — not because of more data, but because of better feedback.

One thing that was clear: what’s non-replicable is how a product feels, how it learns, and how it fits into culture. Maybe the “vibe match” actually becomes the moat?

💰 What Investors Are Actually Looking For in Consumer AI

We asked our partners in the room to share what they’re really evaluating at seed and Series A. There’s no question there is a debate inside VC firms about whether value accrues to the application or the foundation layer, but Mike Mignano at Lightspeed confirmed they’re bullish on the app layer — they believe that users will want dedicated workflows specific to their needs and that the foundation models won’t be able to do everything well. As to what VCs are looking for to invest:

At the Seed Stage: Founder Driven not Product Driven
AI aside, it’s about exceptional founders. VCs are backing founders they believe in, often pre-product, because AI-native products change shape quickly. Founder insight, UX instinct, and taste matter more than traction. That’s why Mike at Lightspeed backed John at Granola.

At BBGV we’re also looking for a founder who is focused on doing one thing really well, and delivering clear value that surprises and delights the user. Where there is early traction, we want to see organic growth and early WOM signals — marketing spend is a bad sign, and skews the picture.

At Series A and Beyond: This is where the data matters. As Danielle Lay from NEA noted, “VCs are wary of consumer because they’ve been burned by growth curves that spike and crash.” So here’s what they’re really looking for:

• Strong retention curves that evidence stable user cohorts
• Real organic growth that comes from true word of mouth virality and doesn’t rely on influencer driven spikes (per Mike: “Don’t tell me you grew because someone shared you on TikTok”)
• Customer obsession that’s evidenced in the user data
• Proprietary data moats

All the VCs in the room agreed that it’s a great time to be an AI founder: valuations are “stupid high” in 2024/25 versus prior years. But what wasn’t lost is that this is a bubble moment — expect the high to come down. Focus on the above fundamentals and you’ll be good.

Even at the Series A, VCs want to meet you early — all agreed that “if you want to lead a Series A, you need to be meeting these companies at seed. You need to understand the founder’s thesis from day one.”

💰 What BBGV is looking for

If you’re building in Consumer AI, building something newly possible and you believe in wow moments; if you’re working on n of 1 personalization and the vibe match with less work users come talk to us. We’re excited by companies reshaping consumer behavior to help us be more productive, creative, prosperous, to help us be well, self-improve, indulge and belong. Reach out at hello@bbgventures.com

Over the years I’ve served on six public boards and more than a dozen private boards that have provided varying levels of value to the company they served. What I’ve learned is that the key to board success or failure lies primarily with you, the founder or CEO. How you set expectations, whether you maintain ownership of the board discussion, how and when you deliver tough news, and how you keep board members informed between meetings will determine the level of partnership — and value — you get from the relationship. This is guidance we share with BBG Ventures’ portfolio companies, but I’m hoping that more founders — especially first-time founders — will find it valuable:

Board Formation

There’s no hard and fast rule about how many board members a seed stage company should have, but 3 is a good place to start.

• For a seed company, that may be the founder/CEO; lead investor; and co-founder or independent.
• For a Series A company, there may be two investors and the founder; but you can also negotiate for the seed investor to move to a board observer role so that the common holders continue to control the board.

Independent board members at this stage are often trusted founders who’ve scaled their own company, but could also be someone with sector expertise, platform experience or a valuable network. If your team is homogeneous — gender, race, background, POV — this is also an opportunity to add a diverse voice. The key is that it is someone you trust will be honest with you; someone you can learn from; NOT someone who will blindly defend you or vote with you.

It’s tempting to say yes to every investor who wants a board observer seat (we’ve been that investor and made the case for observer status). But too many voices will change the dynamics of the meeting, so be judicious.

Board Planning and Prep

When you are forming the board, ask your board members what they expect to review at every meeting. Make sure you have consensus on KPIs at the outset. These may change over time, but the board will expect to see consistent quarter/quarter metrics until you tee up a shift or pivot.

Send a pre-read with a weekend to review it. Let board members know that you will assume they’ve digested it before they come, so that the update portion of the meeting can be covered in the first 30 minutes. The downside of not sending materials far enough in advance is that the board meeting becomes a readout — a waste of your time and ours. We appreciate a format that enables board members to drop in questions or comments, but that’s your call. The pre-read should include:

• progress against goals since last quarter, including KPIs, product updates, launches, key hires, etc.
• an org chart that shows current team and planned hires
• spend against budget
• burn rate and runway.
• what you want to accomplish at the meeting

If there is anything surprising or concerning (e.g. a co-founder leaving; a big miss on revenue; a delay in the launch) call board members individually in advance. It will go down better one-on-one, and you can put it in context.

That said, don’t avoid difficult conversations in the meeting. Ignoring something material doesn’t mean it won’t be discussed; it just means that it will be covered in the exec session, when you’re not present — not a good outcome.

Board Meetings

Keep the format consistent from meeting to meeting. This will save you time prepping the deck; and it will make it easier for board members to assess progress.

Start every deck with a slide on what you will need to show by your next raise. This is a good forcing function to keep you focused on the must-do over the nice-to-do, and it will also prompt board members to weigh in with any market shifts they’re seeing.

Follow that with progress against goals this quarter. Every meeting should start with what you said you’d accomplish; how you did against those goals; and what that means for next quarter and the year. Include a quick review of the KPIs you included in the pre-read, with a focus on best and worst; and what you learned.

The meat of the meeting should be a strategic discussion. This could be one topic, but no more than two. It could be a discussion of your ICP, how you’re currently qualifying pipeline and whether you should consider a change. Or it might be a broader discussion about GTM and what really constitutes product-market fit. Or a deep dive into user data and what it’s telling you about your roadmap. You have the attention of several people with experience and a rooting interest in your success, so take advantage of it. If you have questions that your board can’t answer, ask them for referrals to people who have the expertise you need.

Post-Meeting

Best practice is to send a follow up email within a couple of days with a summary of what you discussed, decisions made, and a reminder to board members about anything they committed to do on your behalf. This should not be long — a couple of paragraphs is plenty. But it will serve you well over time as a record of your board interactions.

Three months is a long time in startup land, so send your investors a monthly update on progress. Tracking and reporting KPIs monthly means fewer surprises, and it will also make quarterly board prep easier. These updates can be structured in such a way that the body of the email can be shared with investors you meet who ask to stay in touch, or investors who could lead a next round. Financials and KPIs can be an attachment for current investors only.

Never hesitate to call board members between meetings if there is something you need help with, or something you want to discuss. But remember that this is your company. You don’t need permission to make operating decisions or make changes in the ordinary course of business.

One last note:

Your goal at board meetings should not be to make the board happy. Your responsibility is to keep us informed about anything that could impact our investment, and to listen to our input. Don’t show best case numbers unless it’s in the context of base case, upside and downside; and caveat projections with potential risks. We are grownups and we know that company-building is full of challenges. Build credibility with board members by being honest and forthcoming — what HBR once called the “virtuous cycle of respect, candor and trust” — and you’ll get the best from us.

At BBG Ventures we are excited about the promise of AI for vertical solutions; specifically for legacy industries and deskless workers or SMBs. There is growing momentum in vertical AI due to the ability to create highly specialized platforms that deliver tailored solutions in categories with industry specific datasets. To dive deeper, we co-hosted a conversation with Flybridge and Omers for early stage builders about what it takes to build and scale vertical startups. The conversation featured vertical experts Nick Ornitz (CEO, Topline Pro, BBGV Portfolio Founder) and Julisa Salas (former Toast executive, GTM and operations advisor). From early GTM hacks to AI-driven sales automation and how to build a true moat in the AI era, here are some key takeaways from our conversation:

1. Customer Discovery and Pivoting Based on Feedback

Before launching Topline, Nick and his co-founder were working on Dwelling, which virtually connected homeowners who needed home maintenance support to experienced professionals. However, they ultimately realized plumbers and electricians don’t want to spend their time on video calls; they want to be out in the field. What they needed was a better way to grow their existing business — so Nick and his co-founder Shannon set out to solve this problem. The company started as “Pro Phone” because the first offering delivered a second “business” phone line, along with an auto-generated website. Nick and team learned that it would be hard for customers to adopt the phone out of the gate but got their attention with the website, which helped with discovery. Today, Topline Pro uses AI to help home service businesses get discovered, trusted and booked, directly. Their product offering and roadmap have relied on staying close to the customer; a priority for Nick and team from day one.

Even as the company has grown, Topline has tactics to ensure everyone at the company stays close to the customer. For example, they have a slack channel for customer support, the Topline team reviews customer feedback together on Fridays and they even have employees work in customer success temporarily to understand the pain points.

Similarly, at Toast, Julisa immersed herself in the restaurant industry to understand the end customer — talking to managers, staff, and even guests — to understand their biggest challenges. Most restaurant owners want to focus on serving customers and doing what they love — not backend operations. This insight highlighted a major gap: the need for technology that streamlines restaurant management without adding complexity to their workflows. Toast started with the point of sale system given it is the operational backbone of a restaurant.

Takeaway: Look for the hair-on-fire problem! Continue to iterate on solutions until you find the thing your customer can’t live without. Even as you scale, continue to incorporate regular touch points for customer feedback into your workflow.

2. Cracking the Go-to-Market Code for SMBs

Selling to small businesses is notoriously hard — they behave like consumers, but customer acquisition can be tough to crack and expensive if done poorly. We dove into which strategies have worked for Topline, which sells to business owners at the smallest end of the market — solopreneurs.

Even when Topline first launched, selling at only a $20 price point, Nick started a dedicated sales motion. In the early days he started with founder-led sales, applying creative tactics such as targeted facebook DMs into home repair worker facebook groups, building out a database of potential customer profiles, and eventually created a “sales lab” to test new sales tactics (demo vs. no demo, video outreach, sharing examples of how the product works for a similar business). The key is testing a number of strategies and quickly making iterative, data-driven changes based on what works. Focus on homing in on the right customer profile and channel over time to improve connectivity rate.

Takeaway: Use data and iterate to optimize for the right acquisition channels, and buyer, to maximize sales efficiency — done well, this can significantly improve connectivity rate.

3. Considerations for Hiring a Sales Team

The right inflection point for scaling the sales team can be challenging to pinpoint. Founders want to stay close to the customers, and are often the best spokesperson for the business, but they also ultimately need leverage to work on other elements of the business.

At Topline Pro, Nick led sales until they had a proven playbook and a repeatable motion — which meant ~8–10 sales reps. It was then that they looked for a Head of Sales whose background could improve their playbooks, and provide more hands-on coaching to the sales team.

When you first start to build out the sales team, Nick recommends hiring at least two sales reps to be able to compare performance and tactics (vs. just one).

While Nick is no longer leading the sales team, he continues to stay close to the customer, even in cases that don’t scale such as going to spend a day with a top customer in person.

Takeaway: A strong sales leader can help scale your team, but no one replaces the founder’s connection to the customer. Whether it’s joining sales calls or visiting customers in person, staying involved is key to building long-term trust and product-market fit.

4. Growing ACVs: Moving upmarket vs. sticking to your customer base

ACV expansion is critical to the vertical SaaS playbook, but founders often struggle with industry depth (serving one niche really well) vs. expanding into adjacent verticals to grow TAM.

To start, there is an opportunity to increase prices as you deliver increasing value. For example, Nick learned that he was actually pricing their offerings too low in 2023, and saw growth increase when they increased prices — customers associated a higher price (up to a point) with better quality. Topline has focused on offering additional higher priced tiers of the product with existing customers as opposed to moving upmarket.

Julisa has seen companies do a mix of both — listening to the customer to add on more products, but also expanding upmarket. She explained that as companies acquire more customers — they leverage their customer base to inform expansion into other areas, ultimately offering a full platform play that could be helpful to a broader set of customers.

Takeaway: Don’t assume you need to “move upmarket” — some companies serving SMBs have been successful expanding ACV by layering on adjacent products instead as they get more specific about the variety of their customers’ needs.

5. Building a Moat in a Competitive AI Market

With so many AI tools hitting the market, building a moat is top of mind for startups. Julisa and Nick had a view on tips for creating defensibility.

Prioritize Brand & Reputation: SMB customers rely heavily on word-of-mouth referrals. A single bad experience can hurt retention, while positive referrals can drive significant growth. Nick suggested focusing on customers and product, and not getting distracted by competition — “if we get distracted by competitors, we’ll stop focusing on what we do best. The biggest risk isn’t competition — it’s losing focus on the customer.”

Own the Workflow: The best AI startups Julisa has worked with don’t just offer one feature — they automate an entire process that previously required human effort. Thinking through end to end workflows and automating something customers weren’t able to do before is a big differentiator. Additionally, while AI models are becoming commoditized, data isn’t. Julisa works with companies that are building their own proprietary databases that offer an inherently defensible asset and moat.

Takeaway: Creating net new datasets establishes a clear moat — but customer experience and brand can still be a core differentiator.

6. AI in Sales & Customer Success

For years, SMB SaaS has historically fallen into a stereotype of being tough to scale — SMBs typically have lower ACVs and potential for higher churn than enterprise customers. Additionally, unlocking the right, repeatable GTM can be difficult, making traditional sales models challenging. But AI is flipping the equation:

A large part of Nick’s thesis is the ability to unlock distribution for SMBs. AI tools can help to acquire and support customers, increasing growth and improving retention. At Topline, Nick uses AI to support live coaching during sales calls (ex: Winn.ai) and also uses AI for customer success (ex: AI to engage with customers over text and provide dedicated customer support) Topline also uses an AI Sentiment Analysis — every customer interaction is categorized as positive, neutral, or negative, helping prioritize support and product roadmap.

Having an internal engineering team that builds tools for sales and CX, making those functions faster, can help you achieve scale quicker.

Takeaway: AI allows one CSM to manage hundreds of SMB accounts, creating efficiency for scale. AI isn’t just powering the product — it’s transforming how AI companies sell and support customers.

We’re excited to back visionary founders leveraging AI in legacy and overlooked industries, helping their customers automate workflows end to end. If you’re building in this space — or you are an investor exploring the impact of AI on industry-specific innovation — we’d love to connect. Drop us a note: claire@bbgv.com and carol@bbgv.com.

About BBGV:

BBGV is an early stage VC firm that invests in female or diverse founders who are building for the polycultural future of America. We look for founders using technology to reinvent the biggest areas of the economy such as health, work, financial inclusion, climate safety and consumer.

The Vertical AI Playbook for Scale, a conversation with Nick Ornitz and Julisa Salas was originally published in BBG Ventures on Medium, where people are continuing the conversation by highlighting and responding to this story.

Since 2014, BBG Ventures has been looking around the corner to identify which Americans have been overlooked and underserved in health, work & education, fintech, climate and consumer. These categories are not unique — but the vast majority of investors looking at them focus primarily on TAM and new product development. There’s no doubt that those are critical aspects of investing, but we believe that the best investment lens — and one that moves the world forward — will come from a more fulsome approach:

• A New Lens: The face of America is changing, rapidly. When we launched the firm, we first sought alpha by backing women building for women — and that will always be a foundational building block — but the past 5 years have highlighted extraordinary demographic and social shifts across race, age and income that are creating a new status quo: we call this The American Polyculture. To best take advantage of the opportunities for innovation ahead of us, investing must keep pace with the changing preference, behaviors and priorities of the new, multidimensional face of the country.
• A Broader View of FMF: Founders who reflect this new mix will have a competitive advantage. Founder market fit lives on two vectors: learned and lived experience. There’s no doubt that classic “learned” or professional background can qualify someone to win, but we believe that “lived” experience — the intangibles that make a founder deeply identify with, and understand, their target market — can provide an unfair advantage.

We’ve always believed that identifying which Americans are underserved and which founders understand them best will drive outsized alpha: from April Koh at Spring Health to Joanna McFarland at HopSkipDrive to Isabela Rafferty at Canela Media. Now, the aperture of our founder purview needs to broaden. To that end, we’ve officially expanded our mandate to embrace the future, backing underestimated founders — female or diverse — addressing the biggest pain points for this polycultural population. At a time when diversity has become a dirty word, we’re leaning in.

We’re excited to announce that BBG Ventures has raised a $60M Fund II to back overlooked founders building for the polycultural future of America. Our areas of focus align with Americans’ most fundamental needs: healthcare, future of work, fintech, climate and solutions for the underserved. We will continue to back founders at the earliest stage — leading or co-leading rounds at pre-seed and seed, across B2B and B2C. And, we’ll help them accelerate to Series A and beyond: as strategic thought partners who have run businesses from start-ups to public companies; and by leveraging our newly launched Operator Network, a community of world-class builders from high-growth companies to help founders get up the learning curve and make important decisions faster.

Read on, or visit our website, for more on our thesis around the Polyculture.

What is the Polyculture and why does it matter for venture capital?

America has a long history of cultural diversity, but in practice its foundations, systems and institutions have been built for a monoculture — a white male culture — that has been the dominant force in every arena from politics to corporate America, from science & engineering to research & healthcare.

Today, as a result of demographic shifts and economic trends, we are seeing the emergence of a newAmerica — a polycultural America — that has broad implications for the nation, but also for innovation. Consider the moment we find ourselves in:

• Emergence of the Majority Minority: Under 18s will be the first majority minority generation: 53% are non-White¹; 1 in 4 are Hispanic, and 1 in 5 are the children of immigrants.² Gen Z is not far behind with 47% of this generation non-White. (Contrast this with Baby Boomers who are 72% White). Meanwhile, 1 in 10 (or 33M) Americans identify as multiracial — 4 times the number a decade ago.
• Aging America: While much attention has been paid to Gen Z of late, we are no longer a young nation. By 2030, Americans older than 65 will outnumber under 18s (23% versus 20%), with older Americans living longer, working longer and spending more. Over 65s are projected to account for 57% of labor force growth in the next decade.³
• Widening Wealth Gaps: Wealth gaps are widening not just across race but across worker type. American knowledge workers are earning 37% more than deskless workers, and the gap between top quintile incomes and bottom quintile incomes has increased by 53% percent in the last decade.⁴

These shifts suggest that we are increasingly a nation made up of a mosaic of unique segments driven by race, gender, age, and income. This is a new status quo in which identities are diverse, complex, dynamic and evolving, where many Americans identify with multiple cultures or communities simultaneously.

In our opinion, such a major shift demands a fresh look at preferences, behaviors and priorities — and sets the scene for a reassessment of what Americans need. We can no longer rely on a singular quintessential American profile to build for the country.

To better understand perceptions of identity, fundamental priorities, and how identity shapes those priorities, we surveyed over 2000 Americans across different races, genders, ages, jobs, incomes and geographies. The full analysis with charts can be found here: The Mind of Polycultural America: A Look at Identity, Priorities and Behaviors. We plan to share subsequent reports on each of the fundamental priority areas we identified and associated opportunities, but here are the five most interesting, and in some cases surprising, finds from the data:

1. The polyculture is here: Americans’ perception of their identity is complex and dynamic, driven by multiple factors.

2. Despite our oft-cited differences we have more in common than we realize: our top two fundamental priorities across race, age and gender are health & wellbeing, and financial security; followed most often by employment & education in third place. Within health & wellbeing we are near unanimous that mental health is our top priority.

3. However, underneath those shared priorities we found significant nuance between men and women; Gen Z and Boomers; AAPI or Black Americans and other races; and between White Americans and other races.

4. White Americans, Boomers, Americans earning under $100K and workers at SMB<20 are the segments that feel least served and least prioritized by government and institutions. And, White Americans feel the least satisfied and least optimistic about the future; almost 2X more so than Black Americans.

5. Boomers are the only group for whom Environmental Safety is a top 3 priority. All other age segments, surprisingly even Gen Z, ranked it as the lowest priority.

Read on for a deep dive into each of these themes.

1. Americans’ perception of their identity is indeed complex and multivariate.

Our research shows that there is no uniform profile of American identity today. Each segment of the country feels defined by multiple factors — mainly a confluence of race, gender and age. By “defined” we mean that respondents consider a factor to be extremely or highly influential to their identity.⁵

• White Americans are more likely to define their identity first by gender (44%), then race (35%) and age (32%). This isn’t a surprise when you consider that dominant groups, such as White people in American society, typically haven’t been forced to think about their racial identity.⁶
• Black, AAPI and Latinx people tend to define their identity by race first (61%, 45% and 48% respectively) then gender (53%, 41%, 46%), followed by age (47%, 31%, 34%). Overall, a larger proportion of Black people select these three factors as extremely or highly influential versus other groups, perhaps indicating a stronger identification with the concept of identity generally.
• Income, job, and political party factor next as drivers across the races — but are of less importance. Of note: political party outranks job as the #5 factor for White people and Boomers.
• Gen Z also define their identity by gender first, though by a much lower margin than White people (Z: 46% gender, 41% race v. W: 44%, 35%). We posit that this may be because Gen Z have grown up in a significantly more racially diverse society. According to the last Census, 53% of under 18s and 47% of Gen Z in total are non-White, compared with 39% of the population over 18 in 47 of 50 states.⁷
• Other age groups ranked race first, over gender, but the story is more varied than across racial segments: more Millennials select income over age as the third defining factor; race and gender far outranked other factors for Gen X; Boomers rank political party almost as high as income as a fourth defining factor, and they are the only other segment besides White Americans who rank it ahead of job.

This has implications for founders and investors alike: Americans today are multivariate and interconnected. Meeting their needs first requires an understanding of how they see themselves, as well as what they need. Only then can we build and innovate better for the country.

2. Despite differences, Americans have more in common than expected, presenting big opportunities for scalable solutions — particularly in health, finances and work.

Though it’s clear that Americans define their identities based on their own unique perception of their place in the world, they have surprisingly common priorities, needs and concerns across nearly all ages, races and genders.

• Health & Financial Security are the top two priorities for every race and gender, and nearly every age group (Gen Z < 18, unsurprisingly, places Employment & Education as their top priority followed by Health).
• Nearly all races rank Employment & Education as their third priority (White people marginally rank Community & Relationships as third; as did Gen Z < 18).
• Climate has the fewest people across races selecting it as a top 3 priority; and it makes it into the top three for only one age group, Boomers.

There are further shared priorities within Health & Wellbeing:

• Mental Health is the #1 concern for nearly every segment (in total, 39% of Americans) with mental health most affected by finances, stress and loneliness.
• After Mental Health, nearly every segment notes Sleep as their second highest priority (33%).
• And, while there are varying degrees of satisfaction with interactions between Americans and their doctors/care providers, there is nearly unanimous agreement on the most desired improvement: Americans want their doctors to provide personalized care, followed by either better availability for appointments or doctors who are more present and less distracted during visits. (Notably, the ability to see a doctor virtually came last for nearly all segments, prompting the question: is telehealth the savior we all considered it to be — or, is it just table stakes?)

As to Financial Security and Employment & Education:

• The majority of Americans across nearly every segment lack confidence or feel neutral about their financial literacy (54%).
• Even more lack confidence or feel neutral about their financial position (65%).
• Paying bills consistently is the #1 financial goal for nearly all races and generations, followed by saving for an emergency fund. Unsurprisingly, high cost of living/inflation is the #1 factor preventing people from building wealth. This is despite the US’s so-called “superstar status” when it comes to GDP growth, historic unemployment rate lows, increasing household wealth and wage growth versus costs. Whatever the stats say, the pain of high costs is firmly planted in American minds.⁸
• When it comes to Employment, a staggeringly high number of employees (84%) are thinking about making a career change.⁹ They are considering switching jobs (37%), starting their own company (18%), taking a break (17%) or freelancing (12%); only 16% are happy in their current role. While this stat may wax and wane with the number of open jobs, it speaks to a general dissatisfaction with their current work experience and a desire for something more.¹⁰

We see two big takeaways from this high level view of commonalities:

1. While we see a ton of division reflected in news outlets and on social media, the primary concerns and greatest needs of Americans across race, gender and age are the same.

2. The emergence of America’s polyculture does not mean entrepreneurs should be building for niche segments. Common needs and common concerns suggest that the opportunity for transformative solutions is bigger than the sum of the parts.

3. Common concerns point in the right direction for innovation, but Americans’ needs are nuanced and the best solutions will be built with different groups in mind.

Identifying top priorities is only one part of the equation. Digging under the hood, the case for building better solutions by considering the needs and attitudes of each segment becomes clear. For example:

Health & Wellbeing

• Trust in Healthcare System: Americans’ trust in the HC system varies significantly across both age, racial and gender segments. For example:
• 53% of Boomers trust the healthcare system versus 32% of Gen Z <18. This may correlate with our other finding that overall Boomers are more proactive about care, and find it much easier to get care than younger Americans, likely due to Medicare.
• White (22%) and Latinx (21%) Americans have a higher proportion of respondents who lack trust (“no trust” or “little trust”).
• Surprisingly, Black Americans report higher levels of trust in the healthcare system versus other races (50% have complete or some trust), driven by above average levels of trust from Black men versus Black women (59% v. 40%).
• More Black women feel neutral about trust in the healthcare system (46%), echoing a broader gender trend — overall, men have significantly more trust than women: 53% men v 39% women have “some” or “complete” trust. This is not surprising, given the lack of focus on women’s health until very recently. Women weren’t included in clinical trials until 1993 — and Black women continue to be underrepresented today. Women are diagnosed on average 4 years later than men across 770 diseases.¹¹ Meanwhile, Black women have 2.6x the mortality rate of White women.
• Improving Provider Interactions: When it comes to improving interactions with providers, while nearly all Americans indicate they want more personalized healthcare, Black Americans (51%) prefer “doctors who understand my background and culture.” This is also the second top option selected by Gen Zers (both over 18 (51%) and under 18 (46%), primarily driven by Black Americans.

Although healthcare start-ups have begun tackling healthcare for different gender and racial segments (e.g. Tia, Maven, Mahmee) or specific concerns (e.g. Pomelo, Allara, and BBGV portfolio company Millie) we have barely scratched the surface on delivering better care and better outcomes for all Americans at scale. AI presents a huge opportunity for patient intake, integrated care, supercharging clinical decision making, as well as for optimizing provider time.

• Mental Health: Although mental health was the top priority within Health & Wellbeing across nearly every group, it is a standout for Gen Z and Millennials (53%, 46% v. 38% for Gen X). Notably, Boomers are the only group for whom mental health doesn’t rank as #1. The younger the American, the higher the proportion who rate their mental health as poor: 22% of Gen Z and 18% of Millennials say their mental health is very poor or poor, which is 2.4x and 2x respectively vs. Boomers (9%). There are clear differences in factors that negatively impact mental health: the majority of Americans report finances, stress and loneliness as drivers, while Gen Z points to self-esteem, family and school. And, while overall, most Americans turn to sleep, exercise and downtime to manage their mental health, it’s mostly Gen Z and Millennials who focus on sleep as a tool to manage their mental health. Digging further we see more nuance in approach to mental health management: 1 in 5 Gen Z tries to get off social media as a panacea, whereas 1 in 5 Millennials, Gen X and Boomers look to medication. Two other key differences emerged: an equal percentage of AAPI respondents prioritize physical health as mental health. And while mental health is ranked as the #1 health priority for both men and women, 33% more women say it’s their top priority. It only just squeezes into the #1 spot for men, followed very closely by physical fitness, men’s health and managing stress.

BBGV was early to mental health with its investments in broadening access to the right 1:1 therapy (Spring Health) and affordable mental fitness tools (Zeera, fka Real). Mental health then had a moment with an explosion of funding in 2020–2021 but has cooled off in the past 2 years. Funding cycles aside, the problem is only getting worse (as highlighted above) particularly amongst our youngest members. The next generation of mental health companies will need to take into account how we live our lives online and interact with younger generations in new formats. We’ve already seen unique approaches emerging, from optimizing digital wellness (Ginko) to “emotional media’’ platforms (Blue Fever). We think younger founders will have unique insights on what is driving their peers’ mental health challenges and how they want to engage with their health. We’re excited to see them turn that understanding into new products and platforms.

Financial Security

• Financial Confidence: Less than half of Americans feel confident in their financial literacy (46%) and financial position (34%), but the gender gap emerges strongly here: men’s confidence levels are above the average (55%, 43% respectively), and women below the average (37%, 30%). Additionally, Black Americans (49%, 38%) tend to have higher rates of confidence versus other racial segments — particularly vs. White Americans (44%, 35%) and Latinx Americans (45%, 32%). Along age lines, Gen X (38%) is most lacking in confidence about their financial position versus other generations: not surprising, given they are on the cusp of retirement — 42% of them lack confidence that they will be able to retire comfortably. (Notably, median retirement savings for Gen X ranges from approx. $115k to $185K¹² with recent reporting suggesting women have one third of that set aside.¹³)

• Financial Goals: Across the board, top financial goals are paying bills consistently, saving for an emergency fund, and saving for retirement; but racial differences emerge: significantly more White Americans are concerned with getting their bills paid versus other segments (57% versus 46% Black, 43% Latinx, and 37% AAPI), while AAPI are most focused on saving for retirement (47%). Meanwhile, long term investing only makes it into the top 6 for AAPI (31%) and Black Americans (20%). Notably, Gen Zers are thinking long term with investing and buying real estate making it into their top 3 goals.
• Property: Of Americans who don’t currently own property, significantly more Latinx, AAPI and Black Americans are saving to buy than White Americans (48%, 47%, 42% versus 34%). Nearly all White Americans who don’t own property cite high cost of living as the major prohibitor (92%).

The time is now for more advanced solutions to wealth creation and management whether it’s in investing, saving or achieving financial goals such as building credit, debt management, or optimizing retirement savings. We’ve invested in solutions to help Americans increase their retirement savings (Icon Savings) and build wealth through real estate (Naya Homes). But we expect to see a step-change in innovation when AI develops the ability to assess an individual or business’s full financial picture — from dynamically underwriting credit for individuals and SMBs (Worth AI, Shubox, Hansa), to creating personalized tax strategies (Muse, April), to taking actions on behalf of an individual to optimize their financial position (Wealthmore, Monarch Money, Quinn).

Employment & Education

• Priority: While Employment and Education are the third top priority for the majority of racial groups, Black (59%), Latinx (64%), and AAPI (56%), White Americans rank Community & Relationships (52%) slightly higher.¹⁴
• Preparation for the Workforce: Americans generally agree that a “better understanding of finances” would have helped prepare them for the workforce (40% across all segments), followed by “more relevant coursework” (36% when looking across all respondents). Breaking it down by generation, Gen Z > 18 assigns greater weight to more relevant coursework (48%) ahead of better understanding of finances (46%, which ties with networking opportunities for second). Millennials rank networking opportunities as their second choice (41%). One note: Black Millennials opt for apprenticeship programs instead of college (39%) as their second choice behind better understanding of finances (47%).

• Career Changes: As noted above, a high number of employed Americans have considered a career change last year (84%). Of those, Black Americans prioritize starting their own companies (22%, and their top choice), followed by Latinx folks (19%, behind switching jobs). That tracks with data on new businesses opened in the US in 2023 — Latinx and Black owned businesses saw the highest growth.¹⁵
  Interestingly, nearly every racial segment has different priorities when considering a new job: White Americans prioritize enjoyment of work; AAPI — benefits, Latinx — work/life balance, and Black Americans — benefits and job security. We continue to be interested in platforms that improve retention and tap into these themes, especially for deskless workers, SMB workers and freelancers who feel less prioritized (see section 4).

As for generational differences, Boomers have the highest number of respondents who say they are happy in their current role (37%). That tracks with other data we’ve seen — Pew’s 2023 research also found that +65s are happier in their jobs than other generations.¹⁶ For a deeper dive into Boomers and work, see BBGV’s Rethinking Retirement.

4. Overall, White Americans, Older Americans, SMB workers¹⁷ and Americans earning <$100K feel less served & prioritized by American institutions; and White Americans feel less satisfied and optimistic versus other segments.

Feeling Served and Prioritized

Generally, Americans feel split on how well they are served and prioritized by institutions (the government, the economy and society at large), but there were four groups who emerged as feeling less served and prioritized.¹⁸

• White Americans: A slightly higher proportion of White Americans (50%) report feeling “less served and prioritized” versus Latinx (46%), Black (45%), AAPI (43%) respondents. More notably, a higher proportion of White Americans (1 in 5) also say they feel “severely underserved and not prioritized at all.” This is primarily driven by two groups: 1) White Gen X and Boomers — approximately 1 in 4;¹⁹ and 2) White Americans earning under $100K — approximately 4 in 5.
• Older Americans: A higher proportion of Gen X (51%) and Boomers (49%) overall report feeling less served and prioritized, compared with 34–45% of Gen Z and Millennials.
• Americans Earning <$100K: Overall, a higher proportion of Americans earning under $100K (48%) overall report feeling less served and prioritized, compared with 28% of Americans earning over $100K.
• SMB, Deskless and Freelance Workers: Finally, feelings of being less served and prioritized also differed amongst worker segments. Americans who work at SMBs with <20 employees feel overwhelmingly less served and prioritized (59%); followed by deskless workers (48%) and freelancers (48%). The sentiment of SMB workers likely mirrors that felt by their employers, who also felt negatively impacted by the economy, according to Amex data last year. More recent data suggests that this sentiment may be turning around.²⁰ Nonetheless there is a long record of these workers being overlooked by workflow innovation, professional development, benefits and financial security. We began investing in this space during COVID, when the nation’s two-tiered workforce of knowledge workers and deskless (frontline) workers came into stark relief. Companies like Topline Pro, Ox, Anthill, and Upwage are delivering software solutions to these previously-ignored segments.

Satisfaction

Feelings of being underserved are mirrored in responses to specific institutions. White Americans tend to be the least satisfied, and Black Americans the most satisfied.

• Healthcare: 22% of White Americans respondents say they have little or no trust in the healthcare system (versus 12% of Black Americans).
• Education: 1 in 3 White Americans say they are unsatisfied or very unsatisfied with how the education system prepared them for the workforce (versus less than 1 in 4 for other races). Of note: a similar proportion of Americans who work at SMBs with <20 employees are the least satisfied with how the education system has prepared them for the workforce (31%) followed by freelancers (26%) and deskless workers (25%).
• Financial Security: White Americans also have the largest number of respondents who report feeling unconfident or very unconfident about their financial literacy (21% versus 14% for Black people) and their financial position (37% versus 32% for Black respondents). While nearly all segments say they are focused on consistently paying their bills, it was a standout for White respondents compared with other racial segments (57% versus 43% for Latinx, 46% for Black, 37% for AAPI).

Optimism

When asked how optimistic they feel that their needs across key priority areas (Health, Financial Security, Employment & Education, Climate Safety, Community & Relationships) will be better met over the next 10 years, the majority of respondents are moderately optimistic. However, White Americans tend to be less optimistic²¹ (i.e. not at all optimistic or slightly optimistic) compared with other races.²² In particular, the optimism gap between White and Black respondents stands out. Black Americans have the highest number of respondents who are extremely or very optimistic compared with other races across all priority areas. It bears noting that this gap is not because of differences in income: 81% of Black respondents earned <$100K versus 73% of White respondents. We’re not the first to identify this theme: other research also suggests that Black Americans have become happier or more optimistic over time, and White Americans less.²³

Digging deeper on the least optimistic respondents:

• Health: White people (18%) have 2X the rate of Black (9%) and AAPI (8%) people reporting they are not at all optimistic about their Health & Wellbeing, largely driven by older Americans and income level: 69% of these respondents are GenX and Boomers (both 34%);²⁴ and 87% earn < $100K.
• Financial Security: White people (21%) have 2X the rate of Black people (10%) not at all optimistic about their Financial Security. Again, this was largely driven by older Americans and lower income levels: Boomers (39%) and Gen Xers (25%).²⁵ Unsurprisingly, White Americans’ lack of optimism about Financial Security is also driven by income — 87% earn <$100K.
• Employment & Education: White people (20%) have almost 2X the rate of Black (11%) and AAPI (11%) not at all optimistic about Employment and Education. Again, this was largely driven by older Americans and income level: here 42% were Boomers; and 84% earned <$100K.

The data on White Americans feeling less prioritized, satisfied and optimistic is not necessarily a new theme, but it was surprising relative to other minority segments who are more generally considered underserved. While those gaps can’t be denied, this new data reinforces the importance of building solutions that can ultimately improve systems and platforms for all segments — and underscores income as a key driver, further suggesting opportunities to innovate around financial position and employment.

5. Boomers are the only segment across ages and races who view Environmental Safety as a top priority; but Gen Z has strong thoughts on actions required to address climate change.

Environmental Safety is a bigger priority for Boomers than other generations; 47% select it as a top 3 priority. Notably, Boomers are the only segment across age and race who say it is a top 3 priority. This is surprising given the commonly held belief that Gen Z is the loudest voice on climate change. (While roughly 1 in 3 across other age segments do say it is a top priority, this is less than half the number of respondents who selected health and financial security as a top 3 priority.)

We dug in further with those who did select Environmental Safety as a top 3 priority.²⁶

• More Boomers (70%) state that scientific evidence is a driver of their concern about climate change versus younger people (Gen Z, 57%; Millennials, 60%).
• Americans across almost all races and generations overwhelmingly believe that governments should take primary responsibility for addressing climate change, followed by large or medium-sized companies, then individuals. Millennials are the only group to assign responsibility to large or medium-sized companies about equally with governments. Boomers assign higher levels of responsibility to these groups than other generations; but notably, more Boomers also believe individuals bear responsibility versus Gen Z (57% vs. 46%).

• Americans are mixed in their levels of satisfaction with actions taken by government and large companies to address climate change. However, Gen Z < 18 are the most dissatisfied with government (46%), followed by Gen X (41%) and Gen Z > 18 (38%).
• Across the board, “minimizing waste generation, e.g. circular economy” (50%) and “transition to renewable energy” (47%) are the actions most respondents would like to see companies adopt to make them more likely to become customers — but minimizing waste is a particular standout for Gen Z < 18 (56%).
• Unsurprisingly, the majority of respondents in this section note that they have already changed their behavior to address climate change, but younger generations (Gen Z <18 (78%), Gen Z > 18 (85%) and Millennials (80%)) indexed higher than Boomers (72%), despite their prioritization of Environmental Safety. The majority of respondents are already taking a number of actions to address climate change, with “using energy more efficiently” (48%) cited by most respondents. However, when it comes to actions they would take in the future to change their behavior, Boomers and Gen X have a higher proportion of people selecting multiple actions versus Gen Z. Perhaps Boomers are more aspirational with Environmental Safety on their mind, but less action oriented in combating climate change day to day?

We’ll save a deeper dive into what we heard across segments regarding strategies and behavior change in climate safety. For now it’s worth noting that Americans largely agree that corporations need to do more to meet their net zero goals; and energy efficiency is the most agreed upon strategy that individuals are engaging in, or willing to try.

Conclusion

When we began using the word “polyculture” 2 years ago, it was off the back of an instinct that the concept of a quintessential American profile had given way to something more multifaceted, dynamic and, frankly, more interesting. Our research brought this to life: American identity is a composite of many parts, overlapping and different at the same time. That new, emerging complexity — buoyed by major demographic shifts across age, race, and worker type — presents us with a mandate to think differently about preferences and priorities, and sets the stage for more nuanced solutions in our biggest areas of need: health, work & education, finance and climate. The fact that needs and priorities are so similar across age, race, and even gender creates an opportunity to build highly scaled solutions; while the differences suggest that how we go to market, and the user experience itself, will demand a new level of personalization to truly serve our polycultural population.

If you’re building in a fundamental category, solving a big problem for all Americans, with a belief in the power of our complexities, we want to hear from you.

Addendum

Some notes on our approach:

• Notes on our survey demographics can be found below.
• We asked over 130 questions digging into more specifics around each of the priority areas, Health, Financial Security, Education & Employment, Community & Relationships and Environmental Safety — we have not included a deep dive of those in Part 1 of this report, but plan to release select insights per topic over the coming months.
• Our survey did include MENA and Native American respondents; however the sample size was too small to include them in this report.
• We haven’t addressed how Americans feel about Community & Relationships (which ranked roughly equally as the number 3 priority for White Americans and Gen Z < 18) and plan to cover this at a later date.

Methodology and Respondent Makeup

We surveyed over 2000 Americans, and we focused on cutting the data by race, age and worker type for certain sections:

• Race: 24% of our respondents identified as AAPI, 24% as Black, 24% as Latinx, and 23% as White. We also included “Native American/Indigenous” and “Middle Eastern/North African,” as an option for selection, but as the number of participants who selected these categories was much lower by comparison (< 5% and < 1%), we ultimately decided not to include these results in our final analysis.
• Age: We cut the results by generation — Gen Z < 18 (12%), Gen Z > 18 (13%), Millennials (26%), Gen X (24%), and Boomers (24%). Used Gen Z under 18 as the best proxy we could for Gen Alpha [explain that makeup and why]
• Gender Identity: 50% of participants selected “woman,” 48% selected “man,” and 3% total selected “trans woman”, “trans man”, or “non-binary/gender queer/gender non-conforming.” Gender distribution was relatively equal across race: AAPI and White participants consisted of slightly more women (~60%), and Latinx and Black participants consisted of slightly more men (~43 women%).
• Job Type: “Knowledge/desk workers” were 29% of respondents (e.g. office or remote desk worker, executive or senior manager, and scientist) “deskless workers” were 22% (e.g. hourly workers and skilled tradesperson), “retired” were 17%, “unemployed but looking” 14%, “freelancer” made up 7%, “Healthcare Worker, “SMB < 20 employees” and “SMB > 20 employees” each made up ~3%, and “creator” made up 1%. (Job type distribution was relatively equal across race, but Black respondents were the only group to have a higher percentage of deskless workers than knowledge workers).
• HH Income: Total responses were divided along total annual household income; they ranged from “under $25k” to “$200k+,” with “25k-49k” at the highest percentage (25%), and 75% of total respondents reporting under $100k. By race, AAPI respondents had the highest percentage over 100k (25%), followed by White (21%), followed by Black and Latinx (~14%).
• Citizenship Status: Over 80% of Black, White, and Latinx respondents said “citizens by birth,” only 52% of AAPI respondents selected this option, with a comparatively much higher portion selecting “naturalized citizen.”
• Parental Immigration Status: AAPI participants also had a much higher percentage of parents who immigrated to America (61%), followed by Latinx (44%), and Black and White (11–12%).
• Language at Home: Likewise, when asked if a language other than English was spoken at home growing up, many more AAPI and Latinx people selected “yes” (~75%) than Black and White people (20%).

Footnotes

1. Carsey School of Public Policy, New Census Reflects Growing US Population Diversity with Children at the Forefront; CNN, US Census Data; US Census
2. Jeanne Batalova, Frequently Requested Statistics on Immigrants and Immigration in the United States
3. Pew research, The Growth of the Older Workforce
4. Tax Policy Center, Housing Income Quintiles; mean income gap between highest and lowest quintiles were $181,910 and $11,490 in 2012, and $277,300 and $16,120 in 2022
5. Where “define” means the factor is “extremely” or ”highly” influential versus “moderately”, “slightly” or “not at all”
6. Ashley Jardina, White Identity Politics; White identity politics is about more than racism — Vox
7. US Census; New Census Reflects Growing U.S. Population Diversity, with Children in the Forefront
8. The Atlantic, The US Reaches Superstar Status (2024)
9. Only asked to people who are NOT already freelancing, running their own business, or are unemployed/retired/homemaker; equating to 88% of Americans who responded that Employment and Education was a top 3 priority
10. CNBC, Nearly 50% of people are considering leaving their jobs in 2024 — more than during the ‘great resignation’
11. Evvy, 100 Effed Facts About the Gender Health Gap
12. Nerdwallet, “Average Retirement Savings By Age”; in fact, the range may be even smaller as this data is reported for ages 45–54, and 55–64
13. Prudential Financial, Retirement Crisis Looming [for Women]
14. Where priorities are ranked by which categories (Health & Wellbeing, Financial Security, Employment & Education, Environmental Safety (Climate Change), Community & Relationship) respondents most commonly selected as a top three priority
15. Yelp, New Business Openings Report 2023
16. Pew, How Americans View Their Jobs (2023)
17. Workers at SMBs with less than 20 employees
18. Where less served and prioritized includes respondents who selected somewhat underserved and insufficiently prioritized and those who selected severely underserved and not prioritized at all
19. White Gen X — 26% and Boomers — 25%
20. Amex, Small Business Blueprint (2024)
21. Less or lack of optimism means “not at all” optimistic and “slightly” optimistic
22. Note we saw similar trends play out across age groups and income groups more broadly across all racial segments — overall, Boomers reported lacking optimism more than other age groups; as did Americans earning less than $100K. However, White Boomers and White Americans over-indexed in lacking optimism
23. American Economic Associate, Blanchflower and Oswald: Unhappiness and Pain in Modern America: A Review of Carol Graham’s Happiness For All (2019); see Fig 4
24. Relative to other ages: Millennials 16%, Gen Z > 18 9% and Gen Z < 18 7%
25. Relative to other ages: Millennials 22%, Gen Z > 18 8% and Gen Z < 18 7%
26. 741 respondents were directed to this section based on their selection of top priorities

The gap in technology for underserved workers, including deskless workers, small and medium-sized business (SMB) owners and freelancers, is central to our future of work thesis at BBG Ventures. Closing that gap represents a massive opportunity for venture capital, as the vast majority of investment is still focused on knowledge workers. Less than 1% of venture funding goes to software for deskless workers, who are often SMB employees.¹

We began investing in SMB tech in 2016 with Mighty Networks, which enables creators to run full-service businesses. More recent investments include Topline Pro, the AI-powered all-in-one business platform for service pros; Norby, which launched with community-management tools for creators; and Icon, a portable retirement plan that makes it affordable and easy for SMBs to provide retirement savings opportunities to employees. In this post, we’ll cover why now is the right time to invest in SMB tech; the biggest problems SMBs face; and where we see investment opportunities.

Why Now is The Right Time to Invest in SMB

SMBs are the backbone of business in the United States — 33M SMBs represent 99%+ of all businesses and are credited with 2/3 of new job growth from 1995–2021. There are a number of thematic accelerants that make SMB tech compelling:

• COVID Fueled Small Business Growth and Tech Adoption: A record breaking 5.4 million new business applications were filed in the U.S. in 2021. When COVID hit, SMBs prioritized building out their tech stacks to stay in business. Today, SMB owners are more tech savvy than ever before. Toast is a well-known example that benefited from restaurants’ fast adoption of technology, seeing 100% YoY growth in June ’20, growth that ultimately positioned the company for a strong IPO ($20bn).
• Next Gen SMB Owners Will Take Advantage of Tech: Nearly half of all small business owners plan to retire in the next five years. The rising generations that take over those businesses are more likely to adopt tech vs. relying on spreadsheets or pen and paper. Cloud, mobile, social media and payments have also all evolved to better support SMBs.
• Gen Z as a Digitally Native Customer: Gen Z represents $360bn in disposable income and prioritizes convenience. They are accustomed to a tech-driven experience, further driving the need for SMBs to incorporate a tech-forward approach.
• Pressure From Macro Environment: Small business optimism hit an 11-year low in April ’24 . Increased economic uncertainty creates the need to better manage SMB costs, made worse by workforce turnover as retailers and restaurants continue to struggle to hire and retain enough workers.
• Massive Opportunity for AI to Free Up Time for SMB Owners: Perhaps most importantly, AI will be a significant accelerant, with 58% of SMB owners intending to make an investment in AI-related technology. SMB owners often wear every hat — from marketing to HR to finance. While the first wave of tools and tech created efficiencies, SMB owners are still ultimately responsible for the execution. The AI opportunity creates promise for owners to run their business end-to-end rather than just assisting with point solutions.

SMB Facilitates the Next Generation of Diverse Entrepreneurs, Both SMB Business Owners and Founders Building in SMB Tech

In addition to the market opportunity, investing in tools to support SMB owners (often women and/or Black/Latinx) can help diverse business owners and new generations build financial security, by optimizing the value of their business.² Many of the best founders in vertical SMB come from the industries they’re building in or have families in those industries, making them well-positioned to win. As an example, the founder of BBGV portfolio company, Formally, which is building legal workflow software, starting with immigration, grew up with an international background and immigrated to the US from Austria for high school. Amelie founded her company after seeing challenges with the US legal system firsthand, creating a platform that enables law firms handling immigration cases to serve people faster and more successfully³. As our friends at Harlem Capital pointed out, many diverse founders come from immigrant backgrounds or have faced adversity, either from their upbringing or economic circumstances, which brings urgency and resilience that fuels entrepreneurship.

SMB Owners Feel Overlooked and Overwhelmed

BBG Ventures surveyed over 2000 Americans across different races, genders, ages, jobs, incomes and geographies to better understand how age and race impact priorities — across health, work, finance, climate and community. Look for the full study later this fall, but these takeaways highlight the opportunity for technology to transform how SMB owners run their businesses:

1. SMB Owners Feel Overlooked, Especially Those With Limited Capital: When compared with other worker groups, SMBs with <20 employees felt the least served and prioritized by government, the economy, and society, with almost half (44%) of SMB workers earning under $100k saying they feel severely underserved. When asked what would have better prepared them for the workforce, 47% of SMB owners with <20 employees pointed to an understanding of finance.
2. SMB workers are overwhelmed by their workload and their mental health is negatively impacted. Excessive workload is the most common driver of burnout across all worker types, however it was a clear standout at 44% for SMBs with <20 employees. Of all worker types, SMBs were second highest in pointing to workload as the reason for burnout. Excessive workload was also cited by SMB owners, followed by chronic stress as the second highest reason for burnout (29%). Likely because of the stress of balancing workload, SMBs with <20 employees had the 2nd highest percentage of all worker groups saying that mental health is their top health priority (45%).
3. Hiring, employee retention and training are top pain points. When asked about top priorities for the business right now, hiring was the biggest concern, with 31% of SMB owners with <20 employees saying it is a top priority, followed by managing finances at 18%. SMBs also need support with upfront training and continuous learning, likely because of the pace of innovation coupled with limited team resources. 36% of SMBs with <20 employees said that upskilling programs were a top priority and 33% are seeking support for learning on the job.
4. Investing in SMB tech creates impact: Of the SMB survey respondents, 57% were Black or Latinx and 43% were women. The diversity of SMB owners is also reflected in SBA loan data that shows roughly half of SMB owners are women and at least 20% are minorities. Furthermore, Women of color are founding businesses at a faster rate than women in general — 42% of newly created women-owned businesses are started by Black women and 31% started by Latina women.

Areas of Opportunity for SMB Tech Right Now

Based on our survey learnings, market dynamics, and companies we’re seeing in market, we’ve identified three core areas of opportunity:

1. SMBs Lack Access to Capital: Opportunity for Platforms that Leverage Unique Datasets for Underwriting
Pain Point: At least half of SMB owners do not have the personal capital to fund their business before achieving profitability.⁴ Historically SMBs have struggled to access capital given the challenges associated with underwriting a small business. With limited, sometimes inconsistent, performance data, SMBs are perceived as higher risk. The limited data available for underwriting SMBs also leads to bias in the underwriting process, — 47% of black-owned businesses that apply for a loan are denied.

How to Win: Build New Differentiated Datasets for Underwriting: We have seen a wave of companies leveraging AI advances to consolidate existing SMB datasets, creating a more comprehensive picture of a businesses’ health. Examples of this approach include Worth AI (general SMB), Shubox (CDFI lenders), and Bonside (brick and mortar). However, in order to create a moat, we believe companies that are building new differentiated datasets to inform underwriting, rather than aggregating existing SMB datasets together have an advantage. It may require time to build a new dataset before a startup is positioned to offer financing products. For example, Hansa is selling their financial assistant tool to SMB owners, with the goal of creating a large dataset to build a superior underwriting model. Another example is Prime, which was spun out of Enigma, leveraging the SMB dataset Enigma has been building since 2012 to provide lending as a service for community banks.

2. SMB Owners are Stretched Thin: AI Facilitates the Next Wave of “Business in a Box”
Pain Point: 44% of SMB owners attribute excessive workload as the reason for their burnout — they are strapped to balance all that they have to do.⁴ SMBs operate in resource-constrained environments, in which data is unstructured and messy. The stress of balancing workload creates a toll on mental health — SMBs with <20 employees had the 2nd highest portion of all worker groups saying that mental health is their top health priority (45%).

How to Win: Next Wave will Leverage AI to Do the Work End-to-end: The first wave of vertical solutions to help SMBs manage workflows were a step forward, creating productivity improvements for business owners. Examples of early SMB winners include Mindbody ($2BN, fitness/beauty), Toast ($14BN, restaurants), Service Titan ($10BN, trades). Now, AI has the potential to create standardization of data and workflows. From lead generation to scheduling to automating training — winners in the next wave will offer a comprehensive “business in a box” platform that gives time back to SMB owners while providing them with data-driven insights. With AI, business in a box technology has the ability to provide significant improvements in efficiency, creating higher ROI and therefore higher willingness to pay — ultimately offsetting challenges with unit economics that have historically plagued SMB tech. Examples include companies like Moxie (medspas), BBGV portfolio company ToplinePro (home services) or EngineEars (musicians). We also see potential for a “business in a box” player to add on financing (Area of Opportunity #1), with the advantage of having first gathered company-specific data.

Bonus Opportunity: The bulk of mental health platforms for workers today are horizontal, with many pursuing employer models (Spring Health, a BBGV portco, is a good example, as well as solutions that started B2C such as Calm, Headspace,). But we see opportunities to build mental health solutions or community resources specifically dedicated to SMBs. We’ve been interested in peer-to-peer models such as Forum and believe this model could be especially relevant for SMB, given the similarities in challenges faced and the opportunity for resource sharing. With limited budgets, the right model to support SMB mental health may come as part of a broader business in a box platform, where the broader platform delivers a clear ROI.

3. Hiring and Training is a High Priority Challenge for SMBs: Opportunity for Vertical Marketplaces That Provide Training
Pain Point: Hiring was identified as the top priority for small businesses, with 31% of SMB owners with <20 employees saying this is one of their top areas of concern.⁴ Service businesses also struggle with retention, with significant turnover in the current macro environment.

How to Win: Verticalized Marketplaces for SMBs + Training: The first wave of SMB recruiting software included companies such as Workable and Ashby. We’ve also seen a wave of companies that incorporate AI into the hiring process such as Tezi. We’re excited to back verticalized hiring marketplaces, which can add greater value to the hiring process by identifying talent that is familiar with industry-specific workflows. Curated vertical solutions have the potential to establish attractive unit economics as they can demand a higher mark-up for talent. Vertical solutions are also more easily added to other products over time, increasing ACV potential. For example, Liftoff is a social recruiting platform that enables companies to find talent through people they trust and compensates networks for referrals. Upwage, a BBGV portfolio company, leverages AI to recruit hourly workers, creating value on both sides of the marketplace — for workers, it brings transparency, flexibility and simplicity to finding a better paying/better fit job; for companies, it dramatically lowers cost, automates screening, and reduces time to hire. Neither of these companies are focused on SMBs today, but their approaches could be adapted for SMBs in the future, when a self-serve version is launched.

Verticalized marketplaces can work especially well in legacy categories that require improvements in the labor market. Examples of this have existed for deskless workers, such as Incredible Health, which helps hospitals hire nurses, or Traba, which helps with shift-based workers in warehousing, logistics and other industrial sections. Providing workers with the training needed to transition into a new industry (which can also allow for wage progression) addresses the hiring challenge by increasing the supply side. For example, Stepful provides training for home health workers. Interplay Learning and MT Copeland provide training for construction. These industries and other skilled trades are well-suited for short-term training to increase supply given that the training is standardized and time-bound. We are excited to see companies combining training with a marketplace approach under a single platform. Once a company makes a hire, retaining them is critical — companies that offer benefits that are often requested by workers, such as our investment in Icon, which offers a portable retirement plan — can be a valuable add-on.

Industries with Market and Impact Potential
To identify industries with the greatest potential, we looked at several inputs:

• Size of market opportunity
• Industries that over-index for diverse founders
• Number of addressable SMBs
• SMB revenues high enough to support software purchases

Below are the areas we identified, the number of addressable SMBs, as well as some examples of interesting companies in each. Of these, areas like beauty and restaurants have the highest representation of diverse business owners, with over a third of entrepreneurs being Black, Latinx and AAPI folx. In many of the other categories, the representation of Black, Latinx and/or AAPI entrepreneurs has increased over time — but we would expect advancements in SMB tech to further accelerate this by making entrepreneurship more accessible.

Healthcare — Independent Physicians:

• Physicians (~360K): Joyful Health streamlines finance management for private practices. Abstractive Health provides clinicians with medical-grade patient summaries. M7 is a scheduling platform for nurses that matches them with career opportunities that align with their goals.

Future of Work:

• Single Family Housing Construction (~355K): Briq helps automate workflows for construction companies. Mbue automates architectural review processes for construction companies. Symbium enables contractors to efficiently get building permits for energy upgrades.
• Real Estate Agents (~350K): BBGV’s investment in Max Home, automates the transaction coordination process for agents.⁵ Luxury presence provides website design and marketing for agents.
• Full Service Restaurants (~320K): Toast is the incumbent, providing restaurant point of sale, ultimately enabling restaurants to improve their operations. Burnt automates restaurants back of house operations.
• Plumbing, Heating and Air Conditioning (~180K): Service Titan is the incumbent, offering a platform for contractors to manage all of their jobs. Avoca leverages AI agents that handle calls to help boost HVAC, plumbing and electrical business revenue.

Community — Beauty and Wellness:

• Beauty Salons (~245K): Glossgenius is building software for spas and salons to manage their business end-to-end. Upkeep provides an easy way to book and pay for medical treatments.

We believe each of the core needs outlined in the Polycultural Future of America study referenced earlier are relevant to SMB tech — from work and learning, to healthcare, community, and environmental safety. And within each of these, we see opportunities to layer on financial security products over time in most categories, in line with vertical saas playbooks. Below summarizes how we think about SMB tech at BBGV, with examples of representative companies, both within our portfolio and others we admire.

The team at BBG Ventures is excited to back the next wave of diverse founders building in SMB tech. As we continue to develop and iterate on our thesis, we would love to connect with great founders building next generation technology for SMBs or other investors looking into SMB tech. If this is you, drop us a note: claire@bbgv.com

Footnotes
¹ The top 8 deskless worker segments are Agriculture, Education, Healthcare, Retail & Wholesale, Hospitality, Manufacturing, Logistics, and Construction. All of these industries are 90%+ SMBs.
² Women of color are founding businesses at a faster rate than women in general. 42% of newly created women-owned businesses are started by Black women and 31% started by Latina women.
³ Formally’s Magic Docs product is accessible to SMBs today, however the majority of the customer base to date has been enterprise, with SMB as a future focus.
⁴ BBGV Polycultural Future of America research coming this fall
⁵ Note: Max sells into brokerages, however users are similar to SMBs given agents run their own book of business.