The evolution of the ‘Passion Economy’ – New trends on where to invest
Benson Oak Ventures has a core investment thesis around belief in the rise of the Passion Economy. In October 2019, Li Jin from Andreessen Horowitz published a seminal blog post on the Passion Economy and the Future of Work.
It’s a fantastic read and details the what, the why, and a future to which we at Benson Oak Ventures wholly subscribe — literally — as we have led investments in multiple “passion economy” deals of late. One year after that blog, in the 30-some weeks since the Covid-19 pandemic struck, economies have been shut down, labor markets roiled, and hundreds of millions of people have been forced to study and work from home. Putting aside the human heartbreak and economic destruction, we will look back at this period as a time when “decades happened” — the bookended confluence of the rapid onset of the Passion Economy with what we term the end of the Workforce Era.
The Workforce Era represented the traditional and historical form of work — go to university, get a job, progress through an organization, get a lateral promotion, retire with enough to live on for the rest of one’s life.(Shout out to Tim Ferriss and his Four Hour Workweek for the first and still compelling arrow piercing the veil of this outdated form of “work”). In the past decade, on-demand marketplaces established the gig economy, providing opportunities to “be your own business” and get paid for your time, services, car, houses, and others. These marketplaces such as Uber, Airbnb, Fiverr, TaskRabbit, etc did not represent passions per se, but a way to get into the gig economy and out of the traditional Workforce Era. However, in some ways, these new platforms simply represented an evolution of the Workforce era albeit in the new form of software-enabled platforms as the new middle-men taking a cut.
Covid-19 as the deathblow of the Workforce Era?
Simply put, the onset of Covid-19 manifested a corporate ability to shed jobs and reduce wages in a proverbial instant. Entire industries laid-off workers (restaurants, hotels, adventure parks, airlines, etc) while others — from early-stage startups to large corporates with billions in revenue — quickly reduced wages in the spirit of shared sacrifice as revenues and funding availability contracted. Even the gig marketplaces have tended to resemble the employers of old by reducing take rates and imposing requirements to ensure their own survivability as platforms. Meanwhile, the stock market has basically lauded and rewarded this “operational flexibility” with sky-high market valuations. The result is that employees — whether of corporates or of the gig economy platforms — increasingly realize that the traditional workforce era places them at the bottom of the totem pole — automation, software, eventually, robots, will all improve upon the costliness of actual people doing these jobs, as their human frailties and required contractual and social obligations impose a detrimental impact on margins. The immediate reaction to this was a record number of new business registrations in the quarter after Covid-19.
The longer-term and permanent reaction will be reflected in the inexorable rise of the Passion Economy. The Passion Economy represents the intersection of entrepreneurship and the concept of a “job,” with huge implications for the future skills and capital required. This creates a new mindset for both employment and entrepreneurship, and the need and comfort to be your own “lean start-up.” Moreover, these new entrepreneurs will take a different approach to their users, as they stimulate their fans to turn their own passions into revenue-producing businesses. As noted in a previous Benson Oak blog post, the Power of Community is
vital for all businesses. We would posit that these new types of SMBs and entrepreneurs will enable that community from the get-go as it is the very mindset of the new kind of entrepreneur. They want to earn from their passion while also feeding the passions of the community. The new wave of tools — ironically many of which buoyed by the same technological innovations that are making the workforce increasingly obsolete — enables everyone to be an entrepreneur, run their business to earn a living, and at the same time, chase their passions. The Passion economies will turn passions into businesses and we are seeing it mature already in various forms:
Do what you love — and get paid directly. Join a marketplace and sell your wares and knowledge. Thumbtack for contractors, Etsy for artisans, Substack for writers, Udemy, and Outschool for teachers.
Create your own business and scale it. Small businesses can now easily create a store on Shopify, join Amazon Marketplace, build a website with Wix, and outsource to cloud services the marketing, financial and other functions, and even sell their business into a larger play. It seems every other TV ad is from Google, Amex and Amazon is about supporting small businesses.
Become an influencer. Join a platform such as Patreon or Medium to sell knowledge or become an influencer via social networks. This stat blew me away — 29% of Gen Z want to be a “YouTube influencer”, and only 23% a professional athlete! In my house, it’s evenly split — one baseball player, one TikTok influencer, and one who votes, “let’s do both!”
We view our new investment in Kre8.TV as a potential intersection of all three trends. Kre8.TV acts as both a marketplace and a platform enabling the “business of valuable content”. As a starting point, creators can do what they love and also earn money from that passion — enabling consumers to discover and gain access to valuable content. providing many ways for people/creators to monetize from themselves. Second, creators can use Kre8.TV as a platform to turn this passion into a full-fledged business by packaging their content into different streams of income, finding users, and having a mobile-based business infrastructure (think “Shopify for Content”). Finally, the aspect of this two-sided marketplace will enable a clear way for consumers of content to see how they too can become an influencer — and get paid for it.
My own mother started her own business so she could follow her passion — creating hand-made dolls with innovative styles. Her passion for making dolls and giving joy to her buyers never dissipated — but it was a grind to run a business, hire employees, pay the rent and overheads and stock the store, and compete with big distributors — and there were no tools available then to allow her to do anything different than a traditional business. In today’s world, she could both make the dolls and create them based on requests, curate gorgeous photos on her own designed website, sell them on any number of e-commerce sites, make an affiliate fee from selling accessories (rather than having to hold and deal with that inventory) and create a loyal following of fans (because her dolls really were gorgeous). In the passion economy, she would be able to focus 100% of her attention on the passion itself — no overheads, business risk, inventory management, and various headaches — just focus on the passion and use the tools to provide the various wares. And as the next step, she could translate that passion to others, create how-to videos and inspire a new wave of doll artisans who in turn can see their passion as a business, not just a hobby.
Funding the Passion Economy Ecosystem
At Benson Oak Ventures, we believe the passion economy will evolve and expand into many unforeseen areas, especially as a new wave of startups create new branches and markets, all spurred by individual creativity. It will represent the prime investment target for our future investments, specifically targeting:
Platforms that provide tools and frameworks for these new entrepreneurs to create and sell their knowledge and services. Kre8.TV is a great example, representing the evolution from social networks whose content is driven solely by the network’s own advertising models to an ecosystem that turns the content and the passion of its creators into a business, like a “Shopify for Creators”.
Tools that enable these new businesses to grow and thrive. In our portfolio, Promo.com
provides best of breed video marketing solutions to SMBs, Become.co
enables SMBs to optimize and access their best funding options. Even ZenGo
— the simplest crypto wallet in the market — will eventually cater to creators of all kinds to enable payments in their individual economies.
E-commerce platforms that combine marketplace and subscriptions as models for creators to earn in ways that make sense for them and their community.
Blockchain and Cryptocurrencies. We see blockchain as having a key role in the evolution of the Passion Economy as an enabler of entrepreneurship and currency for passion-based economies. The use of digital branded currencies and incentives will foster more synergies and participation between creators and followers. Blockchain and its digital branded currencies and incentives enable true cooperation and ways to involve and compensate your followers. These decentralized micro-economies will not only support the new passion-based entrepreneurs to make a living but also have the potential to grow into macro-economies whose branches foster scale from contributors to the ecosystem at multiples levels.
If you are an entrepreneur building something transformative around the passion economy, we would love to hear from you
The Birth of “Passionware” as a new Market Category?
Finally, does the rise of the Passion Economy bring a new category that succinctly summarizes the underlying operating system of the future Passion Economy? If the software is defined as “the programs and other operating information used by a computer.” and hardware as “tools, machinery, and other durable equipment”, how about.
Passionware: tools enabling the creation of products and services stemming from people’s own creativity.
Robert Cohen is the Managing Director of Benson Oak Ventures.