We’re all interested in qualifying how big the Longevity sector will be and the good news is that Dominic Endicott has been hitting the spreadsheets and is ready to share the details:
Last month we connected with Dominic Endicott of 4Gen Ventures, the Agetech VC fund that is expecting to close its fundraise soon and start investing in early 2020.
Dominic’s background in the Longevity economy is as the first investor in a company called “Great Call”, which serves older customers with mobile, health and wellness solutions, and which Best Buy acquired last year for $800m.
Longevity.Technology: Before we get into the details Dominic, what are the drivers for growth in Longevity and Agetech?
Dominic Endicott: Longevity spending is driven by strong growth in the over-50 population as well as in the disposable income of this population. Age-tech is about the digital-enablement of services for this population, and the associated disruption in traditional spending. For example, in the $400b US senior living space. This sector is under pressure anyway; everything from the implosion in long-term care insurance to the shift from defined benefit to defined contribution pensions. But in addition, we should expect to see digital giants, unicorns and start-ups attack slices of the senior care market. I believe the level of competitive intensity will increase – standing still will not be an option.
If we think about all the latest tech – AI, IoT, wearables, robotic automation, even the advances in self-driving cars – they are fundamentally about extending the digital ecosystems deeper into our society and Age-tech will be part of this.
Longevity.Technology: As you know, we cover Longevity in a wider context, beyond Agetech, but for some investors it’s a more tangible ‘bet’ than biotech. So, just how big is Agetech in your opinion?
Dominic Endicott: By our estimates the global Age-tech market will double from $1 to $2 trillion. This is driven by two factors: growth in the so-called “Longevity Economy” (spending by of for over 50s) from $26 trillion to $37 trillion globally; and growth in the rate of digitization from 4% to 8%. That sounds like a big number. To double check the top down math with some bottom up data, it is useful to look at companies and try to tease out how much of their revenue is Age-tech. Our Age-tech estimate for the largest 35 American consumer brands adds up to $350B. This suggests that if anything my global estimate of $1 trillion is too low.
US Age-tech Revenue 2016-2018 $ Billion
Longevity.Technology: Can you explain how you reach these estimates, and what have you learned from this analysis?
Dominic Endicott: To qualify, there are two requirements; it must be spending by or on behalf of people 50 and over and it must be digital. Digital could be something acquired via a digital channel – a book on Amazon or a cup of Starbucks bought by App would qualify, or be a digital product – an iPhone or an Internet subscription. This is a blunt instrument, and we will refine it with time. Some takeaways:
- The most formidable, largest and fastest growing Age-tech companies today are Apple and Amazon, and we see other digital-first companies coming fast behind – players such as Tesla and AirBnb for example
- The telecoms and cable companies, by dint of their substantial investments in digital infrastructure are major Age-tech players, and indeed the company I invested in, Great Call fits into this category. Whether they will leverage their strong position to grow their share or let the Apples and Amazons of this world (or start-ups) yet again claim the throne is an open question
- Most other Global 2000 companies are behind, though we are seeing some interesting action by retailers and financial services firms
Age-tech US Leaders (US Age-tech Revenue $B)
Longevity.Technology: Who do you think is the most formidable Agetech company today?
Dominic Endicott: My view is that that the tech giants – Apple, Google, Microsoft and even Facebook are becoming very strong, but to me the dominant player is Amazon. Jeff Bezos understands that Age is the final frontier, both in terms of how long a human can live, but also in terms of the user experience frontier. Amazon can combine all of its assets: e-commerce, AWS, Alexa, Prime, its store network, Ring, and Pillpack to deliver some amazingly compelling digital solutions to the 50 plus consumer. Amazon and all the tech giants understand that the largest digital transition yet to happen if that of the over 50s, and that this requires a new wave. It is not just about using new technologies such as voice or artificial intelligence, but also about understanding the distinct user journeys of older customers. Amazon’s obsession with user experience becomes a massive asset.
Longevity.Technology: If Amazon and the other Tech giants are ahead in Agetech, what does this mean for other corporate brands?
Dominic Endicott: I think that any Fortune 1000 company has a massive opportunity to grow in Age-tech, if they play to win. Many companies actually are very well advantaged to serve the older customer. In fact, as noted earlier the communications players are already amazingly well positioned and are among the largest Age-tech players because they have digitized their networks and have a large base of older customers. However, somewhat paradoxically many corporations take these older customers for granted, and are failing to develop new services at the same speed as the tech giants, and thus are at risk of falling behind.
Longevity.Technology: Great insights and a demonstration that the Longevity sector is big, still shaping-up and that corporate mindsets need to adapt quickly. Why start a VC fund?
Dominic Endicott: I believe that Age-tech is the next, massive untapped VC market, and could be as large or larger than exciting verticals such as Fin-Tech or Prop-Tech. I also believe it is much broader than healthcare, and will encompass massive sectors such as property, transport, the future of work, finance and even food.
Longevity.Technology: That aligns with our thinking too! What’s the scale of venture capital businesses at this time?
Dominic Endicott: Right now, we estimate that VC-backed Age-tech revenue is about $2 billion/year in the US. By 2025, we believe that this could grow to $35b, and that it will be across a broad range of categories, including care but far broader.
Going back to that $1 trillion figure, and assuming that the US is about half or $500b, that means that today we are but a smidgeon – less than 1% of Age-tech is VC backed. If we assume that the US will double to $1 trillion, that would imply VC backed firms would only have 3.5% of the total. My point is that there is tons of head-room.
VC-Backed US Age-tech Revenue 2018-2025 $B
Longevity.Technology: That sounds exciting, but we know in VC it’s all about timing. What makes you think that the Agetech explosion will happen now?
Dominic Endicott: We see lots of signs – in addition to Great Call, acquired last year for $800m and which I believe could one day be a multi-billion value business, Pillpack was acquired last year for $1b (by Amazon), and we have a list of around 10 Unicorns that we think are stealth Age-tech plays. As more companies become aware of the massive pent-up spending capacity of the 50-plus consumer and employee – roughly 50% of disposable income and 75% of wealth is from 50-plus, we will see the best entrepreneurs shift to serving this need. This explosion is already happening, but it has been largely invisible, which is how many older people actually feel. One of the jobs of 4Gen is to increase visibility of what is already happening.