Investments in consumer tech startups have slowed since 2022, as a turbulent macroeconomic climate and rising inflation have left VCs confused about the power of consumer spending. Over the past several years, most AI investments have focused on winning over enterprise customers, who provide fat checks, multi-year contracts, and a fast path to scale.
But one VC sees the consumer sector poised to rebound by 2026.
“This is going to be the year of the consumer,” said Vanessa Larco, partner at venture firm Premise and former partner at NEA, in this week’s episode from the Equity podcast.
Larco says that even when companies have big budgets and a strong desire to implement AI solutions, adoption often stalls because “they don’t know where to start,” Larco said.
“The exciting thing about consumers and prosumers … is that people are already remembering what they want to use,” Larco continued. “That’s why they buy it, and if it meets their needs, they continue to use it.”
In other words, adoption is faster, and startups building AI products don’t have to guess whether they’ve achieved product-market fit or just won a contract.
“If you are selling to consumers, you will know very quickly if it fits your needs or not, and you will know quickly whether you need to pivot or make some changes to the product or completely scrap and start something completely different,” Larco said.
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And in today’s anxiety-inducing economy, scalable consumer technology products represent a very strong product-market fit.
There are early indications that consumer technology is having a moment. Late last year, OpenAI launched an app on ChatGPT, allowing users to shop with the Target app, explore the housing market with Zillow, book tours with Expedia, or create Spotify playlists, all through the ChatGPT chatbot experience.
“AI will be like a concierge service, which will do everything you can think of,” Larco said. “The question is, which should be specific, and which should be general purpose?”
Or different, because OpenAI can create ChatGPT as a new operating system in the consumer internet, which legacy companies – like Tripadvisor or WebMD – will continue to exist in their own right, and which OpenAI will eat?
While Larco thinks 2026 will be a “gangbuster” year for M&A, he wants to invest in startups that “OpenAI doesn’t want to kill.”
“OpenAI does not manage real-world assets,” he said. “I don’t think they’re going to create an Airbnb competitor because I don’t think they’re going to manage homes…I don’t think they’re going to build a marketplace that requires real humans because they don’t want to manage humans.”
Aside from the startup being able to fill in the gaps, Larco is monitoring what happens if OpenAI “decides to pull Apple or Android where they take a 30% cut of all the traffic you send.”
“Is Airbnb going to play ball with that?” he asked.
Overall, Larco predicts new monetization strategies and new business models will emerge from the evolving consumer experience online.
‘Social needs to change’
While doomscrolling on Instagram about Trump’s arrest of Venezuelan leader Nicolás Maduro, Larco noticed something. He came to the platform to get news of the escalating crisis, but he was overwhelmed. AI-kui Maduro slop.
While deepfakes continue to become mainstream on social media, this is one of the first major news events where AI-generated slop muddies the waters of truth.
“At that point, I was like, if I’m just watching AI-generated videos and photos, I want them to be funny,” he said.
Larco says he’s been inundated with realistic-looking AI videos on social media that just assume it’s all AI, and he’s not the only one. If we all start to think that nothing we see on the Meta or TikTok platform is real, the question is, where do you get the real stuff?
Larco says that others can fill the gap in where to find the right content, non-AI is a rich platform Reddit and Digg make a move to verify humanity. But for Meta? Maybe it’s just an entertainment company, a platform for user-generated short films.
“I think we should continue to take notice from (Meta),” Larco said. “You only get funny videos from there. It’s not social media. It’s just gaming and entertainment media.”
‘Some things are better with sound than screen’
when Meta gets the start of the Manus AI agent Last week, many saw it as a company roll. Larco thinks it could be a step toward improving Ray-Ban’s Meta smart glasses, a product that VCs like because it allows them to answer calls, respond to messages, take photos and videos, and ask Meta AI questions, all without having to pull out the phone and navigate the screen.
Larco said he thinks useful voice AI assistants are finally “on the cusp of things,” powered by more advanced technology and more powerful computing.
“Some things are better with sound than screen,” he said. “And because sound sucks, we need the screen as a crutch. But I like to start separating what works better on screen and what works better with audio.”
Want answers to questions your kids are asking about the tallest building? Definitely a voice. Taking out the phone to enter a question now feels “archaic,” Larco said.
“I think it’s really exciting for designers to finally be able to pick and choose a better form factor for their use case,” he said.