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How Startups Are Building for Underserved Communities
10 Startups Serving 10 Overlooked Communities
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How Startups Are Building for Underserved Communities
When technology connects the world’s population, what initially seem like small markets can reveal themselves to be much larger than expected. But tech is also built disproportionately for certain groups; there are many communities that are underserved, or whose pain-points are less visible and therefore less addressed by technology companies. These gaps form opportunities for startups.
This week, I wanted to look at 10 underserved communities and 10 startups building for these communities. The communities are wide-ranging—from financial aid applicants, to cosplay enthusiasts, to pregnant and post-partum moms. Each startup is addressing a salient problem, one that’s likely both deeper and more widespread than most people expect.
Let’s jump in 👇
Students and FAFSA Applicants | Mos
In a video that went viral on TikTok this summer, a high school valedictorian delivers a sharp rebuke of her school’s administration in her graduation speech: “And thank you,” she says sarcastically, “to the guidance counselors who only informed me of scholarships after they were due, causing me to miss out on thousands of dollars.” It’s a biting speech, and it cuts to the heart of an issue familiar to millions of college-bound kids: struggling to navigate the convoluted, byzantine process of applying for aid. It’s no wonder that young people are bitter about having to navigate it alone.
Every year, 18 million students file the Free Application for Federal Student Aid, better known as FAFSA. About 85% of college students receive financial aid. But most students leave money on the table, not knowing that they might be eligible for grants or scholarships or other hard-to-find ways of paying for college.
This is the problem that Mos initially set out to fix, aggregating $160 billion in financial aid into one simple application that ensured students wouldn’t miss out on potential funding. Since launching, 400,000 students have joined the Mos community.
One of Mos’s customers, Julieta Silva, is a first-generation college student who grew up in a small town in Texas. Her 500-person high school had one college counselor, so she had to turn to TikTok for help finding aid.
Despite the size of the opportunity—20 million people a year!—few startups were building for this customer base. FAFSA applicants didn’t look like a sexy market to go after. But over time, Mos’s founder, Amira Yahyaoui, has expanded Mos into a robust fintech serving young people. Julieta Silva now uses Mos for all her banking needs. Applying for aid is the wedge—the critical painpoint—and Mos then becomes the financial hub through which college students run their lives.
Local Merchants | Pastel
With the growth of Amazon over the past two decades, the narrative has been that local commerce is dead. But building for SMBs is still a massive opportunity; last week’s piece on the Long Tail Framework argued that when you add up the thousands of businesses on the long tail, it often compounds to a larger opportunity than going after the Goliaths. We’ve seen this play out with business models like Faire, Shopify, and Openstore.
There are 306,940 chain restaurants and 352,815 independent restaurants in the U.S., but those independent restaurants are underserved: while chains can invest in a tech stack and marketing, independent restaurants are often on their own. Building for this segment is a large opportunity.
One example of a startup doing so is Pastel, a company that helps local merchants reach customers outside their geographic area. Take San Francisco’s Bi-Rite, a family-owned grocery beloved by locals. If you move to the suburbs, you may miss your Peach Cobbler Bi-Rite ice cream. Pastel solves this, providing delivery for local businesses to customers across the Bay Area.
Pastel’s founders, Ted and Amanda, have experience both from UberEats and from running their own local San Francisco cake shop, Butter&. Pastel aims to empower local merchants by letting them reach loyal customers outside their geo—and by helping with discovery for net-new customers. Locale is a similar business, also helping local California businesses extend their reach state-wide.
Working Parents | Cocoon
Unless you’ve gone through the employee leave process, it’s difficult to see it as the massive painpoint that it is. But applying for leave, such as maternity leave or paternity leave, typically requires hours and hours of paperwork to adhere to company, government, and insurance laws. It’s a nightmare.
Cocoon is a software platform that erases that nightmare by helping companies manage employee leave. What was once an hours-long headache becomes an automated process that takes under 10 minutes end-to-end.
My partner Mark led Index’s Seed and Series A investments in Cocoon, right as he was finishing up his paternity leave. One of my other colleagues had recently spent over 25 hours on the phone with California’s Employment Development Department during the initial part of her maternity leave, trying to navigate a clerical error that threatened her job. The painpoint was clear.
Every year, millions of Americans apply for leave. Those people need a tech solution that brings a cumbersome analog process into the 21st century.
Cosplay Enthusiasts | Coscove
In 2021, New York Comic Con attracted 130,000 people. The convention (alongside other major city Comic Cons) is the nucleus of pop culture fandom, and the biggest annual showcase for cosplay enthusiasts.
Cosplay is a portmanteau of “costume” and “play”, and basically entails dressing up in inventive costumes to represent a favorite character—often characters from Marvel, World of Warcraft, Harry Potter, and other fictional worlds.
People spend a lot of money on their costumes—often many hundreds, or even thousands of dollars—and cosplay is a surprisingly large and fast-growing business. One report estimated the cosplay costumes market to be $4.6 billion in 2020, growing to $23 billion by 2030, a 17.4% (!) annualized growth rate.
The 10 most popular cosplay characters, according to one report that combed through Instagram hashtags at conventions:
Nerd culture is in, with Marvel still cleaning up at the box office, new Game of Thrones and Lord of the Rings series hitting streaming services this fall, and video game IP seeping into big-budget productions. A closely-linked market to the cosplay market, the anime market, is also surging:
Most people buy cosplay costumes in corners of Etsy, Ebay, and Facebook Marketplace. It’s a cumbersome, inefficient process. One startup building specifically for this niche is Coscove, which offers a marketplace for cosplay costumes.
After making and wearing expensive costumes, many cosplay participants want to sell their creations and use that money to buy something new; Coscove offers the place to do so.
Snap Benefits | Propel
In 2021, 41.5 million Americans received SNAP benefits, better know as food stamps. That’s more than the population of Canada.
SNAP, which stands for Supplemental Nutrition Assistance Program, is a government-funded program that offers low-income people electronic benefits they can use like cash to purchase food. SNAP recipients wouldn’t seem like an obvious market for a tech company—but Propel has built a sizable business serving this segment.
Propel’s Providers app (formerly known as Fresh EBT) has over 5 million users and helps people manage their SNAP benefits.
Pregnant and Post-Partum Women | Zaya Care
Despite the fact that the U.S. spends an enormous amount on healthcare per capita—and is the richest country in the world—the U.S. leads wealthy nations in maternal mortality. And while European nations, in particular, offer a wide range of insurance-covered care for mothers, America falls far behind.
That’s where Zaya Care comes in. Zaya is a marketplace through which women can be connected to providers—and get insurance to foot the bill. Zaya’s founder, Leoni Runge, is German, and she aims to bring European-style care to the U.S. system.
The pregnancy journey doesn’t end with birth, and Zaya’s offerings extend post-partum. Women can find pelvic floor therapists, post-partum mental health providers, acupuncturists, lactate consultants, and so on.
LGBTQ+ Community | Folx Health
Gen Z is the queerest generation in history:
It’s stunning to watch the speed with which norms are changing. Gender, masculinity, and sexuality are each becoming more fluid, more complex, more multi-faceted. We see this is in celebrities like Elliot Page and Sam Smith coming out as non-binary, in the ways that Billie Eilish and Harry Styles dress, in Gen Z men (many straight) wearing make-up and jewelry. Most of all, we see it in Lil Nas X and how he’s become a queer icon.
But as the LGBTQ+ population swells in both size and vibrancy, few startups are building specifically for the queer community. Folx Health is one exception.
Folx provides medications like testosterone hormone therapy, estrogen hormone therapy, and PrEP (HIV prevention medication) for queer people. Millions of people who felt overlooked or discriminated against by traditional healthcare turn to Folx for medications and for community support.
Telehealth surged during COVID, making healthcare more accessible and convenient. And telehealth is uniquely suited to serving marginalized groups that lacked access to care or felt uncomfortable seeking care. (Direct-to-consumer healthcare companies like Ro and Hims got their starts with stigma-heavy products like hair loss pills and erectile dysfunction meds.) There are 30 million Americans who identify as LGBTQ+—a 60% increase from 2012—including 1 in 5 Gen Zs. New companies like Folx are building directly for this group.
Hispanic Population | Fortú
One of the stories of 21st Century America is the country’s shifting demographic make-up. In 2045, America will become a “minority white” nation. The Hispanic population, in particular, is growing quickly, swelling from ~65 million people and ~20% of the population to today, to ~120 million people and nearly 30% of the population in 2060.
One interesting trend is the rise of neobanks, such as Fortú, built specifically for Hispanic Americans. This is in line with other neobanks that have emerged for specific segments of the broader consumer fintech market, such as Step (teenagers) and Greenlight (kids).
Black Population | Valence
Black people make up 13% of the U.S. population, but Black people hold less than 3% of national wealth. Representation in tech and business is even more dismal: only 3% of Silicon Valley’s workforce population is Black; there are 3 Black CEOs in the Fortune 500; and only 0.0006% of tech venture funding goes to Black female founders.
There are few Black entrepreneurs, and even fewer Black entrepreneurs building for Black people. But one example is Valence, founded by Kobie Fuller, which offers a professional network for Black professionals. In some ways, Valence is “LinkedIn for the Black community”—but it also transcends that analogy, providing a place for Black mentorship, storytelling, and connection.
Autistic Kids | Elemy
About 1 in 45 people are autistic, but few startups are building for autistic people. Fewer still are building for autistic children.
Elemy is a platform that helps parents navigate the autism diagnosis process for their child, and then access in-home behavior therapy. Parents can request in-home assessments and applied behavior analysis (ABA) therapy, getting matched with a clinician in the area.
Over time, Elemy has expanded its offerings, meeting a broader opportunity: 17% of children have been diagnosed with a developmental disability, such as ADHD or ADD. Elemy offers evaluation, diagnosis, and care for a wide range of conditions:
Many of today’s most successful tech companies were built for what initially looked like niche markets. Veeva, a software company for pharma and life sciences, is a $30 billion public company. Benchling, SaaS for biotech R&D, is one of the most promising private startups today. Vertical software companies can surprise in their scale: Toast (restaurants), Boulevard (salons & spas), ServiceTitan (home services), Shopmonkey (mechanics), Procore (construction).
The same thesis can extend to communities. What initially look like niche communities can surprise to the upside—and these communities are often the ones underserved by technology. A good framework for building a startup is to identify a segment of the market that you believe to be overlooked. Often, the entrepreneur is part of this segment or has firsthand experience: Coscove’s founders are regulars at Comic Con and cosplay conventions; Zaya Care’s founder has a sister who is OB/GYN and experienced the (superior) healthcare system in Europe; Elemy’s founder was diagnosed as a child with ADHD. This gives the entrepreneur an unfair advantage in building a product to solve this group’s pain-points—and often, the opportunity is much larger than anyone thought.
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