At Jefferies’ 2023 Private Internet Conference, Sonya Brown, General Partner at Norwest, spoke with Cameron Lester about evolving consumer trends, technology’s impact on e-commerce, and more. Brown, who co-leads the firm’s growth equity team, brings decades of investing experience across various sectors, including consumer products, internet and e-commerce, and retail.
The Current Landscape & Advice for Founders
Brown’s reflections on the 1999 dot-com bubble offer cautious optimism for the future, pointing to historical patterns as a guide for the months to come. “Things got very frothy when that bubble burst,” she said. “Then, there was a slow build, and eventually a very long bull market. I think things will continue to play out over a cycle.”
In the face of shifting markets, Brown’s advice to founders and management teams is clear: “Focus on profitability. Be efficient with capital. Find ways to grow with fewer investment dollars.”
Brown emphasized the importance of capital efficiency, encouraging founders to “think outside the box” with new technologies. She cited innovations in artificial intelligence as an opportunity to scale and achieve profitability efficiently, without dramatically increasing headcount.
The Market: Lessons from the Past & Strategies for the Future
Brown expressed excitement about investment opportunities in the current climate. Throughout her career, depressed periods created opportunities to invest in promising business models at low valuations.
“A lot of great companies are formed in environments like today’s,” she stated. “Investors often have more success in depressed periods than at the top of the bubble. We’re exercising cautious but excited and open for business. Taking a longer view in moments like this is vital.”
Consumer Behavior & Emerging Trends
Discussing consumer trends, Brown acknowledged mixed signals: high inflation and interest rates juxtaposed with strong spending and a robust job market. Consumers may still be feeling the pain of a COVID economy, but the more enduring change may be shifts in consumer preferences. U.S. consumers are spending more on experiences than products – a trend fueled by demographic and geographic changes during the pandemic.
New research shows that over 2 million people moved from America’s largest cities to suburbs between 2020 and 2022. Major metro areas like New York, San Francisco, and Chicago have all seen their populations decline.
Evolving consumer preferences spurred a corresponding shift in consumer acquisition strategies. Brown remarked on the role of social media – and TikTok, especially – as a consumer acquisition tool.
“43 percent of Gen Z consumers are going first to TikTok to search for a product,” Brown shared, citing research from Jungle Scout. She pointed to her own daughter’s use of the platform – rather than Google, Amazon, or Sephora – to source products like makeup.
Combining Content and Commerce
Brown also recognized a growing convergence of content and commerce, especially in the healthcare space. The rise of health and wellness content post-COVID offers an exciting investment opportunity.
A McKinsey study from 2022 supports Brown’s observation, estimating that spending on wellness products and services now exceeds $450 billion in the US. The market has grown by more than 5 percent annually since COVID.
Diversity, Equity, and Inclusion: Proactivity Matters
Finally, the discussion turned to diversity, equity, and inclusion, one of the key focus areas Norwest has identified to focus on internally and with its portfolio companies. Brown highlighted the firm's long-standing focus on hiring diverse talent and investing in social missions like sustainability.
“We encourage the same practices in our portfolio companies,” Brown said. “Supporting minorities and underrepresented groups in becoming successful founders, executives, and investors is tremendously important.”
Sonya Brown's perspective offers a valuable mix of optimism, caution, and strategic insight in a complex and changing market. By focusing on profitability, emerging technology, and shifts in consumer behavior, she sees opportunities for both investors and founders to find success across sectors of the economy.