Do venture capital firms finance business models that create a “service economy”?

A general partner of a London-based venture capital firm is concerned about continued levels of investment in food delivery and taxi applications.

Manuel Silva Martinez, who is the general partner of Mouro Capital, believes that on-demand grocery delivery is the new wave of “human laziness”, after meal delivery apps and taxi apps.

Corporate-backed grocery businesses have already raised more than $ 10 billion so far in 2021, according to Pitchbook data, eclipsing the $ 7 billion raised by these companies last year. However, it can be argued that these jobs are part of the “service economy”, according to Manuel.

He further comments: “One could indeed argue that VCs finance business models that create a ‘bondage economy’, but this is different from saying that the causes of such bondage are VCs.

“VCs are rational asset managers, and so if servant models emerge, it is because there is a significant demand for them, as recent success stories show. 10 Minute grocery startups are the new wave of “human laziness”, after meal delivery apps, taxi apps and the like. These show how people’s daily activities have been granulated, integrated into an app and served by a new population of workers and other examples can be found in the media and content industry and in e-commerce.

“Venture capital firms have invested hundreds of millions of dollars in these companies over the past few years, with the pace not slowing down in 2021 alone. In fact, AppJobs experts say the odd-job economy is about to jump 300% in three years – and the long-term effects of the Covid pandemic mean it is unlikely to slow down. . “

Manuel says that this working model also creates challenges regarding the quality of work and employment.

He explains: “The ‘service economy’ model – which goes far beyond the odd-job economy – creates undeniable challenges in a wide range of issues, in quality of work and in employment, from job stability and mental health, to environmental issues associated with the consumer. desire for convenience.

“But there is a larger question here: who is to blame for creating an economy where technology allows a ‘ruling class’ of price and convenience-sensitive consumers to command a ‘subclass’ of servants with the swipe of an application or a press for a “like”? The public sector and regulators should probably take some responsibility, as should the companies providing these services, especially in educating consumers about the impact of their purchasing decisions.

“Of course, we cannot ignore that VCs fund many of these companies, with their investment and governance rights attached. As such, VCs must take into account the larger context in which the companies in which they invest thrive, and consider the wider implications alongside the potential profits when investing in these types of companies ”.

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