Hi folks,
Welcome to our latest newsletter from Connect Ventures.
Our last newsletter on Consumer AI (linked here) got a lot of replies. The calls and emails we received almost all came back with the same question: “I know you’re positive on Consumer, but what are others saying? Particularly, what are unbiased sources saying?”
So, we set to work diligencing this. We pulled together research from Goldman Sachs, Morgan Stanley, PitchBook, a16z, Menlo, Forerunner, Will Ventures, Recursive and USV and distilled the most useful data points from each. Everything is sourced and we've tried to let the numbers do the talking.
This involves very disparate organizations that have used very disparate methods, but they've all converged on similar points.
The Investment Banks
We'll start here because these are the voices that are less contrarian and not biased.
Goldman Sachs Equity Research · May 2026
Decoding the Agentic Economy
Goldman’s team published a major research piece on what they’re calling the “agentic economy” and they dug into consumer vs enterprise growth. In their base case, AI agents drive a 24x increase in global token consumption by 2030. And half of that growth (12x) comes from consumers. Goldman models show daily consumer LLM queries growing at about a 40% CAGR to 11B AI queries per day by 2030 with the adoption of agents handling search, shopping, travel, email, and productivity tasks.
The part we found most compelling to LPs: Goldman explains this is both a volume story and a margin story. LLM token prices have stabilized while underlying compute costs keep falling at 60–70% per year. That spread is where the profit lives. They think gross margin inflection for the major AI providers happens in the next 3–12 months. When Goldman equity research says "positive margin inflection," the market tends to listen.
Morgan Stanley Equity Research · November 2025
Agentic Shoppers Are Coming… Who Could Win or Lose?
Morgan Stanley went deep on one specific consumer use case, Agentic Commerce, (which is perhaps the sub-sector Connect Ventures is doing most work on atm, so please email us about anyone you like in the space). Their base case is ~$50B in incremental US e-commerce spend unlocked by agents by 2030. Bull case: $115B. They benchmark the adoption curve against web commerce in the 1990s and mobile in the 2010s, and find the trajectory comparable.
Their framing on what this means for existing players is also worth noting: the traditional e-commerce funnel (search, social, direct traffic) gets disrupted simultaneously. The advertising model underpinning most e-commerce platforms' earnings faces real structural pressure as third-party agents route purchases around it. Amazon and Walmart, with deep fulfilment infrastructure and consumer data, are best positioned. A lot of the middle gets squeezed.
At Connect Ventures, we believe Agentic Shopping is one of the largest areas of AI investment opportunity, from the rails to the apps. Just as Amazon won the eCommerce race, despite the fact that Wal Mart had the distribution, we believe a new company will win the Agentic Shopping Race and it’s a $1 trillion+ prize to be won.
Source: www.morganstanley.com/insights
PitchBook Institutional Research · March 16, 2026
Analyst Note: VC Investment in Consumer AI
PitchBook is probably the most dispassionate source in the bunch. They're in the business of counting deals, not selling a thesis. Their numbers: venture investment into B2C AI hit $89B across 668 deals in 2025, up 72.5% year-on-year. Strip out the mega-rounds from OpenAI, xAI, Anthropic, and Waymo, and the ex-outlier figure is still a healthy $17.5B, up 3.6% on a deal-count-adjusted basis.
Digging in, Corporate VCs, who tend to be the canary in the coal mine for where strategic acquirers see long-term value, participated in 82.8% of Consumer AI deal value in 2025, the highest share since 2016. On mobile, AI-native app downloads doubled to 3.8B between 2024 and 2025; in-app purchases tripled to $5.1B; time spent in apps increased 3.6x.
And the monetization gap PitchBook flags is really the crux of the opportunity: only around 5% of OpenAI's 800M+ weekly users pay for anything. Aggregate AI mobile app conversion sits at 2.8%. When those numbers even partially normalize towards streaming or social benchmarks, the revenue story changes dramatically.
Source: pitchbook.com/news/reports
The VCs
We appreciate that VCs may be biased but the sources below are trying hard by using real data, primary research, or fund mandates that put money behind the thesis.
a16z · March 9, 2026
The Top 100 Gen AI Consumer Apps, 6th Edition
a16z publish this ranking every six months, and this edition crossed an important threshold: for the first time, they've included legacy apps where AI has become core to the product experience: CapCut, Canva, Notion, Grammarly. The AI/non-AI distinction has effectively collapsed. Everything consumer is becoming an AI product.
The headline numbers are ChatGPT now reaches 900M weekly active users, over 10% of the global population, every week. Claude is growing paid subscribers at 200%+ year-on-year; Gemini at 258%. Notion's paid AI attach rate went from 20% to over 50% in a single year; AI now accounts for roughly half of their ARR.
Source: a16z.com/100-gen-ai-apps-6
Menlo Ventures · June 26, 2025 · Survey of 5,000+ US adults
2025: The State of Consumer AI
Menlo did primary research and surveyed over 5,000 US adults to find 61% of American adults have used AI in the past six months. Nearly one in five use it every day. Scaling that globally, roughly 1.7-1.8B people have used AI tools, with 500–600M engaging daily.
The demographic breakdown challenges the usual assumptions. Millennials, not Gen Z, are the most intense daily users. 45% of Baby Boomers have used AI in the past six months. Parents with kids under 18 are 1.9× more likely to use AI daily than non-parents. Consumer AI is mainstream.
And then there's the monetization gap, which Menlo quantifies more starkly than anyone else: 1.8B users × $20/month = a theoretical $432B annual market. Current revenue: $12B. That's a 3% conversion rate. Menlo calls it "one of the largest and fastest-emerging monetization gaps in recent consumer tech history." We'd call it an opportunity.
Source: menlovc.com/perspective
Forerunner Ventures · June 18, 2024 · 7,800+ companies analyzed
What the Data Says about Consumer vs. Enterprise
Forerunner did the most rigorous historical work on the enterprise-vs.-consumer returns debate that we've seen, analysing over 12,000 tech companies that raised a Series B since 2012, of which 7,800 were classified and studied. The findings should matter to anyone who's defaulted to enterprise because it felt "safer."
Consumer startups are as likely to go public as enterprise startups. They're as likely to achieve 10×+ multiples at IPO and they're more likely to surpass the Rule of 40. Despite ‘The Rule of 40’ typically being considered an enterprise benchmark, the data says consumer beats it more often.
Their conclusion: "The consumer startups that muscle their way to a Series B go on to perform just as well — if not better — than their enterprise counterparts." The enterprise-first bias in LP allocations is a legacy of a pre-AI world. The data doesn't support it.
Will Ventures · January 20, 2026
The Rise of Agentic Commerce
Will Ventures makes a structural argument that the attention economy has reached its ceiling. After two decades of infinite scrolls, notification spam, and ads-as-business-model, consumers are aware of how these products work and increasingly willing to disengage. They believe the next paradigm is outcomes-based.
Agents are the mechanism. Unlike ad-supported platforms, agents only succeed if they produce good outcomes for the user. That structural alignment is a genuine moat — not a feature, a business model. Will focuses particularly on travel and shopping as the first major disruption zones: frequent decisions, real money on the line, systems that are confusing by design. Vertical agents with real integrations (inventory, payment rails, loyalty accounts) will outperform general LLMs in these categories because winning requires connections.
Source: willventures.substack.com
Recursive Ventures · May 14, 2025
Consumer AI: The Next Frontier for Venture Capital
We included this one mainly because of who said it. Itamar Novick spent a decade as a B2B/SaaS-focused investor who was historically skeptical of consumer and then publicly announced a $1M Consumer AI program and a thesis pivot. When a long-time enterprise investor changes their mind and puts capital behind it, it's worth reading why.
His argument is that AI has rewritten the moat equation. For the past decade, consumer incumbents were protected by network effects, data advantages, and massive distribution budgets. AI lets startups build experiences that are 10× better without needing billions to compete. Natural language removes the distribution friction that previously required massive user acquisition spend. It's the same dynamic that made mobile such a fertile period for consumer category creation, and the consumer vertical is always where those shifts are felt first.
Source: www.itamarnovick.com
Union Square Ventures
I will leave you with this Podcast from my old Partner, Mike Mignano, where he and Harry Stebbings do a terrific job discussing the why now for Consumer and Prosumer AI: spotify.com/episode
The Conclusion
The Consumer AI thesis isn't a contrarian VC position anymore. Goldman Sachs, Morgan Stanley, PitchBook, and five experienced venture firms, using different data, different methodologies, and different incentives, are all pointing in the same direction.
The monetization gap and the adoption data are both real. The historical returns data on consumer startups (thanks, Forerunner) directly contradicts the received wisdom about enterprise being the "safer" bet. And the structural shift from attention-based to outcome-based commerce is only just beginning.
We still believe the single most underweighted allocation in most LP portfolios is dedicated Consumer AI exposure. And we're increasingly not alone in saying it.
Top 20 Midas Investor Jeremy Liew on the 4 Things to Look for in a Consumer Deal
This edition, we interview our Connect Ventures advisor, my old Lightspeed partner, my greatest mentor and the Godfather (well, my daughter Sienna’s godfather), the terrific Jeremy Liew.
Q: You were a great mentor and partner to me at Lightspeed (still are) and always have great words of wisdom. Let’s start right there. What do you know now about investing that you wish you knew 20 years ago?
I was GM of Netscape before I started at Lightspeed, and I think my experience as an operator incorrectly colored my view on what investments to make early on. As an operator, you play the hand you're dealt, so you have to figure out how to make the best of the resources and challenges that you are given. As an investor, you don't have to play any hand, so you can wait and wait and wait until you find the perfect hand to play.
I was too eager to invest early in my career, too willing to overlook potential issues that I thought could be addressed. It's easy to tell bad from good. It's much harder to tell good from great, and to have the patience and judgment to wait for great.
Q: Was there an investment that changed how you think about venture?
It was probably investing in bitcoin in 2013. Typically you have at least some illusion of influence as a lead investor if you take a board seat and have a good relationship with the founders.
When you invest in crypto, there isn't even the illusion of influence. You're very clearly along for the ride. But even as a lead investor, you don't have that much influence. A board member might make a 30% difference, whether positive or negative. A management team, maybe a 3x difference. The founders, maybe a 30x difference. Now obviously +30% is a lot better than 0%, let alone the -30% that some board members might contribute, but it's all swamped by the founders and the management team.
VCs are in the picking business, not the poking business, and bitcoin made that even more clear.
Q: What's one thing the best investors understand that the rest of the market still misses?
We spend a lot of time thinking about the investment. What's the risk/reward ratio, is this the right round, have we done all of our diligence, is this the right price. We spend a lot less time thinking about when to distribute stock in our winners. And that can have a massive impact on overall fund returns. Catching "the last double", or missing a big drop in value by distributing at the right time never gets the same amount of time and attention as the initial investment.
Q: You’re an investor in Connect Ventures (thank you). What made you most excited about Connect and what gives us the ability to win the most competitive deals?
Consumer tech is as much a part of pop culture today as music or movies or dance. People spend more time on their phones than watching TV, streaming video and listening to music combined. Yet most VCs are looking at new investments purely through a technical lens. They aren't thinking about the social, societal and cultural landscape in which new behaviors take hold and new companies get launched. Connect Ventures is very differentiated in that way.
Q: Starting a venture firm today, what do we need to do differently? What does it take to build a top-decile venture firm?
Ultimately there are two ways to make extraordinary returns in venture: see what others don't or win competitive deals. You have to be great at one or the other, ideally both. These take somewhat different skills, and the people who can bring both skillsets to the table are rare and very advantaged.
Q: Consumer used to be 1 in 3 VC dollars and now it’s 1 in 16. Give us your thoughts on whether Consumer is as hard as everyone says and how you’d be positioned now?
I think it's a fair argument to ask how many pure-play US consumer companies formed in the last 10-12 years have become decacorns. Not many. Chime, OpenAI, although it didn't look like a consumer company at launch, that's about it. You get Revolut and Rappi if you go international outside of China, and then there are quite a few more in China. But if you were looking back, you'd be forgiven for believing that the age of new consumer startups was over.
But that is because new companies get formed out of new behavior changes. And the last one was the shift to mobile apps which started in 2008. That launched that wave of consumer startups that lasted maybe 6-8 years including Instagram, WhatsApp, Uber, Airbnb, Snapchat, Shopify, and so many more. After that the winners emerged, and network effects made it harder for new startups to break through. Then we had a couple of false starts. AR/VR never really took off for example.
We're in the midst of a new behavior change driven by generative AI, and we're seeing lots of new consumer behavior emerge. As a result I think we're seeing a new wave of consumer/prosumer companies emerging right now and will continue to for quite a while.
Q: Looking back at the last decade of consumer, what separated the iconic companies from the ones that looked just as promising?
I don't think it is easy to see this at the beginning, it's only possible to see at the end. Sometimes the difference between a good company and an iconic one is driven by one product call, or one lucky break. You can't only invest in the great companies, or else venture would be a lot easier! But if you have a portfolio of good companies and you're exposing yourself to enough luck, enough "upside volatility", some of them will become iconic.
Q: You say history doesn’t repeat itself but it rhymes. What's a pattern in Consumer you've seen repeat across investing cycle?
People love self-expression. They want to show other people what is special to them. Back in the 90s that meant putting stickers and pictures cut out of magazines on your locker or your school binder. When Myspace and Facebook first showed up it was about decorating your profile page or your wall. Then it became about posting selfies on Instagram, or sharing memes in Discord or on WhatsApp. Now we're seeing people using GenAI to create pictures, videos and music to share with their friends or more broadly. Ultimately, these are all forms of self expression that show off the version of you that you want other people to see.
Q: Where do you think Consumer AI creates the biggest opportunities?
Enterprise investing is about efficiency. Consumer investing is often about entertainment. Some view this through the lens of the 7 deadly sins, others through lenses like self expression, belonging/popularity etc, but ultimately, the question is, are you keeping me entertained?
Q: What's one question you ask founders to tell whether they're exceptional?
There are four things that I look for in a consumer investment. Can it become part of pop culture? Is it creating new habits? Is there a scalable, repeatable way to grow? And finally, does the founder have a unique insight that explains the first three questions. It has to be both unique (in that it's not widely known or understood by others) and an insight (that it is a true glimpse into what's going on, maybe informed by user psychology or some behavioral shift driven externally). Any questions that can elicit that are what I'm trying to ask.
Portfolio News
Sekai is the latest addition to the Connect Ventures portfolio. We co-lead the company's $20M Series A alongside Khosla Ventures. Sekai is turning software creation into a form of creative expression, enabling anyone to build and share AI-powered mini apps from a simple text prompt. The TikTok-style interface makes app creation feel playful, social, and instantly accessible.
With users regularly spending more than an hour a day on the platform, Sekai has already inspired the kind of product obsession we look for at Connect. As Nicole put it, "The future of joy is creation," and we believe Sekai is building a platform that invites millions of people to consume and create.
Nicole sits on the board. We’re turning our attention now to all the ways we and the CAA ecosystem can help Sekai fly. For starters, we encourage you to download Sekai and experience for yourself why everyone is obsessed.
TMRW Sports is the majority owner and operator of the TGL with the PGA and the WTGL with the LPGA. The WTGL launch is just around the corner, scheduled for winter 2026-27 at the SoFi Center in Florida and has gained significant momentum since our last newsletter.
On the player side, WTGL's current roster includes 14 committed players, including five of the current top 11 players in the world and represents a combined 95 LPGA Tour victories. Players include Jeeno Thitikul, Lydia Ko, Brooke Henderson, Charley Hull, Lexi Thompson, and Michelle Wie West, with more players to be added ahead of the launch of the season.
The WTGL also recently announced Motor City Golf Club, led by principals Michael Hamp, Peter Hamp and Kevin Kelleher, alongside Rob Walton, owner of the Denver Broncos, will be the fourth team in the new league. Previously announced team ownership groups included Arthur Blank, owner of the Atlanta Flacons, Steve Cohen, owner of the New York Mets, and Alexis Ohanian, owner of LOVB Los Angeles and Los Angeles Golf Club.
Moises is the creative suite for musicians to practice, perform, create, and collaborate. Moises and Fender Studio have launched a first-of-its-kind integration inside Fender Studio Pro 8.1, bringing stem separation, stem generation, and voice transformation directly into the recording workflow.
The integration gives Fender Studio Pro users access to Moises tools directly inside their session. Without leaving the DAW, creators can isolate individual parts of a song, generate new musical ideas from one of their own stems, and reshape vocals using voice models built with real artists who are paid royalties for their use.
The Greats is a newsletter of thought pieces, portfolio company updates and interviews of the very best in their business. You were added to this newsletter as someone we deeply respect from our time investing at Lightspeed and CAA. If you’d like to unsubscribe, please do so below. If you know others who would like to learn about the future of Consumer, please forward it and they can subscribe here.
