Are venture capital firms funding business models creating a ‘servant economy’?

A General Partner in a London venture capital firm is concerned about the continuing levels of investment in meal delivery and taxi apps.

Manuel Silva Martinez, who is General Partner of Mouro Capital, believes on-demand grocery delivery is the newest wave of ‘human laziness’, after meal delivery apps and taxi apps.

Venture-backed grocery companies have already raised over $10 billion so far in 2021, according to data from Pitchbook, eclipsing the $7 billion raised by such firms last year. However, it can be argued that these jobs are part of the ‘servant economy’ Manuel argues.

He comments further: “One could indeed support the idea that VCs are funding business models that are creating a ‘servant economy’, but that is different from saying that the causes of such servitude are VCs.

“VCs are rational asset managers, and so if servant models are emerging, it’s because there’s significant demand for them – as recent success stories show. 10-minute grocery startups are the newest wave of ‘human laziness’, after meal delivery apps, taxi apps, etc. These demonstrate how people’s day to day activities have been granularized, wrapped into an app and serviced by a new population of workers and other examples can be found in the media and content industry and e-commerce.

“VCs have ploughed hundreds of millions of euros into these companies over the past few years, with the pace not slowing in 2021 alone. In fact, experts at AppJobs say that the gig economy is on course to surge 300% in three years – and the long-lasting effects of the Covid pandemic means this is unlikely to slow down.”

Manuel says that this model of work also creates challenges around labour and employment quality.

He explains: “The ‘servant economy’ model – which goes well beyond the gig economy – creates undeniable challenges across a broad range of issues, from labour and employment quality, through employment stability and mental health, to the environmental issues associated with the consumer desire for convenience.

“But there’s a broader question here: who is to blame for the creation of an economy where technology allows a ‘ruling class’ of price- and convenience-sensitive consumers to command an ‘underclass’ of servants with the swipe of an app or a tap for a “like”? The public sector and regulators should no doubt shoulder some responsibility, as should the companies providing these services, particularly for educating consumers on the impact of their purchasing decisions.

“Of course, we can’t ignore that VCs fund many of these businesses, with their investment and governance rights attached. As such, VCs must consider the broader context in which the businesses they invest in thrive, and consider broader implications alongside any potential profits as they make investments in these kinds of businesses”.