START-UPS FOR SILVER SURFERS / THE FINANCIAL TIMES

Start-ups for silver surfers

The pandemic has forced more over-65s online quickly — and entrepreneurs will be keen to cash in

Gillian Tett


© Shonagh Rae


Last week an 85-year-old friend of mine raised a new investment fund. No surprise there, perhaps: Alan Patricof has spent 50 years working in venture capital and remains determined to stay in the game in a way that reflects New York’s hyperactive work culture.

But his latest initiative has a Covid-19 twist. The Primetime fund, launched with business partner Abby Levy, plans to invest in start-ups that are serving the “elderly”, defined as those aged over 65. (Never mind that this no longer looks so terribly “old” today.)

But both Patricof and Levy think it is an underserved market since, they say, about 10,000 Americans turn 65 each day, the elderly already account for more than half of spending and the west has an ageing demographic. The US Census Bureau calculates that “seniors” account for 15 per cent of the population today, but will reach 22 per cent by 2050. “[This is] a sector that has long been ignored by venture capital money,” says Patricof.

In a wider sense, what makes this move interesting is what it says about the potential behavioural impact of Covid-19. A decade ago, it was widely presumed that old people would head to nursing homes when they became infirm.

As many of these homes have been a hotspot for the pandemic, it is likely that more people will now choose to “age in place” — ie at home — and they will need support. Nursing homes that do continue to operate will have to overhaul services considerably.

Moreover, Covid-19 has forced the elderly to embrace digital technology to an unprecedented degree, whether to shop, seek entertainment or simply see friends and family.

This marks a striking shift from the past: in 2017 according to a Pew Research survey, “many seniors remain relatively divorced from digital life”, since “one-third of adults aged 65 and older say they never use the internet, and 49 per cent say they do not have home broadband services”. But if seniors are rushing into tech, the leaders of the Primetime fund hope this will create demand for new types of elderly services, which entrepreneurs could tap.

It’s too early to say whether this will actually happen on the scale they hope. Nonetheless, the move is thought-provoking — even cheering — for at least two reasons. First, it illustrates that Covid-19 is not just unleashing terrible economic pain (which I fear we have not seen the worst of yet), it is also opening pockets of entrepreneurial activity. While the latter is unlikely to offset the former, it is fascinating to consider how this may reshape the economy and create a spirit of adaptation.

You can already see this in a physical way in New York: when I returned to the city this week, I was startled to see restaurants operating out of hastily erected al fresco spaces in streets. Someone I know who used to work in the hospitality business has hustled his way into a job selling face masks; a former chef has become an expert on staging digital events; a teacher is doing online lessons. Reinvention, though born of necessity, is the theme of the day.

The other reason Patricof’s thesis is thought-provoking relates to productivity — and how digital innovation might now boost this in an economic sense. One of the mysteries that has blighted the economies of the US and Europe since 2000 is that productivity growth has slumped: In the US, it fell from 2-3 per cent in the second half of the 20th century to 0.4 per cent in the five years up to 2016.

This looks strange, given that Silicon Valley has been churning out innovations that are supposed to make our lives more — not less — productive. Some economists blame the decline on the problems that statisticians face in counting all the “free” activity that happens online (such as using a search engine). If these activities were included, real growth might be slightly higher, economists at the Fed have calculated, which would make those productivity statistics look better.
Another factor that might help solve the mystery is a time lag effect: the adoption of tech innovation in recent years has been very uneven among consumers and companies, as the OECD — and Andy Haldane, chief economist at the Bank of England — have pointed out.

That gap between laggards and leaders may have contributed to dragging down the productivity statistics — on top of any inaccuracies in the data. Some (such as ride-sharing companies) have become hyper-productive with tech; others (nursing homes, say) have not. Meanwhile, seniors have badly lagged millennials in this arena, as the Pew data shows.

Until recently, it was hard to imagine this uneven picture changing rapidly. But Covid-19 may now force tech into all manner of unexpected places, from education to food and elderly care, of the sort Primetime is betting on.

It will not be easy to reap all the potential productivity benefits of this unless there is a greater effort to instil digital literacy and infrastructure too; rolling out good broadband to rich and poor populations will be key in this respect.

But if digital innovation is suddenly spreading, productivity may rise too; or at least it could when the shock of the Covid-19 economic slump comes to an end. What this new cadre of “silver surfers” does next could be rather cheering in economic terms — never mind those sharp-eyed venture funds.