I prefer to start my AEC_VC posts with a “why now” trigger. This week, it would make sense to start with the whole $hitshow that FTX has created.
But my fascination last week was all about a favorite US company – Forge – and how they create a new tech-enabled category of employment in the blue-collar trades and crafts.
So how to connect this to how FTX triggered this post ?
How about: FTX lost a lot of money of hard-working folks in the trades and crafts who invested with them.
Those folks who TRULY keep our economy running, and build stuff.
Let’s talk about them, and how the next-generation of blue-collar 2.0 will look.
In the Western markets, inflation has hit hard over the past 18 months. It peaked around 10% in US and Eurozone in 2022 (with a history of moving the goal-posts).
Why is this relevant to blue-collar ? Because inflation, in its most fundamental essence, happens when there is too much demand for too little supply. The more money is being brought into circulation (M1 supply) and being used frequently (velocity), the more money facilitates demand to bid for supply. If we now have stagnating or – worse – shrinking supply, your inflation becomes painful.
And that’s exactly what happened in the Western markets since beginning of COVID.
Regardless of what the Fed would like to make you believe, inflation in the Western markets is here to stay unless we fix supply.
Because demand is going nowhere. Take housing: The US needs 2.3M new homes per year, Germany and UK 400k and 300k respectively. On top come several hundred thousand of thermal renovations across Europe and US that will be required to deal with the energy situation and climate asks.
While demand will stay, supply of craftsmen and installers is shrinking drastically.
Demand rising. Supply shrinking. Inflation here to stay.
Lucky for us, this is where the story begins.
We see insanely talented founders who build the next-gen of blue-collar models to fix supply. Three models in particular create the blue-collar 2.0 space:
In new construction, we observe all 3 models and combinations thereof. While in renovation, robotics are much more tricky due to less controlled environment – a combination of tech-enabled employers and BiaB work very well in reno.
We believe the academy piece to be critical to both models. Classical blue-collar education has steep on-ramps for the new talent pools of lateral hires, migrant talents and GenZ+. In Germany (representative for Europe), a carpenter undergoes 1’200 classroom hours over 3 years and has to take 2 exams to be allowed entry into the trade.
There’s so much wrong with this. Monopolistic authority over the curriculum unfit for 2023, too generalistic education (rather than verticalization and further specialization to allow fast entry into productive life), and training for flexible problem-solving rather than being linked to standardized workflows creates the steep on-ramps and too long training time.
This is where tech-enabled employers and BiaB solve the EdTech element of blue-collar 2.0. Having (1) standardized workflows around a core software/hardware stock and (2) deeper verticalized and specialized job roles that they train (3) in internal academies.
Makes for a very sticky blue-collar 2.0 employment. And low on-ramps.
Can’t wait for these next category leaders in blue-collar 2.0 to be built in Europe.