August 9, 2021

VCs are financing an economy of servants

VC money is pouring into 'servant economy' companies — that should stop.

Paolo Feser

I live in a house in central London with four flats. Most nights the bell rings (often mistakenly ours, as the letters are rubbed off the sign) and the sound of a bulky backpack rubbing against the wall betrays our visitor — food delivery is here. While Deliveroo is still the most common ‘service provider’ in our house, I’ve also seen the recently launched immediate-delivery companies Getir and Gorillas. 

These 10-minute grocery startups are the newest wave of VC bets on human laziness, after taxi-apps — Uber, Lyft, Via — and meal delivery — Grubhub and DoorDash in the US, Deliveroo and Just Eat in Europe. VCs have ploughed hundreds of millions of euros into these companies in 2021 alone. 

But this is more than just the most recent unicorn-bubble fad. It's bringing us one step closer to living in a servant economy. The world’s most powerful VC investors are funding an economy where technology allows a ‘ruling class’ to command an ‘underclass’ of servants with the swipe of an app.


The new luxury: having people bring things to you

Already in 2019, one in 10 Brits was employed in the gig economy, up from one in 20 only in 2016. The number of those in these precarious jobs will only have risen dramatically during Covid-19 as other jobs — in hospitality and events, for instance — were temporarily lost. That means ‘entrepreneur-drivers’ for Uber and Deliveroo, riders for Getir and Gorillas (even though we are slowly moving away from the gig workers, at least in the UK). They help with assembling IKEA furniture, cleaning or completing other maintenance tasks in our homes. All of these jobs are part of the ‘servant economy’.

While for some — people self-isolating, people with mobility issues — these helpers provide crucial support to procure goods, these workers mostly cook, repair, shop and deliver for people who don’t fall into these categories. On the contrary, the customers of these on-demand services are more likely people with (relatively speaking) high discretionary incomes, who are happy to pay other people to do daily tasks for them. The ‘new’ (Covid-driven) luxury is not mobility, but staying put and having others running around you to satisfy your desires. 

The servant economy also reinforces existing racial, socioeconomic and generational divides, often in an algorithmically surveyed and enforced way. 85% of Uber drivers are from Black, Asian or other underrepresented backgrounds (similar statistics can be found for Lyft drivers in the US). In 2018, almost 60% of gig workers in the UK were 18 to 34. We talk about people working in dark stores and dark kitchens, out of sight, out of mind — exactly like the servants who waited on Western aristocracy (and colonialists) in the past. 

One class against another

But what's at stake is not just employing people properly and/or paying them well — what is often called the casualisation of work’. At the core of enabling, financing and founding this servant economy is something much less tangible but substantial: what kind of an economy do you want to produce with your decisions? How far do you want to push the division of labour between (elite) educated high earners and people providing menial services for this class? 

The economy we are currently seeding is one where convenience for some is worth more than community and solidarity for all. It pits one class of unstably employed (gig) work ‘entrepreneurs’ against an often older, surely more established class blessed with safety and security, benefitting from a new choice of servant services. 

It pits one class of unstably employed (gig) work ‘entrepreneurs’ against an often older, surely more established class blessed with safety and security, benefitting from a new choice of servant services.

The financial incentives some of these apps provide are at times hard to resist, especially given the VC money that fuels them. But should it really be cheaper to have a delivery driver fetch a bottle of water for you and get it to you within 10 minutes, rather than going to the corner store yourself? Recent mega-rounds in the immediate-delivery apps — $290m for Gorillas, $550m for Getir or $100m for Zapp, among others — make this possible at least in London, Berlin and Paris, further extending the city/rural divide. 

VC money is fuelling this divide

Interestingly, many of these ‘servant economy’ apps are not unit-economics positive even after years of operations (and far from profitable, as in the case of Uber or Deliveroo). But profitability — ie. building a business that is able to sustain itself long-term — is not necessary for the VC model to work out (in the current climate); unlike the origins of venture capital, focused on seeding sustainable businesses, today’s VCs are about blitzscaling unicorns.

A series of mega-rounds is pushing the startup in the direction of an exit/sale or a public listing, at which point the VC can leave the table — ideally with a sizeable return on investment. The amount of private capital available has also fuelled a crazy market of secondary sales, allowing VCs to get out even more easily. Whether the company survives beyond that point doesn’t matter. Solving a real issue even less so. You just need to find an investor that is willing to buy you out. We should keep that in mind when we think about who to blame and hold responsible.

This makes me ask an even more fundamental question: is the structure and business model of most VC firms today unfit for solving complex problems sustainably and long-term? Do we need a rethink the VC business model more generally? A first starting point could be a strong embrace of ESG principles — if done correctly and beyond a simple tick-box and reporting exercise. Taking into consideration the impact (and unintended consequences) startup investments might have on society — where we shop, how much we move, who we interact with — would at least spur reflections on the dangers of what I call the servant economy. 

In the meantime, we as consumers need to make the conscious choice to avoid supporting the servant economy whenever possible. We can decide against fulfilling the absurd market projections VCs base much of their excitement on. We can choose local and choose community (and at times exercise) over convenience.


Dr. Johannes Lenhard is a research associate and centre coordinator at the Max Planck Cambridge Centre for Ethics, Economy and Social Change. He is writing a book about the ethics of venture capital and is also the coauthor of Better Venture. He tweets at @JFLenhard.