By: Simran Suri & Hunter Lampson
You can read our full investment thesis here.
The pandemic forever changed consumer behavior and preferences. Shopping shifted from in-person and brick-and-mortar to e-commerce and on-demand. Spending shifted from travel and socializing to home renovations and wellness. For many of us, work shifted from cubicles and conference rooms to our homes. And for 20% of Americans, their careers shifted from W2 to 1099 as they sought out more flexibility and higher pay.
There’s a misconception that the 1099 workforce is exclusive to delivery and rideshare platforms through labor marketplaces like Uber, Lyft, DoorDash and Instacart. The pandemic didn’t just accelerate the on-demand economy — it also wreaked havoc on industries like construction, retail, logistics, education and healthcare. Labor shortages, business uncertainty and mass layoffs pushed both employers and workers towards the flexibility of 1099. Today, 1099 workers aren’t only Instacart shoppers and Uber drivers, but landscapers, ultrasound techs, contractors, substitute teachers and more. Each represents an end consumer that is making their own decisions about schedule, pay and overall career, rather than relying on their employer.
While this independence from employers is largely a positive, it also leaves over 70 million 1099 workers and their dependents without any insurance coverage. In 2022, the average annual cost of healthcare per person in the US hit an all-time high at $13,493 — almost twice as much as other wealthy countries. In 2023, about half of all adults in the US found it difficult to afford healthcare costs and 60% of uninsured adults went without necessary care due to cost. Similarly, 61% of adults in the US are worried they won’t have enough money to support themselves in retirement. As our workforce moves from W2 to 1099, these gaps in coverage will almost certainly have a negative impact on current and future generations.
In order to better understand the impact of this coverage gap on the 1099 workforce, we conducted a comprehensive survey of over five hundred 1099 workers in the US. We found that over 80% are required to source their own benefits. 80% are also willing to pay out of pocket for insurance and benefits, with particularly high demand for health insurance, retirement benefits and life + accidental death and dismemberment insurance. These workers must navigate obtaining insurance and benefits on their own, through the open exchange or through direct-to-consumer insurance companies and brokers. Our survey found that, more often than not, this resulted in high costs, suboptimal coverage and an overall negative experience.
At Maveron, we’re actively looking to meet with teams increasing access to fair, transparent, cost-effective insurance and benefits for 1099 workers through a next-generation union. Unions empower workers in strength through numbers, leading to higher wages, better benefits and safer workplaces. We believe there’s an opportunity to build economies of scale within the 1099 workforce to do the same, starting with health insurance and other forms of protection like workers’ compensation and expanding into additional benefits like retirement savings and workforce development. We also believe there’s an opportunity for technology to amplify the collective voice through data-driven job placement, insurance underwriting and upskilling programs. Workers have been empowered to take charge of how they work, when they work and what they earn with a 1099 classification — that same empowerment should apply to their protections. You can read more about our investment thesis, including our POV on product feature set, pricing and go-to-market strategy, here.
If you’re building a benefits solution for 1099 workers, we would love to meet you. Please reach out to Simran (simran@maveron.com) and Hunter (hunter@maveron.com)!
