A New Generation of Parents Are Dropping Serious Dough

The Signal: This year has already seen $55M+ in VC raised in the children's products and services space. Startups are looking to a new generation of parents with a high willingness to spend.

*Excludes edtech funding rounds.

Close to 100% of babies born are now to millennial and Gen Z parents. They are more educated, tech savvy, and constantly digitally connected. They are also demanding better child-centered products and services.

In May we wrote about the recent rise in demand for child care; this is just the tip of the iceberg when it comes to white space in the children's industry.

The opportunities: New parents are particularly focused on providing their offspring with the best. They're dropping dough on high-end offerings, from organic food to luxury products.

Simplification, gender neutrality, and personalization will also be key trends in the children's space going forward. Specific ideas include:

Rental Subscription Services: Kids' needs change rapidly, creating clutter, waste, and high expenses as parents try to keep up.

The average American parent will spend $6.5K on toys per child before they reach their teens. At any given age, each child in the US has ~100 toys.

Enter the rental subscription service: Get what you need when you need it, and only pay for that period of use.

We recently covered the electronics rental market which, boosted by COVID-19, shows no signs of slowing. Goods rentals in general are rising in popularity, and the children's space is a perfect fit.

Entrepreneurs could curate high-quality toy rentals, work with existing brands to develop D2C toy rentals, or branch out into baby electronics and wearables (the Owlet smart sock, $539, is very popular; and used for a maximum of 18 months).

Other opportunities for rental subscription services:

1. Feeding and food prep goods: Baby-food makers, high chairs, and food storage solutions (that won't gather dust after infants outgrow them).

2. Transportation and furniture: Rental options for durable, high-end strollers (no, you are not the only one wondering when strollers got so expensive) and other limited-use items like cribs, dressers, and changing tables.

3. Develop an end-to-end app: Customers enter their child's age, and a list of appropriate rental products comes up. Leverage the personalization trend by giving parents a questionnaire that returns personal recommendations for their little angel.

4. As gamification takes off, AR/VR rental options will be met with high demand. PlayShifu just raised a cool $17M for expansion of their STEM-focused toys that gamify early learning skills.

Screen time reduction: Kids are becoming more digitally connected, and balancing tech vs. nature will be a big market.

Google searches for "screen time parental control" have been rising. Parents will look for ways to encourage time outside for their children. Forest school is already a thing, and is trending with 33.1K searches per month, according to Keywords Everywhere.

Source: Google Trends

Forest school site Run Wild My Child (self-explanatory) has 60K+ site visits/month, Similarweb shows.

In the US, 22% of children (and 32% of their parents) feel like they do not have enough time to play. Entrepreneurs could offer age-related classes, courses, afternoons, weekends, etc., out in nature. Forest birthday parties are another good niche.

Audio offerings for children should also be on your radar: Storypod raised $1.6M pre-seed last year for its no-screen entertainment option for kids. Entrepreneurs could develop high-quality audio options (a paid podcast platform for children might be the next big opportunity).

Organic Child Nutrition: Organic baby food is expected to grow at a ~12% CAGR over the next five years.

Demand is soaring. Almost half of American parents report that buying organic food for their children makes them "feel like better parents"; 84%+ of families think organic food for both babies and toddlers is "very" to "extremely" important.

Current US leader Little Spoon offers organic baby and toddler meals, delivered. They have 300K+ site visits per month, according to Similarweb.

Source: Google Trends

You could leverage new science and nutrition trends like local produce, gut-health support, or plant-based food.

Personalization will take off here too, like meal plans and supplements designed specifically for fussy eaters and allergy sufferers.

Trends is a daily business and tech newsletter read by over 1M young professionals each morning. Subscribe to Trends by The Hustle for more.