Evolving Business Models in the Tech Era

This chapter examines the transformation of business models and defensibility in the context of technological advancements over the past 15 years. It highlights the shift from tangible to intangible assets as key components for sustainable growth, alongside the challenges faced by consumer-focused companies amid changing investor sentiments. The discussion also covers customer retention strategies, the complexities of measuring it in consumer businesses, and the importance of enhancing user experience to manage churn effectively.

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In this episode, CJ sits down with John Connolly, Managing Director at Spectrum Equity, to explore the evolution of consumer investing. They discuss how investor sentiment toward consumer companies has shifted over the past 15 years and why traditional SaaS metrics like net dollar retention (NDR) don’t always apply in this space. John explains what signals indicate a strong consumer business, whether brand or product wins in the long run, and how consumer companies have adapted their monetization strategies over the last decade. Plus, John shares the story behind Spectrum Equity’s investment in Teachers Pay Teachers and the craziest thing he’s ever done to land a deal.

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@cjgustafson222 (CJ)

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TIMESTAMPS:

(00:00) Preview and Intro

(02:32) Sponsor – Subscript | Rippling Spend | Vanta

(06:04) The Evolution of Investing and Defensibility

(08:50) Cooling Investor Appetite for Consumer Businesses

(10:13) Efficiency Metrics for Consumer Businesses

(12:24) How To Navigate Retention and Churn

(14:12) Sponsor – Tropic | NetSuite | Planful

(17:47) When Churn Is Necessary