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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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
(19:15) Increasing TAM in Consumer Businesses
(21:13) The Most Important Metric: Funnel Health
(24:08) Celebrity Partnerships as a Competitive Mode
(25:05) Why Brand Is Even More Important in B2C Than B2B
(26:25) The Strongest Brands John Has Invested In
(28:23) Changes in How Companies Monetize Over the Past Decade
(29:52) Using the Supply Side To Bring You Demand
(34:02) How COVID-19 Wreaked Havoc on Consumer Trends
(38:11) Evaluating Consumer Businesses
(39:04) The Craziest Thing John Has Done To Win a Deal
(40:56) How To Pitch to Bootstrapped Founders
(43:00) The Revolutionary Teachers Pay Teachers Marketplace
(46:18) Wrap
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