The Upcoming 2023 Churn Tsunami of Companies Serving as “Capabilities”
In the age of abundance of capital, there has been an onslaught of waste in the last couple of years. Founders with good intent started to build standalone tools with more capabilities and less platform or vision to become a platform. This is separate from a company that begins as a feature, as all companies start this way. More on that later.
The problem with building companies around capabilities is that, generally, their ACV is very small to entice rapid sale velocity. As a result, over time, these products lose their novelty, and the value prop usually does not land throughout the entire organization. I have seen these companies start getting rapid momentum, but they typically generate significant double-digit churn in short order.
After a 1-churn cycle, you can lose about 15%+ of your revenue and logos. I do not care what anyone tells you about what is “standard.” That much churn is a financial nightmare as you need to grow 115%+ now to keep momentum. Furthermore, if your acquisition cost increases, which it always does, you can die in the water after two churn cycles.
For this reason, DWP Capital is refining its thesis to include these company attributes as a central investment pillar.
Vertical Specific + Workflow Embedded + Demonstrable ROI
After workshopping this company profile, we developed a roadmap of ideal company profiles for Investment.
Now that we have religion on our targets its off to sourcing we go!