Content Published Last Week

1. ENTERRPISE: Constellation Software: 5 Key Operational Metrics

2. Spotify Podcasting: a Show Host's Perspective

3. Dino Polska: Evolution of the Polish Competitive Landscape

4. Snowflake: Pace Of Innovation & Next Growth Vectors

5. Trupanion: Maine Regulation

6. Diploma PLC: Windy City Wire

7. IP Podcast:Constellation Software: Altera Acquisition Analysis

Constellation Software: 5 Key Operational Metrics

This analysis is the culmination of 6 months of interviewing Former CSI executives to understand the operational metrics CSI uses to operate its VMS companies post-acquisition.

CSI uses 5 specific KPI’s to optimize each cost line item in the opco P&L. It splits every dollar of cost into 5 buckets: Professional Services (PS), Maintenance, Sales, R&D, and G&A. This standardizes the P&L of every opco to better compare performance across the group:

CSI own 900+ software businesses which gives them an amazing bank of data to work out what good or rubbish looks like and can share best practices. They know who is the best at professional services so they can teach the rest of the group. Such a spread allows them to have core KPIs for software businesses in all sectors. They can look through the same lens to measure the efficiencies of professional services and support teams, and cost of R&D, G&A and sales and marketing. They can tag every individual and pound spent or made into those five buckets, and know professional services revenue should be this ratio of professional services spend. That's what it should be, which means they can immediately spot weak spots in target businesses. - Former M&A Executive at CSI

Each KPI has been refined over 1000+ transactions and arguably defines best-in-class economics for slow growing VMS assets. This analysis shares the details and rationale of each KPI. Each metric has been verified and checked across multiple Former CSI executives.

Spotify Podcasting: a Show Host's Perspective

Over the last few years, Spotify has spent over $900m acquiring Gimlet, Anchor, Megaphone, and Podsights in the podcasting ecosystem. This excludes the acquisition of first-party content shows like Joe Rogan or The Ringer. Including 1P content, the total sum is likely over $1.5bn.

During the 2022 investor day, SPOT reported it generated ~$200m in podcast ad revenue and a $103m gross profit loss. Although it’s hard to measure the net paid subs added from shows such as JRE, SPOT has paid a hefty sum to enter the space relative to the ad dollars generated.

We’re working on a project internally to understand more about SPOT’s podcast strategy and opportunity.

This interview is in the first in a series and explores SPOT podcasting from a Podcast Show Host perspective. The executive was the host of a show acquired by Gimlet, which was later acquired by SPOT. Years later, this host acquired the show back from SPOT as the economics weren’t working.

We interview the show host on this history and explore how and why SPOT struggled to monetise 1P podcast content.

The exclusivity didn't work because if you reduce an audience by 80%, and then inform the advertisers, you're essentially reducing the ad revenue by the same percentage. The economics of these shows no longer make sense. When you look at the profit and loss statement, you see that we can't accurately determine how many new subscribers these shows are bringing to Spotify's music platform. At best, the impact is marginal. The ad revenue from these shows simply doesn't make economic sense, leading to their cancellation. - Podcast Show Host and Former Gimlet / Spotify Executive

Dino Polska: Evolution of the Polish Competitive Landscape

As part of our ongoing coverage on Dino Polska, we interviewed the Former CEO of Biedronka, a large competitor of Dino. This interview walks through what it was like to compete with Dino, how Biedronka can compete with its offering, and the long-run opportunity for both companies.

In short, there is potentially more than enough room for Dino to continue to win share from local convenience stores without Biedronka becoming a major risk:

Dino has a 5% market share, Biedronka has 30%. That still leaves 65% of the market. They're not the only two players. We have Lidl, Aldi, Eurocash with 1,000 shops that will have to exit sooner or later, 2,500 supermarkets; you have Delikatesy Centrum from Eurocash, Intermarché, and Aldi. There are still many players that aren't winning. The market isn't a duopoly. - Former CEO of Biedronka

Snowflake: Pace Of Innovation & Next Growth Vectors

Frank Slootman, SNOW’s CEO, is known for running a fast-paced organization. In this interview, a former Engineering Director shares insight into the culture, leadership changes and how its positioned for the next leg of growth:

The culture we fostered pre-IPO was one of urgency and speed. We had clear objectives and a mantra that we don't walk at Snowflake, we always run at 150 mph. We believed that everything needed to be done today, as if there was no tomorrow. This culture is quite different now. We can't afford to take three to six months to deliver something because the market won't wait. There are agile startups ready to step in and the space is evolving rapidly. There will be consolidation in the future, but competition won't wait for us - Former Engineering Director, SNOW

Trupanion: Maine Regulation

The abolition of the waiting period in Maine may set a precedent for other US states. This may result in an increase in the number of claims for pet insurers which, if not compensated by price hikes, may end up hurting their profitability. This interview with a Director at Healthy Paws Insurance explores the potential impact of regulation in detail.

The Maine regulations, including the removal of the waiting period and the impact of regulations on insurance, came into effect on January 1, 2023. This affected many people because waiting periods were no longer allowed. They were only removed for accidents that are considered acute. Previously, acute related accidents or illnesses were preexisting, but now they must be covered. For example, when you sign a contract, say on January 31, you couldn't submit a claim for 15 days, no matter what happened. Even if there was an accident, you couldn't submit a claim due to the waiting period. However, the new law states that there can't be a waiting period for any acute accident-related injuries or illnesses. If you buy the policy now, on July 31, and your dog gets hit by a car tomorrow, it must be covered. - Director at Healthy Paws Insurance

Diploma PLC: Windy City Wire

Over the last 2 months, we’ve been interviewing multiple Former WCW executives to understand more about the business and DPLM’s acquisition. So far, we’ve had quite mixed reviews. We will be writing more on this shortly.

This interview is with a Former Sales VP at WCW and shares insight into what makes the business unique:

The primary reason why other companies don't replicate Windy City's approach is that they don't manufacture the cable themselves. They purchase it from various manufacturers. Windy City, on the other hand, manufactures its own product, allowing it to control its packaging and branding. - Former VP, Sales at WCW

In the interview, we dive further into the product mix, exclusive licenses of certain cables, risks to growth and margins, and the culture set by WCW founder.

Constellation Software: Altera Acquisition Analysis

In this podcast, we review our approach to our analysis on Altera. We discuss the year-1 performance of Altera, CSI's largest acquisition to day, and share our learnings from 6+ hours of interviews with Former Altera / Allscripts executives and CSI M&A execs who worked on the deal. We explore:

- Why Altera's customer churn could be higher than expected

- Challenges meeting meaningful use regulations and new product development on Altera's R&D budget

- Impact on CSI's potential levered and unlevered IRR

- Comparison with Acceo, CSI's first LBO in 2018