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1、September 2023Consumer Subscription SoftwareEnhancing everyday lifeImportant disclosures appear at the end of this reportGP Bullhound Corporate Finance Ltd and GP Bullhound Asset Management Limited are authorisedand regulated by the Financial Conduct Authority GP Bullhound Inc is a member of FINRAGP
2、 Bullhound Luxembourg S.R.L.is regulated by the CSSF in Luxembourg2Consumer Subscription SoftwareGP BULLHOUND INSIGHTSThe view from GP BullhoundConsumer Subscription Software The viewEric Crowley,Partner,AdvisoryIts unprecedented!The app stores are the largest consumer marketplace in history.Entrepr
3、eneurs can produce a product and instantly have it available for five billion people to buy around the globe.”Alec Dafferner,Partner,AdvisoryHaving covered the CSS sector from its infancy,we are excited to see the continued growth of the market as the overall number of CSS players continues to expan
4、d,meeting specific consumer needs and interests.With a meaningful number of CSS leaders reaching significant size and scale,we expect an acceleration in investment and acquisition activity from both strategic and financial investors.”GP Bullhounds CSS Index,the first to track how public CSS companie
5、s are valued,underscores market stabilisation.M&A and private financing remain activeKey CSS insights Main valuation driver for investors is the winner-takes-all dynamic;entrepreneurs focus on content,commerce&community and see gold in churned users for auto-renewalsExpert views from company builder
6、s What CSS leaders,investors and privacy experts have to say about the ecosystem,their business environment,and what they expect for the future CSS metrics to watchEntertainment businesses search for ways to keep momentum,Fitness/Recreation lead in converting to paid users,Prosumer see new gains thr
7、ough AI,and Family/Dating move from outliers to the default option for consumersWhat investors focus on and the key nuances:Enterprise SaaS vs.consumer subscription,and the six key bench markers Getting the fundamentals right:insights taken from our previous reports and still relevant today Past CSS
8、 insightsCurrent CSS ecosystemMarket updateA leading technology advisory and investment firm,providing transaction advisory services and venture capital investmentAbout usDaniel Roberts,Associate,AdvisoryWe are excited to see CSS apps grow and become indispensable to consumers as they navigate their
9、 daily lives.We expect to see these apps become mission critical to consumers similar to how enterprise software has become critical for so many companies.”Table of contents043708451750273Consumer Subscription SoftwareGP BULLHOUND INSIGHTSThe view from GP BullhoundConsumer Subscription Software The
10、viewPer Roman,Managing Partner,Investment ManagementWe are passionate supporters of the CSS ecosystem and have been impressed as entrepreneurs have created tools and solutions for millions of consumers.We are excited to see the ecosystem evolve as it empowers consumers through new use cases of AI an
11、d other technological breakthroughs.”GP Bullhound CSS investmentsINVESTMENT BYFund VINVESTMENT BYFund VINVESTMENT BYFund VINVESTMENT BYFund IVINVESTMENT BYFund IVINVESTMENT BYFund IVINVESTMENT BYFund IVINVESTMENT BYFund IIIINVESTMENT BYFund III4Consumer Subscription SoftwareAbout GP Bullhounds CSS t
12、eam5Consumer Subscription SoftwareAndrea LopezHEAD OF CREATIVE SERVICESMaria LazarevaASSOCIATE,INSIGHTSCONSUMER SUBSCRIPTIONSOFTWAREGP Bullhounds CSS teamGP Bullhounds CSS team leverages decades of collective experience,proprietary intelligence,deep industry relationships,and leading data sources to
13、 identify and communicate what you need to know to stay ahead of thecurve.Our CSS practice is led by our San Francisco-based Partner,Eric Crowley,who has over 11 years of advisory,operating and private equity experience.Eric CrowleyPARTNERMatt StampPARTNERKelemen PappPARTNERDaniel RobertsASSOCIATEBe
14、n PittariDIRECTORAdam SegallASSOCIATEJade WilliamsBUSINESS DEVELOPMENT MANAGEREren YagmurluANALYSTAlex La BrieANALYSTAlec DaffernerPARTNERKyle YuANALYSTInsights and design teamAbout usMetricsEcosystemQ&A withMarket updateKey insightsPast insightsPierce Lewis-Oakes VICE PRESIDENTpierce.lewis-Gerry Ke
15、lliherVICE PRESIDENT6Consumer Subscription SoftwareCONSUMER SUBSCRIPTIONSOFTWAREDeep domain expertise in consumer subscription sectorConsistently serving as a contributor and guide to the CSS ecosystem and entrepreneursFirst investment firm with CSS focusFeatured in TechCrunch,2021“I believe CSS is
16、still in the early stages of its growth perhaps where B2B SaaS was a decade ago.The beauty of the CSS model is the complete alignment between the business and its customers.CSS companies dont have to please advertisers,and they can design purely for their users.”Eric CrowleyPARTNEROur CSS reportsCli
17、ck on the images below to read moreCelebrated news articlesClick on the images below to read moreAbout usMetricsEcosystemQ&A withMarket updateKey insightsPast insights2022202120207Consumer Subscription SoftwareCONSUMER SUBSCRIPTIONSOFTWAREGP Bullhounds recent CSS activityGP Bullhound continues to le
18、ad in the CSS sector in its advisory and investment activities.ACQUIRED BY ACQUIRED BY INVESTMENT BYFund IIIINVESTMENT BYFund IVFund IVINVESTMENT BYINVESTMENT BYFund IIIINVESTMENT BYFund IVACQUIRED BYFund VMusic productionSell SideACQUIRED BY INVESTMENT BYFund VFitness&HealthSell SideCURRENT CLIENTI
19、NVESTMENT BYFund IVINVESTMENT BYFund VTravel subscriptionSell SideCURRENT CLIENTACQUIRED BYINVESTMENT BYINVESTMENT BYOnline Job PortalOnline JobseekerConglomerateACQUIRED BY INVESTMENT BY CSS conglomerateSell SideB2B2C fitnessSell SideNutritionSell SideFamily managementBuy SideOutdoor explorationSel
20、l SideACQUIRED BY ACQUIRED BY INVESTMENT BYCURRENT CLIENTCURRENT CLIENTCURRENT CLIENTCURRENT CLIENTCURRENT CLIENTCURRENT CLIENTCompleted transactions About usMetricsEcosystemQ&A withMarket updateKey insightsPast insights8Consumer Subscription SoftwareMarket update9Consumer Subscription Software46,29
21、1 53,768 68,425 78,129 95,000 100,093 46,192 85,413 79,078 200222023ETGSPGB5196438681,20220212022CONSUMER SUBSCRIPTIONSOFTWAREApp stores are the largest markets in human historySource:1Statista,2Business of Apps,3Apple press release;4Simform,5CapitalIQ 202
22、3 estimates and GP Bullhound Estimate,6Techcrunch,7QuartzOur view Apple and Googles app stores can drive sales for five billion consumers globally The Apple App Store is already larger than 450 of the Fortune 500 by revenue 5m+businesses sell through app stores5.7 millionTotal apps1$87bnFY22 app sto
23、re spend2$109bnIn-app ads(FY22)340Avg.#appsinstalled433%Apple Services contribution to GM$5+150 millionIncrease in subs YoY61 billionTotal subscriptions7GP Bullhound expects increased interest in consolidating applications within app stores,similar to roll ups in the Amazon and Shopify ecosystems.Wh
24、o will be the Berkshire Hathaway of app stores?We have included a list of premier CSS aggregators with a head start in the Investor section.Apple services dwarf well known Fortune 500 companiesTotal Apple services revenue vs.large cap peers5($bn)Total billings and sales facilitated by the App Store3
25、($bn)Total in-app advertising facilitated by the App Store3($bn)About usMetricsEcosystemQ&A withMarket updateKey insightsPast insights10Consumer Subscription SoftwareCONSUMER SUBSCRIPTIONSOFTWAREEpic Games case against Apple ushers in new eraSource:CNN,The Verge,Engadget,TechCrunch,PCMag While Apple
26、 did prevail against Epic in Epic Games,Inc.v.Apple Inc,it has led to some substantial changes to the Apple App Store and Google Play stores Many more plaintiffs have echoed Epics complaints in the subsequent months Pressure remains high on Apple to reduce its commission rate broadly which would be
27、a huge boost for the industryOur view The fallout from the court case has only been positive for developers and consumers with a few changes including:Apple App Store:Apple reduced its subscription fee to 15%for the first$1m in annual revenue from 30%Google Play:Google reduced its fee to 15%on all r
28、evenue for developers if customers keep a subscription for 12 continuous months Alternative payment methods:This was a ruling that Epic won in its case.The court ruled that Apples anti-steering policies,which prevent any app from directing or informing its users to a different storefront outside of
29、Apples iOS to make purchases was not legal.This opened the door for developers to direct users to other payment methods that could circumvent App Store fees These changes have given developers and regulators momentum as cases mount in the courts to try and capture more value for the CSS ecosystemMan
30、y other parties have taken the torch from Epic in the courtsPlaintiffAllegationsSize($m)1,500 UK app developersApples charges to app developers are excessive and only possible due to its monopoly on the distribution of apps onto iPhones and iPads1,000Coalition including:The coalition criticisesthe f
31、act that,for now,the app stores of both Apple and Google charge their clients a 30%fee on any purchases made over their storesUndisclosedDutch FoundationApple has taken advantage of their monopolistic position,forcing the foundation to increase their prices5,500Socit du FigaroApple is being accused
32、of violating US antitrust law by overcharging Figaro to use its app storeUndisclosedAnticompetitive practices,unfair 30%commission on in-app purchases,favouringApples own services over third-party appsUndisclosedAbout usMetricsEcosystemQ&A withMarket updateKey insightsPast insights11Consumer Subscri
33、ption Software020040060080000CONSUMER SUBSCRIPTIONSOFTWAREVR the next consumer platform?Sources:GP Bullhound Insights,Business of Apps,Precedence Research With the release of Apples Vision Pro,AR/VR is finally coming to the iOS ecosystem in a major way While we dont yet know if
34、 VR will be a long-term success,we do know early adopters will be winners in the space Our view Backed by the worlds first spatial operating system,VisionOS,Apples Vision Pro will unlock an incredible opportunity for developers to create a new kind of application that interacts with consumers and th
35、e spaces around themAlgoriddim,a DJ software,has already updated its applications to be able to interact with AR and give DJs the feeling of performing on stageBlack Box VR lets users work out in a gym,but feel as if they are in a video game The opportunity is huge for the AR/VR market as the number
36、 of individuals using these tools is expected to grow to over two billion by 2027iPhone users globally(in million)FoundedLaunched public betaFoundedLaunchedFoundedFoundedFoundedFoundedFoundedLaunchedFoundedFoundedFoundedAbout usMetricsEcosystemQ&A withMarket updateKey insightsPast insights$38$48$60$
37、75$94$118$148$186$235$296$37320222023202420252026202720282029203020312032Augmented reality and virtual reality market size,2022 to 2032($bn)12Consumer Subscription SoftwareCONSUMER SUBSCRIPTIONSOFTWARECSS is the only streaming game in town Live rights to sporting events was one of the last bastions
38、for cable providers to lure consumers into packages The changing economics are upending sports leagues from US College Football to Indian Cricket and the repercussions will be felt in players salaries and league revenuesOur view Consumer choice:Consumers now have access to niche sports that wouldnt
39、make economic sense on broadcast television such as ESPN while allowing fans to watch in any geography at any time Latency:Advancements in bandwidth and more access to high-end hardware have given consumers overall quicker internet speeds Streaming production:Gone are the days of needing high-end eq
40、uipment for production.A simple mounted camera paired with quick internet speeds provides consumers with a great experience Consumer interest:Many consumers have taken a keen interest in new sports that are only available via streaming platforms Rising subscriptions:Sport being premium content is dr
41、iving subscriptions for streaming platformsNoteworthy agreementsStreaming PlatformLeagueSize($m)2,0005952,7603,0041,5001,500UndisclosedAbout usMetricsEcosystemQ&A withMarket updateKey insightsPast insights13Consumer Subscription SoftwareCONSUMER SUBSCRIPTIONSOFTWAREPublic CSS valuations have stabili
42、sed over the last yearSources:GP Bullhound Insights and CapitalIQ(15 September 2023),Market cap weighted index4.4x5.1x5.6x0 x2x4x6x8x10 x12x14xSep-17Mar-18Sep-18Mar-19Sep-19Mar-20Sep-20Mar-21Sep-21Mar-22Sep-22Mar-23Sep-23GPB CSS Master Index-TEV/Forward RevenueGPB CSS Master Index-TEV/LTM RevenueDeb
43、uts at 27.0 xDebuts at 15.2xDebuts at 5.4xOur CSS index,the first to track how public CSS companies are valued,includes:Debuts at 10.4xAbout usMetricsEcosystemQ&A withMarket updateKey insightsPast insights14Consumer Subscription SoftwareCONSUMER SUBSCRIPTIONSOFTWARECSS ecosystem includes multiple fu
44、ture IPO candidatesSources:GP Bullhound Insights,StatistaCSS IPOs to look out for in the next 24 months Description:Provider of an extensive suite of free and paid options including online chess gameplay,puzzles and game analysis as well as lessons taught by chess grandmasters and coaches Founded:20
45、05 Amount raised:Undisclosed Lead investor:General Atlantic Product and pricing overview:Monthly and annual subscriptions 3 Tiers(Gold,Platinum and Diamond)Monthly subscriptions ranges from$6.99 to$16.99 Users can save 40%with an annual subscription Platform has more than 100m users Description:Oper
46、ator of a digital media company intended to publish a collection of active lifestyle and sports content Founded:2017 Amount raised:$169m Lead investors:Sequoia Capital,JAZZ Venture Partners Product and pricing overview:Outside+priced at$4.99 monthly,and includes access to the following brands:Outsid
47、e,Trailforks Pro,Gaia GPS,VELO,Pinkbike,Backpacker,and Yoga Journal Outside Magazine has 675,000+monthly subscribers Description:Developer of an instant messaging and digital distribution platform designed to help users socialise with their friends and communities Founded:2012 Amount raised:$1.1b Le
48、ad investors:Dragoneer Investment Group,Tencent Holdings Product and pricing overview:Nitro Basic and Nitro subscription offers larger file upload sizes,enhanced video streaming capabilities and many other features Nitro Basic is$2.99 per month and Nitro is$9.99 per month Discord has more than 150 m
49、illion users Description:Operator of a digital media platform intended to produce,distribute and monetise high school sports in the US.The companys platform includes video production capabilities and a multi-platform distribution system Founded:2008 Amount raised:$162m Lead investors:KKR,Panoramic V
50、entures Product and pricing overview:Brands include:NFHS Network:Annual pass is$79.99 and monthly pass is$11.99 rScholToday:Activities management NVV:Sports marketing platform Description:Developer of a mobile mapping technology designed to show clearly marked property boundaries,and public and priv
51、ate landowner names,and aggregates nationwide data on trails and permitted land use in the US Founded:2009 Amount raised:$108m Lead investor:Summit Partners Product and pricing overview:Three products,each being sold in premium and elite packages OnX Offroad:Premium:$2.92 monthly;Elite:$8.33 monthly
52、 OnX Hunt and OnX Backcountry:Premium:$29.99 monthly;Elite:$99.99 monthly Description:Developer of a social application platform that allows users to record fitness activity,analyse,share and compare data against themselves,friends and pros Founded:2009 Amount raised:$180m Lead investors:Sequoia Cap
53、ital,TCV Product and pricing overview:App allows users to compete on segments,accelerate their training with advanced analytics,and discover new routes 100 million active users 30+activity types featured on app Monthly subscription of$6.67About usMetricsEcosystemQ&A withMarket updateKey insightsPast
54、 insights15Consumer Subscription SoftwareDateTargetBuyerCategoryValue($m)TEV/LTM revenueJan-23Health-Jan-23Social17-Jan-23Cybersecurity-Dec-22Gaming83 2.67xDec-22Education-Nov-22Sports-Nov-22Productivity300 3.00 xNov-22Health-Nov-22Gaming-Oct-22Sports-Sep-22Design20,000 50.00 xDateTargetBuyerCategor
55、yValue($m)TEV/LTM revenueAug-23Utility-Jul-23Entertainment-Jul-23Edtech1,610 10.05xJun-23Outdoor-May-23Utility200-May-23Lifestyle-May-23Health-Apr-23Fintech-Mar-23Utility52 0.28xFeb-23Cybersecurity1,530 2.70 xJan-23Outdoor-CONSUMER SUBSCRIPTIONSOFTWAREM&A deal activity is improvingSources:GP Bullhou
56、nd Insights,Capital IQ,and Pitchbook(September 2023).All currencies converted at the time of the transactionNotable deals since our previous reportAbout usMetricsEcosystemQ&A withMarket updateKey insightsPast insights16Consumer Subscription SoftwareDateIssuerLead investorCategoryInvestment($m)Sep-23
57、Edtech15Aug-23Edtech16Jul-23Lifestyle8Jun-23Streaming74 May-23Design77May-23Community fundraisePublishing3May-23Audiotech25Apr-23Fitness130 Apr-23Utility50 Apr-23Health7Mar-23Audiotech6Mar-23Productivity150DateIssuerLead investorCategoryInvestment($m)Mar-23Audiotechn.a.Feb-23Gaming14 Jan-23Finance35
58、Jan-23Productivity100 Dec-22Design30 Nov-22Design19Nov-22Productivity23Oct-22Productivity125Oct-22Outdoor87 Sep-22Design340Sep-22Edtechn.a.Sep-22Audiotech59Private financing continues to surge Sources:GP Bullhound Insights,Capital IQ,and Pitchbook(September 2023)CONSUMER SUBSCRIPTIONSOFTWARENotable
59、deals since our previous reportAbout usMetricsEcosystemQ&A withMarket updateKey insightsPast insights17Consumer Subscription SoftwareGP Bullhound key CSS insights18Consumer Subscription SoftwareCONSUMER SUBSCRIPTIONSOFTWARECSS flywheel attributes to drive premium valuationSource:GP Bullhound Insight
60、sA key valuation driver for investors is the concept of winner-takes-all in CSS apps;if the company has the potential to dominate a niche or a broader market through network effects,investors will pay upIt is important for entrepreneurs to understand their competitive positioning and be able to defi
61、ne their market nicheRecurring revenuePremium contentProprietary dataUser acquisitionMonetisation&pricing strategyNiche user base vs.large TAMChurn/retention Monopoly in a small market can be lucrative Large TAM apps need to prove differentiation and moats(e.g.,fitness apps)Create a compelling benef
62、it to convert users from free to paid Free to paid conversion rates are critical KPIs Efficient user acquisition&conversion with viral element Targeted ads,call to action,SEO,&sharing content proven successful User data retained&utilised within app Network effects from existing user base,reinforcing
63、 proprietary content and/or monetised data Churn of consumer subscriptions will be higher than traditional enterprise SaaS models LTV/CAC a KPI to watch Intuitive UI paired with high-quality content Design&UX crucial to convincing consumer of premium product Verticals expanding as consumers become m
64、ore comfortable paying for appsWe advise founders on CSS opportunities using our proprietary CSS flywheelAbout usMetricsEcosystemQ&A withMarket updateKey insightsPast insights19Consumer Subscription SoftwareCONSUMER SUBSCRIPTIONSOFTWAREContent,Commerce&Community for next-gen companies Consumer compa
65、nies are rapidly innovating on how to build or buy missing pieces of the“3C Ice Cream Cone”.ContentContent establishes trust and facilitates customer acquisition.It can be produced by the company or,even better,its usersConsumers discover a brand through content shared by friends or influencers,sear
66、ch engines,or AI toolsContent is the initial touchpoint for user engagement,highlighting the brands unique selling proposition and encouraging product discoveryMonetisation:Ad revenue/“free”CACCommerceAllows users to test-drive a brand for the first timeCommerce is the conversion engine that transit
67、ions interested users into paying customers,leveraging the pull created by engaging contentBy prioritisinga user-friendly and seamless purchasing process,commerce solidifies the relationship between brand value perception and actual investmentMonetisation:Single purchase/paid trialCommunityCommunity
68、 enhances value and creates lock-in through initial relationship onwardsA community serves as a robust platform for user retention through powerful network effects.It amplifies the impacts of both content and commerceAn engaged community provides a sense of belonging and facilitates product improvem
69、ent and free UGC,fostering a cycle of continuous growth and customer satisfactionMonetisation:SubscriptionsConsumer loveContent:Fuels conversations that turn curiosity into customersCommerce:Transforms interest into a purchaseCommunity:Strengthens solidarity,transforming subscribers into stakeholder
70、sUserGeneratedContentAbout usMetricsEcosystemQ&A withMarket updateKey insightsPast insights20Consumer Subscription SoftwareCONSUMER SUBSCRIPTIONSOFTWAREA new approach to segmentation:unlocking value post-acquisitionExample engagement metricsSource:Lennys Newsletter,Appcues and Userpilot;E.g.,of a me
71、aningful retention metric Segmentation is a powerful and common tool to group prospective customers into segments with common characteristics for targeted marketing/user acquisitions efforts This tactic can also be applied aftercustomer acquisition to an existing user base based on novel criteria li
72、ke user age,location,and engagement for a targeted approach to retention and user experience This strategy can prove to be extremely effective for A/B testing,fixing issues,or significantly improving key CSS metrics,but it must be approached thoughtfully based on the vertical or product offeredKey i
73、nsights The best founders do not overlook or oversimplify segmentation.They recognise the importance of underlying motivators for each distinct user base Duolingo was able to accelerate user growth 4.5x from a mature product by segmenting by user engagementOver-segmentation:Too many segments can lea
74、d to confusion and noise,impacting results.A balance must be struck between thorough and simpleOverly broad or generic segmentation:Segmentation is not a“one size fits all”approach and should be tailored to your specific app/platformBiased or impartial segmentation:Demographic information can be pow
75、erful but should be used carefully to avoid biasDesirable approaches to user segmentationBehaviour or engagement-based segmentation:Focus efforts on the highest ROI user groups and ignore the“cheetahs”for maximum impactPsychographic segmentation:Interests,lifestyles,values,and preferences,potentiall
76、y collected during onboarding,can be an effective means for segmentationPrivacy-focused segmentation:Privacy is of critical importance for trust with users and compliance with regulatory bodies1New User Retention RateRetention rate of new users in the last yearCurrent User Retention RateRetention ra
77、te of non-new current usersReactivated User RetentionRetention of deactivated/reactivated usersResurrected User RetentionRetention of churned and resubscribed usersAt-Risk WAU Retention RateWeekly active users&inactive in past dayAt-Risk MAU Retention RateMonthly active users&inactive in past 7 days
78、Dormant User RetentionRetention rate for dormant/inactive usersFree Trial Retention RateRetention for free trial to subscription usersCustomer Onboarding RetentionRetention directly after onboarding23456789What is user segmentation in this context?Undesirable approaches to user segmentationAbout usM
79、etricsEcosystemQ&A withMarket updateKey insightsPast insights21Consumer Subscription SoftwareCONSUMER SUBSCRIPTIONSOFTWAREB2C goes B2B CSS companies across fitness,mental health,education as well as prosumer are exploring adding B2B offerings to drive further revenue growth and reduce user churn Lev
80、eraging rich customer data and intuitive UI designs,CSS companies are uniquely equipped to deliver user-friendly B2B solutions that are actually being used Their competency in providing uniform experiences across platforms,in combination with the inherent network effects from existing users,shapes a
81、 comprehensive and strategic approach to B2B growthKey insightsBy exploiting the rich customer data at their disposal,CSS companies are strategically positioned to craft robust B2B offerings and drive business growthUser-friendly UI designs inherited from B2C applications often surpass the aesthetic
82、s and intuitiveness of traditional B2B offerings,granting superior functionality and usability When the network effects of a CSS application reach critical mass within an organisation,transitioning to a B2B agreement emerges as the logical next stepCSS companies can deliver a uniform web and mobile
83、experience,providing an edge over B2B counterparts typically focused on one platformLeveraging their experience in safeguarding data for a vast B2C user base,CSS companies can provide a trusted,secure solution for B2B clientsThe proficiency in rapidly launching and updating B2C apps translates into
84、quicker deployment and iteration times for its potential B2B solutions How CSS businesses can help supercharge B2B offerings Leading B2B2C businessesAbout usMetricsEcosystemQ&A withMarket updateKey insightsPast insights22Consumer Subscription SoftwareWhere are the opportunities to build a CSS“catego
85、ry killer?”Source:GP Bullhound InsightsCONSUMER SUBSCRIPTIONSOFTWAREAt GP Bullhound,we have identified six categories where there is white space for a category killer CSS business to be created.We are actively investing here and believe the winners will incorporate the three Cs of Content,Commerce,a
86、nd Community to win.Meeting the growing sophistication of news consumptionProblem:Traditional news is tarred with click-bait headlines and too much opinion,with declining trust from audiencesDemand for premium and factual news fuels monetisationpotentialLucrative reader communities already exist in
87、established domains like technology,business and politicsReplacing the private wealth manager and tax advisorProblem:Limited digital tools for complex finances and human advisors remain expensive with questionable qualityAI coupled with access to personalisedinformation will automatically offer best
88、 practices customisedto the individual and goalsServices can go outside public market investing to include private investments,taxes,home management and spending answersStage-agnostic Femtech to unify womens healthProblem:There is no Apple for female healthFragmented womens health offerings require
89、an integrated platform for lifelong care,boosting accuracy and cutting costsOpportunity for a provider to streamline the experience,from preparing for pregnancy to childcare,has a huge opportunityProblem:There isnt a single resource planning solution for family and parenting management(a family ERP)
90、Unifying family management,spending,scheduling and parenting tools presents a compelling opportunityIntegrating with multiple data sources and enabling product-led growth with aspects like youth sports,school schedules,budgeting,health,wellbeing,and moreUnifying the needs of family management and pa
91、rentingYouth sports/ActivitiesProblem:Parents spend thousands on youth sports and activities with limited adoption of digital toolsSoftware that integrates across consumers(B2C)and sports organisations(B2B)will be a mustConsumers will demand features like stat tracking,player highlights and automati
92、c scheduling of games/eventsVerticalisation of AI:Personal assistant for any subjectProblem:LLMs are built for broad populations but need to balance access/personalisation with privacyExisting LMMs have enhanced subject-specific expertise but need to integrate with third-party data sets including em
93、ail,finances,schedules and healthcareCreating a tool that works will generate viral consumer adoption and interest where scale will matterOpenAIs ChatGPT has amassed more than 100 million usersAbout usMetricsEcosystemQ&A withMarket updateKey insightsPast insights23Consumer Subscription SoftwareCONSU
94、MER SUBSCRIPTIONSOFTWAREThe second coming of newsletters and message boardsSource:GP Bullhound Insights Digital newsletters were viewed by many as just another marketing ploy by businesses.They since have evolved into robust consumer subscription businesses on their own As cheap and low quality has
95、proliferated on the internet,consumers are increasingly willing to pay for high-quality content,from news and finance,to technology,sports,and farming Paid newsletters and forums are increasingly supported by major tech platforms including Substack,WordPress,YouTube,Medium,and X(formerly Twitter)Key
96、 insightsWhere newsletters have thrivedFinance&daily newsNewsletters have risen in prominence in finance due to the need to stay up to speed on daily deal announcementsLarge publishers have pivoted their offering to cater to both traditional consumers who prefer to visit the publishers websites and
97、those who prefer curated topics via newslettersCultureMany newsletters offer subscribers an escape from daily life with updates on art,wellness and various other topicsNewsletter and message board facilitatorsSports have always been conducive to newsletters dating back to the first newspaper.Message
98、 boards have become the home for many sports fans About usMetricsEcosystemQ&A withMarket updateKey insightsPast insightsSelected expert companies operating in the space24Consumer Subscription Software“Picks and shovels”to increase“downloads and subscribes”Source:GP Bullhound InsightsCONSUMER SUBSCRI
99、PTIONSOFTWAREThe ecosystem of“pick and shovel”tools comprises mainly horizontal applications that provide the building blocks necessary to stand up an app and manage key functions.For the largest and least specialisedplatforms,CSS customers may only represent a small amount of revenue.But for tools
100、with a focus on the CSS ecosystem,investors and acquirers can consider them equally(if not more)valuable,with significant consolidation and investment in the space.Typical tools used in the foundations of leading CSS platformsMessaging infrastructureMarketing managementSubscription managementPayment
101、 processingReporting&analyticsInfrastructure/developmentAbout usMetricsEcosystemQ&A withMarket updateKey insightsPast insights25Consumer Subscription SoftwareRe-marketing to churned users(there is gold in churned users)Source:GP Bullhound Insights,RevenueCatCONSUMER SUBSCRIPTIONSOFTWARE All consumer
102、 apps experience churn.In our experience,leading consumer apps make the departure of a consumer easy with the goal of re-acquiring those consumers when their needs change Firstly,it is important to understand why the consumer churned.Did they no longer need the product(fitness/weight loss),have they
103、 stopped the activity(biking/hunting),or were they just testing a need(prosumer)?Tracking auto-renew status on annual subscriptions provides an early look at likely subscriber churn,which helps inform LTV assumptions and allows for targeted re-engagement months before users churn CSS businesses see
104、churn through app usage,with most subscribers who turn off auto-renew for annual subscriptions doing so in the first month As apps grow,the cohort of churned users also grows,which means the opportunity to re-engage past users expandsKey insightsTypical cohort journey for CSS businessesof the people
105、 who turned off auto-renew during the year,12%turned it back on as they engaged with the service0%10%20%30%40%50%Auto-renew off Month 1Auto-renew off Month 2Auto-renew off Month 3Auto-renew off Month 4Auto-renew off Month 5Auto-renew off Month 6Auto-renew off Month 7Auto-renew off Month 8Auto-renew
106、off Month 9Auto-renew off Month 10Auto-renew off Month 11Auto-renew off Month 12When do subscribers turn off auto-renew?With CSS businesses capturing 12%resubcription each year,results in a 26%improvement in subscribers in year 2 vs.a typical cohort20040060080010001200Month 1Month 13Month
107、 2520040060080010001200Month 1Month 13Month 25About usMetricsEcosystemQ&A withMarket updatePast insightsKey insights26Consumer Subscription SoftwareHarnessing Generative AI:a game-changer for CSSNote:GP Bullhound sample illustration using data exampleCONSUMER SUBSCRIPTIONSOFTWARE The cons
108、umer interest in generative AI has been nothing short of meteoric since the release of ChatGPT towards the end of 2022.The burgeoning technology smashed adoption records,with the app reaching 100 million users in just two months and prompting OpenAI to quickly adopt a CSS strategy to capitaliseon th
109、e commercial opportunity Many CSS players have fully embraced the technology with deployments ranging from novel and truly value-add to unnecessary or downright bizarre Snap launched a controversial generative AI chatbot in Snapchat+Replika offers a virtual companion in the form of a 3D avatar power
110、ed by ChatGPT that can serve as a friend,coach,or romantic interest Grammarly and QuillBot supercharged their suite of personal writing tools with generative AI capabilities The promise of generative AI in CSS is undeniable,but there are plenty of pitfalls on the path that could lead to potentially
111、disastrous results if not properly supervised or regulated But if executed properly,generative AI can decisively distinguish your platform and truly enhance the user experience invaluable competitive advantages clearly linked to CSS success via accelerated organic growth,improved unit economics/rete
112、ntion,and creation of avenues for upsell/additional opportunities for incremental monetisationPotential ways to integrateBenefits of successful executionPotential pitfallsHyper-personalisationVirtual assistants/interactivityAutomated/dynamic contentInternal/external automation or integrationRealtime
113、 translationAccelerated organic growthIncreased engagement and retentionIncreased efficiency and unit economicsCapture of valuable usage dataSustainable competitive advantageResource intensive integration and maintenanceData privacy concernsLimited real time data and hallucinationsUnpredictability,p
114、articularly with chatbotsNeglect core competencies/offeringsAbout usMetricsEcosystemQ&A withMarket updateKey insightsPast insights27Consumer Subscription SoftwareExpert views from company builders28Consumer Subscription SoftwareCONSUMER SUBSCRIPTIONSOFTWAREGP Bullhounds CSS Report participants have
115、a successful track recordStatistically,if your company is featured in our CSS report,you have a nearly 80%chance of raising or selling for a great exit.Since 2019,GP Bullhound has profiled 10 companies,of which five have raised additional capital,two have sold and one is still on its journey.We rema
116、in bullish on the four companies from our 2022 report to do great things.To be featured,please reach out to Daniel Roberts at INVESTMENT BYNOV-21DEC-20MAY-21MAY-23NOV-20FEB-23APR-22ACQUIRED BYACQUIRED BYINVESTMENT BYINVESTMENT BYINVESTMENT BYINVESTMENT BYYear of report:2020 Year of report:2020Year o
117、f report:2020Year of report:2021Year of report:2019Year of report:2019 Year of report:2019Year of report:2020 Growing RapidlyGrowth InvestmentAbout usMetricsEcosystemQ&A withMarket updateKey insightsPast insights29Consumer Subscription SoftwareFORECASTING THE NEXT BIG SNOWFALL WHAT ARE THE GROWTH AR
118、EAS FOR THE BUSINESS IN THE COMING YEAR?Before we think about growth,we think about retention.The renewal rate(of our annual subscription)is high,and we want to keep it that way by adding features and making incremental improvements to the existing product.From a growth perspective,we have a lot of
119、people that are using the limited version of OpenSnow for free,and we think that adjustments to the packaging of our features and more clearly communicating our differentiation will entice some free users to pay for our All-Access subscription.Finally,a minority yet still significant share of our re
120、venue comes from direct advertising sales,so we also ensure that our advertising partners are seeing the results in exposure and conversions that they are looking for.WHAT WERE THE MOST CHALLENGING DECISIONS YOU HAVE MADE AND HOW DID YOU OVERCOME THEM?In December 2021,we went“full in”with our subscr
121、iption product.For about eight years prior to this,the free version of our product provided a lot of value,so many of our big fans did not upgrade to our subscription because they could get most of whatthey wanted to free.Then we made the switch to limit the free product and put most of the value be
122、hind the paywall.Having thisconviction that our product was worth paying for has changed our business.While we received some hate-mail after this change,the overwhelming result was that a lot of people upgraded,these people continue to be excited at the improvements that we make every year,the usage
123、 of our product has increased as our paying users use our product more frequently,and we now have the revenue to reinvest in the business.Joel GratzCEOWHAT ARE THE FEATURES THAT POWER USERS LOVE OF OPENSNOW?The weather nerds(a technical term)love the Daily Snow which is a couple of paragraphs writte
124、n by a local forecaster throughout the season.This local commentary puts the weather into human terms and helps people understand the incoming storms,which days could offer the best snow quality,the uncertainty of the forecast,and we also offer our reasoning about why some forecasts do not work out
125、as we expect.Another popular feature is the ability to quickly scroll through snow forecast graphs for all your favorite ski areas to see which locations have the best chance for powder.WHY WOULD SOMEONE USE OPENSNOW VS.FREE WEATHER APPS?Most free weather apps focus on forecasts for cities and towns
126、 while we focus on forecasts for adventures that often take peopleaway from cities and towns.The ability to get a forecast for any location on earth,which considers that locations elevation,is super useful for skiers/riders and backcountry users like hikers,climbers,and bikers.Also,the views of our
127、weather data are built to allow people to make decisions about where and when to find the best conditions while most other apps are focused onproviding a quick view of the temperature and a general forecast.In addition,an increasing number of users find that OpenSnow can serve as the default weather
128、 app for forecasts in their house.MISSIONOpenSnow makes it easy to instantly find accurate weather forecasts.LONG-TERM VISIONProvide comprehensive forecasts for adventurers.SCALECreate the complete platform for weather forecasts and snow reports.HOW DID YOU START THE BUSINESS AND WHAT INSPIRED YOU?T
129、he business started because we were weather forecasters who were obsessed with understanding the weather patterns that delivered the best snow to regions of the western United States.We started as multiple local weather blogs,and our vision was to grow the audience so that we could have the revenue
130、to allow us to build out a full weather app and website with forecast data,weather maps,and local commentary.About usMetricsEcosystemQ&A withMarket updateKey insightsPast insightsCEO30Consumer Subscription SoftwareEMPOWERING THE NEXT GENERATION OF TRADERSHOW DO YOU THINK ABOUT PRICING YOUR PRODUCT A
131、CROSS THE THREE TIERS FOR SPOTGAMMA AND SPOTGAMMA ACADEMY?SpotGamma has a clear value proposition in that our community gets daily expert analysis,proprietary levels,and comprehensive trade analysing tools.We believe that for between$4 and$12 a trading day,our products and services can drive materia
132、l trading opportunities that fully-justify the ROI of a SpotGamma subscription.Additionally,we track our competitive space to arrive at final prices that also keep us within bandwidth of other offerings.WHAT ARE THE GROWTH AREAS FOR THE BUSINESS IN THE COMING YEAR?In the B2C arena,we expect to grow
133、our current subscriber numbers,launch new volatility products,and expand our educational programming.In the B2B arena,we are anticipating product launches with both Bloomberg and directly to institutions via a live data feed.Matthew FoxCEOHOW DO YOU LEVERAGE THE FOUNDERS NOTE AND OTHER FREE CONTENT
134、ON THE WEBSITE TO DRIVE NEW SUBSCRIBERS?We have an exit intent pop-up on our site where you can receive the daily Founders note by entering your email.In terms of monthly or annual subscriptions,we deliver content via our blog site,YouTube videos,and Twitter posts which all have a pull-through to a
135、one-week free trial before being charged.WHAT HELPS SPOTGAMMA STAND OUT FROM OTHER TRADING EDUCATION PLATFORMS?We bring forward the pedigree of a world-class financial insights company,being frequently published in the Wall Street Journaland Reuters and deliver our insights in a digestible way for o
136、ur subscribers.Our proprietary algorithms,twice-daily expert analysis,and unique tracking tools have provided an edge without exposing our core inputs to the markets.MISSIONTo unveil how the options market is driving US stock and futures prices.LONG-TERM VISIONProvide a comprehensive portfolio of to
137、ols for individual and institutional traders.SCALEExpand the platform from purely B2C traders to B2B traders across the world.HOW DID YOU START THE BUSINESS AND WHAT INSPIRED YOU?In early 2020,stock option volumes were often driving stock prices,but traditional investors did not have a way to see or
138、 understand the impact.Our founder,Brent Kochuba,viewed this as a clear opportunity to start a twice-daily newsletter laying out key areas where traders were expected to enter the stock market.Since then,the business has expanded to include proprietary software across all US stocks and indices paire
139、d with real-time trading tools.WHAT WERE THE MOST CHALLENGING DECISIONS YOU HAVE MADE AND HOW DID YOU OVERCOME THEM?The transition from being a pure content company to providing unique software tools required more technical experience.We started with multiple part-time programmers to facilitate orga
140、nic growth,and as we have grown our business,we now have better processes and outcomes with fully-engaged senior software engineers.About usMetricsEcosystemQ&A withMarket updateKey insightsPast insightsCEO31Consumer Subscription SoftwareCREATING STRUCTURE FOR A SUCCESSFUL CO-PARENTING RELATIONSHIPWH
141、AT ARE THE GROWTH AREAS FOR THE BUSINESS IN THE COMING YEAR?Our main growth areas are centered around our customers.Were looking to continue to drive consumer engagement and optimise our technology to improve the experience across multiple platforms and device mediums.We are also looking to continue
142、 expanding our content base through blogs,articles,and webinars.Additionally,the company continues to invest in the legal community.HOW DO YOU THINK ABOUT PRICING YOUR PRODUCT ACROSS THE THREE TIERS?We believe everybody should have access to TalkingParents regardless of economic circumstances.The fr
143、ee tier provides essential co-parenting tools and court needs and provides immediate,compelling value for the platform.At the same time,our subscription model provides an enhanced and premium experience with an additional feature set.Multiple subscription options enable customers to get value at a p
144、rice point that works for them.Vince MayfieldCEOWHAT UNIQUE STRATEGIES DO YOU UTILISE TO ACQUIRE AND RETAIN CUSTOMERS?What sets TalkingParents apart is that our focus is on creating an ecosystem around supporting our customers the parents going through a divorce.TalkingParents is more than just an a
145、pplication.We provide a community for our customers centered around how to be better parents and aid them in managing their co-parenting relationship.That is how weve achieved our success so far.WHAT HELPS TALKINGPARENTS STAND OUT FROM THE COMPETITION?We designed TalkingParents from the beginning as
146、 a court record that creates and reinforces accountability.We are hyper-focused on the customer.We are not trying to compete with or be any other company.We are being ourselves.We have an experienced leadership team with strong legal and software know-how,but more importantly,have faced the trials a
147、nd tribulations of parenting.MISSIONTalkingParents helps make co-parents lives easier.LONG-TERM VISIONTo provide the necessary structure and tools to facilitate a successful co-parenting relationship for all parents.SCALEExpand the platform to more device mediums and invest in the content base.HOW D
148、ID YOU START THE TALKINGPARENTS BUSINESS,AND WHAT INSPIRED IT?The birth of TalkingParents is like those youve heard from many technology startups-an idea born as a solution to a problem brought to life in a homegrown environment.As an attorney running his criminal defense and family law practice,alm
149、ost everycase that founder,Stephen Nixon,worked on involved poor communication between co-parents and a lack of comprehensive,reliable records.Stephen partnered with myself and our COO,Louis Erickson,to fix this issue,and TalkingP was born.WHAT IS ONE FEATURE THAT HELPS TALKINGPARENTS BECOME A KILLE
150、R APP IN THE CO-PARENTING CATEGORY?First and foremost,being a killer application is not about features.TalkingParents allows our customers,parents,to focus on their children.We want to keep them out of court.And if they go back,TalkingParents and our records have their back.If we had to pick just on
151、e thing,our secret sauce,it is that we build accountability into every feature we create.We listen and respond to the needs of our customers.For example,one of our premium features:Accountable Calling,complete with voice and video calls,has transcripts and recordings built into our records.We survey
152、ed and asked our customers what they wanted.Accountable Calling resulted from a direct feature request from our customers.About usMetricsEcosystemQ&A withMarket updateKey insightsPast insightsCEO32Consumer Subscription SoftwareINVESTMENT MANDATES FOR CSS BUSINESSESWHAT ARE SOME AREAS THAT FOUNDERS S
153、HOULD FOCUS ON AS THEY SEEK TO ATTRACT INVESTOR INTEREST?I would advise entrepreneurs to focus on sound business fundamentals rather than catering to perceived investor desires.When we look at companies at Spectrum,were looking at their core unit economics things like LTV/CAC and cohort retention be
154、haviour,as well as the size of the market opportunity and their competitive positioning.We tend to gravitate to companies which have been very capital efficient as theyve scaled and have built durable competitive advantages.Ben SperoMANAGING DIRECTORYOUVE BEEN AT SPECTRUM SINCE 2001.ANY REFLECTIONS
155、ON HOW THE INDUSTRY HAS EVOLVED DURING THAT TIME?Spectrums roots go back to offline media and content businesses in the mid-1990s,before the internet really existed.The most successful consumer subscription businesses today whether Netflix,Spotify,Ancestry,M share many parallels with those tradition
156、al media business models,theyre just delivering their products online.Mobile was another huge growth catalyst for the industry as people had 24/7 access to content and a different hardware form factor to leverage.Time will tell if AI,wearables,VR or some other big macro trend will be an additional c
157、atalyst like we saw with mobile,but I think the industry has a ton of growth still ahead.FIRM FOCUSFounded in 1994,Spectrum is a leading growth equity firm investing in high-growth internet-enabled software and information businesses.The firm partners closely with entrepreneurs,providing them with c
158、apital and strategic support.WHAT WAS THE FIRST CSS BUSINESS YOU INVESTED IN AND WHAT ATTRACTED YOU TO THAT OPPORTUNITY?The first consumer business I invested in at Spectrum was A in 2003.The company had created a whole new product category online,thanks to its massive library of digitised content,i
159、ts community-driven user generated content,and its technology.Genealogy was a niche hobby then,but there was widespread interest in learning more about ones family history.We believed Ancestry could tap into latent consumer interest and become more mainstream as product usability improved and the co
160、ntent library continued to grow.Thankfully,that played out well its become one of the biggest online subscription businesses in the world,with well over$1bn in revenue.Spectrum was a shareholder for 16 years.It was a great run!IS CSS BUSINESSES EVOLVING TO BECOME HYBRID ENTERPRISE MODELS A BROADER T
161、REND OR GROWTH STRATEGY?Yes,thats a trend were really excited about.We increasingly see the lines blurring between consumer and B2B businesses.Enterprise-focused companies are doing more content marketing and funnel optimisation,which had traditionally been B2C skillsets.Similarly,several of our com
162、panies such as SurveyMonkey,Headspace and L developed sales teams and new enterprise go-to-market channels which have become meaningful drivers of growth.INVESTMENTSHOW DO YOU THINK ABOUT VALUING BUSINESSES FOLLOWING THE CORRECTION IN THE MARKETS OVER THE LAST COUPLE OF YEARS?There isnt a magic form
163、ula for this.In general,the projects we lean into are companies where we have very strong conviction in forward growth,and we see good alignment with management;particularly situations where we believe we can help them grow even faster based on our experience and resources.However,private valuations
164、 need to be grounded in the realities of the public markets as a frame of reference.Despite the multiples that some companies were getting in 2021,its unrealistic for a company to expect a big premium to current public valuations unless its financial metrics are fundamentally more attractive.About u
165、sMetricsEcosystemQ&A withMarket updateKey insightsPast insightsINVESTORS33Consumer Subscription SoftwareSource:1Proprietary research from GA Growth Acceleration(2022)INSIGHTS FOR CSS BUSINESSESWHAT WAS THE FIRST CONSUMER BUSINESS THAT YOU INVESTED IN AND WHY?Its funny to look back on in many ways,th
166、e company is certainly not a Consumer Subscription Software business,yet it still shares many of the same core characteristics that great CSS businesses have.The business was called Grand Design RV,a luxury RV manufacturer that I invested in while I was at my former firm,Summit Partners,in 2013.The
167、RV category long before Covid was a surprisingly large industry,with$10bn of RVs sold annually and attractive tailwinds from baby boomers and young families increasingly getting into the field.The investment ultimately came down to the experienced founders,a leading product with excellent consumer a
168、nd dealer reviews,and effective distribution through unique dealer relationships.Although this was a consumer product business,these same tenants still hold true for what we at General Atlantic look for in consumer internet businesses visionary teams building product-led companies with unique and ef
169、fective distribution that are less reliant on paid marketing spend.And weve seen a number of CSS businesses that are able to drive market growth in seemingly“niche”verticals through a fundamentally better product experience combined with greater affordability.WHAT ARE THE AREAS THAT FOUNDERS SHOULD
170、FOCUS ON IN THEIR BUSINESSES TO DRIVE INTEREST FROM INVESTORS?We get a lot of questions from founders around the financial KPIs that we are focused on,or what our minimum user growth anddownload thresholds are.Solely focusing on user growth can be inefficient.Id instead encourage founders to focus o
171、n buildingan irreplicable product and community.I believe,if you get those right,the financial profile and scale will inevitably follow.It will always be challenging to stay on top of consumer trends and even more difficult to predict how preferences may shift.One of ourportfolio companies,C,has rea
172、lly nailed building a market-leading app,today with a community of more than 150 millions chess users.The team at C was hyper-focused on building a platform that leveled up an experience already engrained in human culture.By prioritising product for chess enthusiasts,they were able to gain incredibl
173、e organic growth andtop-of-funnel traction and,in addition to that,demonstrate uniquely strong retention.Its easy to pay for users,but its really hard to keep them engaged and retained without a strong product and community.Were excited to share more of Cs growth story in an upcoming episode of Gene
174、ral Atlantics podcast featuring their CEO,Erik Allebest.Continued WHAT ARE YOUR THOUGHTS ON THE EVOLUTION OF THE CSS ECOSYSTEM?We published a piece last year called“Leading the Wave of Consumption in Consumer Tech”in which I discuss the proliferation ofthe subscription model in consumer tech and som
175、e of the interesting trends weve seen as the category evolves.Overall,its been amazing to watch the CSS ecosystem expand from traditional media and entertainment to new verticals that have really capturedconsumers time and interest.For example,the shift from Blockbuster to SVOD models from the likes
176、 of Netflix and Disney+was something that permanently changed the media industry.Similarly,weve seen the CSS offering unlock affordability,experience,and massive growth across individual markets like fitness,wellness,education and content creation.While there is currently some pressure on consumer s
177、pending,we remain excited about the CSS ecosystem,especially for those companies delivering incremental value to consumers.In fact,research from our Growth Acceleration team indicates that the average consumer is expected to increase annual spending on subscriptions by 33%over the next three years1.
178、Im eager to see what AI and more comprehensive and readily available data can do for the CSS ecosystem.I believe there is so much value to be uncovered through delivering targeted experiences and even personalised pricing and packaging for the individual consumer.MISSIONGeneral Atlantic identifies e
179、merging companies with strong fundamental performance and organic growth that can accelerate their expansion and scale globally.It partners with companies to help them grow with its capital,insights,global resources and network.Jessie CaiVICE PRESIDENT,TECHNOLOGYAbout usMetricsEcosystemQ&A withMarke
180、t updateKey insightsPast insightsINVESTORSINVESTMENTS34Consumer Subscription SoftwareWHAT SKILLS WILL CSS BUSINESSES NEED TO DEVELOP TO EXTEND THEIR OFFERINGS FROM PURELY B2C TO B2B2C?This was an exciting vein for companies over the past few years,particularly during Covid,when corporations were foc
181、used on improving the employee experience across all dimensions.When I think about some of the GA companies that have seen success in B2B2C or B2C2B,Slack and Gympass(which sells both B2B and B2C with strong retention rates)come to mind.Ultimately,both companies success stories from a go-to-market p
182、erspective come down to product.While you still need end-user adoption and true engagement corporate signups are great,in theory,given quick user growth in bulk and potential for higher retention these sign-ups may be short-lived if customers dont come back to use the product habitually.Slack benefi
183、ts from daily user engagement across a team(which drives network effects)and from being a system of record of your daily communications and your day-to-day workflow.Gympass similarly relies on employee feedback(which translates into engagement).Their strong revenue retention rates,which are more sim
184、ilar to enterprise SaaS and even on the B2C side,drive strong expansion through members electing to sign up for higher plans.While CSS businesses will inevitably need to adapt their customer service engine to their go-to-market motion to sell top-down,we believe some of the best B2B2C companies get
185、bottom-up demand from a passionate freemium user group.INSIGHTS FOR CSS BUSINESSESHelen ChristakosPARTNER,HEAD OF US PRIVACY/DATA SECURITYAbout usMetricsEcosystemQ&A withMarket updateKey insightsPast insightsPRIVACY EXPERTS36Consumer Subscription SoftwareIN PREPARING FOR A TRANSACTION WHAT SHOULD FO
186、UNDERS DO TO ENSURE THERE ARE NO PRIVACY OR CYBERSECURITY RED FLAGS THAT MAY IMPACT THEIR DEAL TERMS?If you havent been working closely with privacy/cyber counsel on an ongoing basis,consider meeting with privacy/cyber counsel prior to the diligence process to evaluate your level of compliance.Legal
187、 counsel can quickly assess what global privacy/cyber laws you are required to comply with,and whether you comply with them.To the extent any non-compliance may impact deal terms,privacy/cyber counsel can help remediate the issue prior to the transaction.Compliance these days goes well beyond having
188、 an accurate privacy policy on your site and/or app.Depending on what laws a company is subject to,it can also include having accurate and appropriate information security policies,handling security incidences in an appropriate manner,having a data map,having on-going security audits(including penet
189、ration tests and vulnerability scans),implementing employee and vendor training on privacy and security matters,having statutorily required flow-through terms in service provider and customer agreements,utilisingappropriate data transfer mechanisms,having consumer opt-out mechanisms in place,offerin
190、g data subjects certain rights and adhering to data subject requests(such as data deletion),performing data impact assessments,implementing enhanced measures with respect to the processing of sensitive personal information,having appropriate website cookies,banners and opt-out mechanisms,and the lis
191、t goes on.Counsel can assess any deficiencies in these areas and help remediate them,so they wont impact deal terms.Note:The information presented is not legal advice.Consult with your attorney.INSIGHTS FOR CSS BUSINESSESHelen ChristakosPARTNER,HEAD OF US PRIVACY/DATA SECURITYMISSIONAllen&Overy is a
192、 global law firm that helps the worlds leading businesses to grow,innovate and thrive.For almost a century,it has built a reputation for commitment to thinking ahead and bringing original solutions to clients most complex legal and commercial challenges.REPRESENTATIVE CLIENTS ContinuedAbout usMetric
193、sEcosystemQ&A withMarket updateKey insightsPast insightsPRIVACY EXPERTS37Consumer Subscription SoftwareCurrent CSS ecosystemIf we skipped your company click here to get in touch!38Consumer Subscription SoftwareCONSUMER SUBSCRIPTIONSOFTWARESource:GP Bullhound InsightsEntertainment was the first CSS c
194、ategory to garner great consumer interest.Its constituents are now searching for ways to keep up the momentum.EntertainmentAbout usMetricsEcosystemQ&A withMarket updateKey insightsPast insights39Consumer Subscription SoftwareCONSUMER SUBSCRIPTIONSOFTWARESource:GP Bullhound InsightsThe Fitness/Recrea
195、tion space continues to lead in converting users from freemium to paid but has been challenged to maintain growth post Covid.Fitness/Recreation/OutdoorsAbout usMetricsEcosystemQ&A withMarket updateKey insightsPast insights40Consumer Subscription SoftwareCONSUMER SUBSCRIPTIONSOFTWARESource:GP Bullhou
196、nd InsightsThe Prosumer category has exploded in the past years with more to come as gains in artificial intelligence have created a whole new cohort of companies focused on increasing efficiency for consumers.ProsumerProWritingAidAbout usMetricsEcosystemQ&A withMarket updateKey insightsPast insight
197、s41Consumer Subscription SoftwareCONSUMER SUBSCRIPTIONSOFTWARESource:GP Bullhound InsightsHealth&Mindfulness have grown as enterprises began seeing value in offering employees access to their various services.Health&MindfulnessPersonal financeFinance is expanding,but still focused on monetisingpayme
198、nts or transaction flow.Huge opportunity remains.About usMetricsEcosystemQ&A withMarket updateKey insightsPast insights42Consumer Subscription SoftwareCONSUMER SUBSCRIPTIONSOFTWARESource:GP Bullhound InsightsEdtech tools have expanded from the classroom to the home as more and more individuals use n
199、ew tools to learn.Dating and family apps have become the default instead of being an outlier.Religion remains a huge opportunity.EdtechFamily/DatingOtherBrilliantAbout usMetricsEcosystemQ&A withMarket updateKey insightsPast insights43Consumer Subscription SoftwareSIGNIFICANT RELATIONSHIPS WITH SPONS
200、ORSThe pool of CSS investors continues to growSource:GP Bullhound InsightsPremier CSS growth investorsAbout usMetricsEcosystemQ&A withMarket updateKey insightsPast insights44Consumer Subscription SoftwareSIGNIFICANT RELATIONSHIPS WITH SPONSORSThe pool of CSS investors continues to grow(continued)Sou
201、rce:GP Bullhound InsightsPremier CSS buyout investorsPremier CSS early-stage investorsPremier CSS seed investorsPremier CSS aggregatorsAbout usMetricsEcosystemQ&A withMarket updateKey insightsPast insights45Consumer Subscription SoftwareCSS metrics to watch46Consumer Subscription SoftwareCONSUMER SU
202、BSCRIPTIONSOFTWAREEnterprise SaaS vs.consumer subscriptionSource:Nico Wittenborn at AdjacentContent sharingAverage revenue per user(ARPU)Investors look at many of the same investment metrics as SaaS companies,but key nuances are important to recognise,and CSS businesses will have a different definit
203、ion of success.Higher early user churn is typically the biggest hurdle for traditional investors to overcome,but entrepreneurs can highlight low customer acquisition cost(CAC)and long-term retention to illustrate the staying potential of their CSS business.Consumer subscriptionEnterprise SaaSMass ma
204、rket potentialWord-of-mouth distributionChurnImplementation difficulty Expansion revenueAcquisition costsHigherHigherHigherHigherHigherHigherAbout usMetricsEcosystemQ&A withMarket updateKey insightsPast insightsHigherHigher47Consumer Subscription SoftwareCONSUMER SUBSCRIPTIONSOFTWAREInvestor benchma
205、rking criteriaInvestor criteria and expectations have changed since Covid,but the core CSS fundamentals remain the same.Source:GP Bullhound Insights*Very dependent on size of the companyCSS investors evaluate each business based on its own unique attributes as well as sub-industry nuances.There are
206、industry standard metrics that help investors differentiate good businesses from great businesses.Annual user growth rate*30%50%+60%+90%+Gross margins3x6xLTV/CAC1stperiod annual retention rate60%2%10%+Free to paid conversion rate50%Organic vs.paid user acquisition*About usMetricsEcosystemQ&A withMar
207、ket updateKey insightsPast insights48Consumer Subscription SoftwareCONSUMER SUBSCRIPTIONSOFTWAREInvestors dive into key CSS metrics and KPIsSource:GP Bullhound Insights Entrepreneurs need to closely define and communicate the different types of consumers that interact with the serviceFree usersActiv
208、e usersPaid users/subscribersRenewing subscribers vs.new subscribersCustomer lifetime value=number of months or years the average customer stays with the company multiplied by the ARPU times the gross profit margin(%)CSS businesses have the unique attribute in that they typically have high churn aft
209、er the first pay period or trial period ends.Companies typically see churn of first-time users anywhere between 20%and 70%of total sign-ups Consequently,investors are looking for retention of users after the first pay period typically the 3rd,6th or 12th month.High retention in those periods indicat
210、es that users are discovering value in the service and are likely to be retained long-term,building the“CSS cohort layer cake”Exceptional CSS businesses renew 60%+of each annual cohort and 40%of Year 2Customer acquisition cost(CAC)payback period is typically stated in months.Represents the time take
211、n to fully pay back sales and marketing investment to acquire a single customerCAC Payback of 60%RevenueCats data shows that most apps have first-year renewals between 17%and 40%with Productivity tools and Lifestyle tools outperforming Fitness and Photo&Video editing 45%+represents the top quartile
212、of apps and those generally attract the most investor interestSource:RevenueCatReview first renewal rate of annual subscriptionsFirst renewal rate of monthly subscriptions71%41%56%45%12%27%Overall MedianAbout usMetricsEcosystemQ&A withMarket updateKey insightsPast insights53Consumer Subscription Sof
213、twareCONSUMER SUBSCRIPTION SOFTWAREOvercoming churn to build the“cohort revenue layer cake”Growth:Adding 30,000 users per month with celebrity promoters and heavy Instagram presence Usage:Limited customisationof the service and a priority on notifications to consume content Cohort Churn:Retains 40%o
214、f customers by month 6 and only 10%by month 12Source:GP Bullhound proprietary analysisAs entrepreneurs build their companies,they can typically invest in growth marketing or product innovation to drive retentionFocusing on engagement and mitigating churn will result in a better long-term business th
215、an high growth and flashy advertising Growth:Adding 10,000 users per month leveraging targeted marketing through partnerships with limited social media marketing Users leverage the data to manage their personal health information and have synched data input into their fitness tracker Cohort churn:Re
216、tains 68%of customers by month 6 and 50%+by month 12(effectively having the cohort become flat)020,00040,00060,00080,000100,000120,000140,000160,000180,000200,000CheetahCohort1/1/20202/29/20203/31/20204/30/20205/31/20206/30/20207/31/20208/31/20209/30/202010/31/202011/30/202012/31/20201/31/20212/28/2
217、0213/31/20214/30/20215/31/20216/30/20217/31/20218/31/20219/30/202110/31/202111/30/202112/31/20211/31/20222/28/20223/31/20224/30/20225/31/20226/30/20227/31/20228/31/20229/30/202210/31/202211/30/202212/31/2022020,00040,00060,00080,000100,000120,000140,000160,000180,000200,000ThroughbredCohort1/1/20202
218、/29/20203/31/20204/30/20205/31/20206/30/20207/31/20208/31/20209/30/202010/31/202011/30/202012/31/20201/31/20212/28/20213/31/20214/30/20215/31/20216/30/20217/31/20218/31/20219/30/202110/31/202111/30/202112/31/20211/31/20222/28/20223/31/20224/30/20225/31/20226/30/20227/31/20228/31/20229/30/202210/31/2
219、02211/30/202212/31/2022020,00040,00060,00080,000100,000120,000140,000160,000180,000200,000CheetahCohort1/1/20202/29/20203/31/20204/30/20205/31/20206/30/20207/31/20208/31/20209/30/202010/31/202011/30/202012/31/20201/31/20212/28/20213/31/20214/30/20215/31/20216/30/20217/31/20218/31/20219/30/202110/31/
220、202111/30/202112/31/20211/31/20222/28/20223/31/20224/30/20225/31/20226/30/20227/31/20228/31/20229/30/202210/31/202211/30/202212/31/2022020,00040,00060,00080,000100,000120,000140,000160,000180,000200,000ThroughbredCohort1/1/20202/29/20203/31/20204/30/20205/31/20206/30/20207/31/20208/31/20209/30/20201
221、0/31/202011/30/202012/31/20201/31/20212/28/20213/31/20214/30/20215/31/20216/30/20217/31/20218/31/20219/30/202110/31/202111/30/202112/31/20211/31/20222/28/20223/31/20224/30/20225/31/20226/30/20227/31/20228/31/20229/30/202210/31/202211/30/202212/31/2022New user marketing is cutLong-term valuable custo
222、mersWhat would you invest in?105,000 usersby month 647,000 users by month 6CheetahThoroughbredAbout usMetricsEcosystemQ&A withMarket updateKey insightsPast insights54Consumer Subscription SoftwareCONSUMER SUBSCRIPTION SOFTWAREThe importance of subscription pricingSource:GP Bullhound Insights Subscri
223、ption pricing models have been an effective way to drive customer retention and growthIts important to determine the value that is being provided when creating a subscription pricing model instead of using an arbitrary price,such as the standard$29.99 per year offeringFocusing on weighing a tiered p
224、ricing model versus a usage pricing model is important in providing a consistent path of upselling and driving up customer lifetime valuePaddle acquires ProfitWell on the back of its$200m raise.ProfitWell offers tools to provide analytics and retention data to companies using subscription models.Thi
225、s acquisition provides Paddle with a larger platform to supplement its core payments business.AB testing pricing focuses on multiple methods to find the correct price for new offerings of products and services.Representative AB testing pricing companiesOnX and Tinder are prime examples of tiered pri
226、cing based on the value provided Both offer discounts for annual pricing compared to the monthly pricing,with Tinder offering a 66.6%discount and OnX offering a 44.4%discount The companies also differentiate their annual offerings based on the number of services provided.OnX expands area coverage wi
227、th its annual offering and Tinder adds additional features,such as messaging,before receiving a“like”in its platinum offering Subscription pricing considerationsCase studyKey insightsAbout usMetricsEcosystemQ&A withMarket updateKey insightsPast insights55Consumer Subscription SoftwareKey insightsCON
228、SUMER SUBSCRIPTION SOFTWAREFemtech and family-focused appsSource:GP Bullhound Insights Femtech(female-focused apps)and family-focused apps have broken into the CSS space in a large way.A variety of apps are improving how women and future parents communicate and plan their families.Categories include
229、 fertility,baby KPIs,childcare support,and family management.We expect to see significant growth in this category over time as app adoption increases and increasingly busy parents look for solutions to everyday problemsHowever,there are major privacy and health information concerns that need to be d
230、iscussed,especially given recent rulings on abortion in the US and the potential impacts on individualsKey verticals within the Femtech spaceSelected companies operating within each verticalFertilityPregnant individuals now have a wide range of tools to measure their body rhythms to increase the cha
231、nce of a successful pregnancy,communicate with their doctors,and learn about their newborns progressBaby KPIsOnce a child is born,parents are rapidly turning to tools to measure food intake,health,and wellness.This information can easily be shared with partners,including doctors,nannies,and daycares
232、Childcare SupportParents with limited family support are quick turning to consumer subscription offerings to supplement their childcare plans or find local parenting organisationsFamily ManagementStreamlining what was previously sticky notes,paper calendars,or text messages into automated apps,digit
233、al calendar reminders and trackable offeringsAbout usMetricsEcosystemQ&A withMarket updateKey insightsPast insights56Consumer Subscription SoftwareGP Bullhound overviewBUILD THE FUTURE57Consumer Subscription SoftwareABOUT GP BULLHOUNDGP Bullhounds Entrepreneur clockGP Bullhound partners with entrepr
234、eneurs throughout their founding journey,supporting them with advisory,capital,insights and access toour global network.58Consumer Subscription SoftwareABOUT GP BULLHOUNDA leading technology advisory and investment firmNote:Global M&A transactions between$10m and$300mMergers&Acquisitions Leading glo
235、bal advisor to technology companies in competitive international sale and acquisition processes 450+successful M&A transactions completed to date,with a total value of over$28bn Leading global advisor to companies and their owners on capital transactions including venture,growth,debt,acquisition fun
236、ding,secondary block trades and initial public offerings 140+rounds of financing for technology companies completed to date,with a total value of$5bnInvestments GP Bullhounds funds provide investors with access to global category leading technology companies Our software focused investment strategie
237、s cover the private,public and debt markets Our assets under management total more than$800m and our limited partners include institutions,family offices and entrepreneursInsights&Events Our events bring together thousands of leading technology entrepreneurs and investors throughout the year Our glo
238、bal insights team publishes thought-leading research read by decision-makers and medias worldwideCapital transactionsSince 1999,GP Bullhound has been an investor in and advisor to brilliant leaders.Powered by more than 150 employees across 14 offices worldwide.No information set out or referred to i
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