What if I told you there’s a company that has delivered a +30% return every year since 2006? Don’t believe me? Go look at a chart of Constellation Software. We’re going to spend all week diving deep into this true compounder. Constellation Software WeekIt’s Constellation Software Week this week! In four articles, you’ll get a full deep dive into the company (over 60 pages). Here’s what’s coming up in this 4-part series:
Constellation Software👔 Company name: Constellation Software
1. Do I understand the business model?Constellation Software HistoryMark Leonard worked in venture capital for almost 11 years. During that time, he learned something important. There are many small companies that make a lot of money.
But almost nobody wants them. Why? Because their Total Addressable Market (TAM) is too small. As a result, Venture Capitalist companies ignore them. Mark Leonard saw this as an opportunity: Vertical Market SoftwareThese companies are called Vertical Market Software (VMS) companies. They make very specific software for one very specific type of customer. Their software is mission-critical, meaning customers really need it, but it usually costs less than 1% of the customer’s budget. So customers keep paying every single year. Examples include:
|