The Bullish Future of Subscription Models

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The Bullish Future of Subscription Models
The Bullish Future of Subscription Models
At the Northside Innovation Festival, the customer was front and center. That is, the value of companies owning that direct connection to their customers.

Part of a multiple-day conference also featuring panels on journalism and music at night, the innovation festival focused a lot on small companies and startups, and how VCs appraise them.

The talk that kicked things off featured former eMusic CEO David Pakman, who is currently a partner at Venrock, who talked about how VCs find the right company and, by proxy, entrepreneurs.

The firm has invested in Dollar Shave Club, and a lot of the questions from the moderator from Fortune and the audience focused on that unique unicorn (whom we have written about before) and subscription models in general.

While Pakman said that not every business makes sense as a subscription (he picked cars out of the air, though the moderator wisely said that may change as car ownership wanes and automated cars changes the dynamic), the value of having a direct connection with your consumers cannot be understated or underestimated.

The most interesting he said was that he was not bullish on companies that don't have a direct access to their consumers. Of course, that means he's not bullish on many established companies, the ones that have historically created products and then sold them to intermediaries who then sold them onto customers.

If you buy a Coke (or Pepsi, if that's okay), you're not buying it from Coca-Cola. You're buying from a supermarket or bodega, a vending machine, restaurant, or a host of other companies that are not Coca-Cola. Same thing with Serta, Kraft Macaroni and Cheese, and millions of other products.

Contrast that with Casper or Blue Apron, customers are entering into a direct relationship with the product creators. As such, those companies own the data relationship with the customers, have a direct contract to continue to supply their customers, and do not have to pay an intermediate to complete the transaction.

Now it may make sense why so many consumer products behemoths are acquiring these subscription-model companies.

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