Five Business Models We Love
And why great venture returns come from margins and defensibility, not just tech
Morgan Housel’s piece “Betting on Things That Never Change” has stuck with me for a long time. He lays out a simple idea: while technology evolves, some business principles remain constant. Amazon benefited from the shift to the internet, but its success is rooted in timeless traits like low prices, fast delivery, and customer trust.
That perspective influenced how I think about venture investing. Instead of building conviction around sectors or trends, it’s better to build conviction around the team’s ability to execute and the structure of the business itself. I invest in companies where the business model works, the core risks are clear and, if we’re right, the payoff is large.
Over time, I’ve distilled this down to a few recurring models we tend to be drawn to. These are models where the motion of the product or service creates margin, expansion, and defensibility. Most of them involve complex systems built over time, often with both hardware and software components.
Here’s the list:
1. Recurring Revenue Infrastructure
These are companies that build real-world systems and monetize them with usage-based or subscription pricing. The business grows as the network grows, and the revenue is predictable.
2. Full Stack Vendors in High Trust Markets
In regulated or risk-sensitive environments, customers prefer one responsible counterparty. If you can deliver a complete solution—hardware, software, service—you build trust and stickiness.
3. Tools That Become Platforms
Start with a narrowly useful product. Over time, expand into adjacent workflows, integrations, or systems of record. These businesses often start as tools and evolve into infrastructure.
4. Data-Exhaust Flywheels
Some companies generate valuable data as a natural byproduct of their core operations. That data can be used to build intelligence layers, drive new products, or create entirely new revenue lines.
5. Real Asset Arbitrage
These businesses find overlooked physical systems—cooling, sensing, RF, etc.—and apply modern technology to reprice risk, lower cost, or create new economic leverage. They often don’t look exciting from the outside, but they work.
These business models tend to grow steadily, not explosively. But when they work, they create real durability. The market can move around them, and they still keep working.
In my experience, these companies usually build iteratively. They get a basic version of the system in place, then layer improvements over time. That layering process creates defensibility, both in the talent density they build over time and the accumulated knowledge that comes from it. The more integrated the system gets, the harder it is to replace.
Some things change, but the fundamentals of how good businesses behave stay pretty constant. That’s what I try to bet on.
