November by D'Ornano + Co: Introducing the Durable Growth Moat - What ServiceTitan and Palantir Tell Us About Sustainable Tech Advantage
This is our monthly newsletter dedicated to Tech x Investments.
Dear readers,
Picture a medieval castle surrounded by its protective moat. For centuries, this image has defined how investors think about competitive advantages. But today's technology companies (and those putting tech front and center of their business models) face threats that don't just come from across the land and water – they come from aerial assaults like generative AI breakthroughs and invisible forces like shifting customer behaviors. And there are still other unpredictable dimensions from which an attack may come that we are still discovering.
Withstanding these attacks requires deep underground fortification through robust fundamentals. Including strong unit economics and operational efficiency. Two years after ChatGPT's debut revolutionized our understanding of AI's potential, this multi-dimensional defense has never been more critical.
When a single AI advancement can reshape entire industries overnight, we need to fundamentally rethink protection and how to fortify defenses
After years of analyzing hundreds of disruptive technology companies, from venture capital to IPO, I've identified what makes a truly Durable Growth Moat. Unlike traditional economic moats focusing on static competitive advantages, these new defensive mechanisms combine four critical elements: Quality of Revenue, Quality of Growth, Quality of Margins, and Balance Sheet Strength. These are the four pillars of our pioneering Advanced Growth Intelligence (AGI) methodology that we have developed to analyze the resilience and durability of business models.
Together, they create a dynamic shield that evolves as rapidly as the threats it guards against to prevent “single points of failure.”
As we close out 2024, these new competitive dynamics are starkly evident in the stories of two fascinating companies that sit at the heart of the tech valuation debate: Palantir, whose stock has surged to historic valuations on the promise of AI transformation, and ServiceTitan, whose recent IPO filing offers a unique window into how vertical SaaS players can build lasting advantages. These companies, each facing intense market scrutiny, highlight why we need the Durable Growth Moat framework. In this month’s newsletter, I have applied AGI to both companies to assess the strengths and weaknesses in their respective moats.
The timing for this framework couldn't be more crucial. At Goldman Sachs' PICC conference, the consensus pointed toward a revival in tech dealmaking that has already started in 2025. This optimism, coupled with the transformative impact of generative AI, suggests we're entering a new phase of tech investment where traditional metrics alone won't suffice.
Consider Palantir's trajectory. Despite skepticism about its valuation, justified to some extent, the company has demonstrated remarkable resilience by continuously evolving its product suite to incorporate AI capabilities while maintaining strong government relationships – a perfect example of a Durable Growth Moat in action. Similarly, ServiceTitan's IPO filing reveals how a vertical SaaS player can build multiple layers of protection through deep industry integration and network effects.
As we enter 2025, investors need to recalibrate their evaluation frameworks. The companies that will thrive won't just be those with the most innovative technology or the fastest growth rates, but those that have built Durable Growth Moats – protection mechanisms that evolve as rapidly as the threats they guard against.
The next wave of tech investment won't be about picking winners based on traditional metrics. Instead, it will be about identifying companies that can maintain their growth trajectory while building resilience against an increasingly complex landscape of technological disruption. The Durable Growth Moat framework provides the lens we need to spot these opportunities early and evaluate them effectively.
As we mark the second anniversary of ChatGPT's release, it's clear that we're only beginning to understand how AI will reshape competitive dynamics. In this context, the ability to build and maintain a Durable Growth Moat isn't just a competitive advantage – it's a survival imperative.
Have a great read and a fantastic end of the year ahead. Thank you for your loyalty and engagement once again!
Raphaëlle
Durable Growth Moats: The New Shield for Disruptive Tech
As the era of Discontinuity accelerates, driven largely by genAI, the Durable Growth Moat is a framework that offers a method for evaluating a business model's intrinsic value and resiliency when historical benchmarks and measures no longer apply. Our newsletter this month starts with a deep dive into how we define these moats and why they matter. The introduction to this concept also illuminates how our firm approaches our financial and strategic missions.
Does Palantir have a Durable Growth Moat? Making sense of the valuation of an AI champion through AGI lenses
Palantir commands a sky-high valuation. Is its 57x revenue multiple justified? Our Advanced Growth Intelligence (AGI) framework shows that this valuation implies flawless execution that isn't yet evident in its operating metrics. And yet, its AI potential remains compelling.
This breakdown provides a strong case study of a company that has built a Durable Growth Moat—but one with vulnerabilities. How the company addresses these could determine whether it can fulfil those lofty expectations.
ServiceTitan’s S-1 AGI Teardown: Building a Durable Growth Moat in the Trades Industry
ServiceTitan's IPO filing offers a perfect case study for applying our Advanced Growth Intelligence (AGI) framework to assess the durability of growth of high-growth technology companies. While the company has built a remarkable $9.5B business by digitizing the massive $1.5T trades industry, beneath the surface lies a more nuanced story.
Our analysis reveals that despite impressive top-line momentum and strong customer retention, ServiceTitan faces challenges in its margin architecture and operational scalability. These vulnerabilities become critical as generative AI threatens to reshape the competitive landscape of vertical software.
By dissecting ServiceTitan's fundamentals through the AGI framework, we aim to provide guidance about what truly constitutes a Durable Growth Moat in today's market – and whether ServiceTitan's current positioning can withstand both immediate pressures and looming technological disruption.
Benedict Evans' highly anticipated 2024 tech presentation tackles AI's transition from hype to reality. Moving beyond technical capabilities, he examines how AI is actually reshaping business models and competitive dynamics. His analysis comes at a crucial moment as companies shift from experimentation to implementing AI at scale, facing hard questions about ROI and value capture. Thank you again for these great insights!
Swedish battery champion Northvolt, once Europe's most valuable startup at €12 billion, has filed for bankruptcy protection in the U.S. This development marks a sobering moment in Europe's ambitious bid for battery independence, highlighting the growing tension between strategic importance and financial realities in the capital-intensive EV supply chain. The FT provides us with some answers on what went wrong.
Why AI agent startup /dev/agents commanded a massive $56M seed round at a $500M valuation | TechCrunch
In the meantime, AI startup financing continues to demonstrate remarkable velocity, with /dev/agents securing a $56M seed round at a $500M valuation. The company's vision of creating a new operating system for AI agents represents a compelling thesis – one that could fundamentally reshape how generative AI is deployed and consumed. The valuation reflects intense market enthusiasm for infrastructure plays in the AI stack, particularly those addressing the emerging paradigm of autonomous agents.
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