[THREAD] Something that most people in tech don't realize is McKinsey is a mega🦄 hiding in plain sight.

I worked there for 3 years and saw 10 acquisitions that put McKinsey on pace to shatter $100M+ ARR.

Here's how they did it 👇👇👇
Over the last century, McKinsey has been the iconic brand in management consulting. Engaged by the C-Suite for top tier strategy work, McKinsey has built a behemoth of a business. A few highlights:

- $10B+ in revenue
- 80%+ of the F500 as clients
- <1% of applicants get hired
But like every company, McKinsey isn’t impervious to disruption.

"Pure strategy" work is now only ~10% of McKinsey's portfolio (down 7x over the last 30 years) and clients are pushing for more value based billing.

Implication: Clients want tangible, measurable results.
McKinsey had 2 options when staring at disruption in the face:

(A) Go upstream and flee to work that will be last touched by disruption (e.g. highly specialized)

OR

(B) Leverage its strength, lean into the disruption and accelerate it industry wide.

They chose Option 2.
So how did they pull that off?

3 Tiered Approach: Build, Buy or Partner.

McKinsey does all 3, but its M&A activity is the secret sauce.

Over the last 5 years, McK acquired 10+ companies and created McKinsey Solutions - the business unit that’s going to drive $100M+ ARR.
McKinsey has a really specific acquisition type - it either acquires a company that aligns with a vertical or a horizontal.

Vertical: Solves for a problem widely observed in an industry

Horizontal: Solves for a problem widely observed across a function
These acquisitions are natural evolutions of how McKinsey works.

(A) Observe: Identify clear patterns across 1000+ clients

(B) Partner: Find software that fits into the consulting solution workstream

(C) Acquire: Buy the software company and own the SaaS revenue
Why do it this way? 2 reasons.

Defense - Derisk the deal. By the time an M&A offer is on the table, the two companies know how to work with each other.

Offense - Accelerate out the gates. Post acquisition, its a hard press to roll this out across every relevant client.
The latest example of this is Orpheus, a procurement spend analytics product.

This sentence from the deal announcement is key:

“The combination of McK consultant expertise and Orpheus market-leading software will help create the future of digital procurement.”
Before McKinsey, Orpheus had been around for 15 years. They did ok, but now they can win. Why?

(a) Better distribution - Access to C-Suite rolodex

(b) Stickier relationship - Hard to unbundle Orpheus / McK

(c) Pricing power - Packaged in a larger $1M+ engagement
Let’s do the math

If Orpheus charges $100K for the software and gets 100 clients, they’re at $10M ARR.

Multiply this across 10 companies McK acquired in the last 5 years and you’re looking at a $100M ARR software portfolio.

(This is super conservative)
McKinsey is growing fast and is best positioned to pull this off.

But how? Isn’t consulting a totally different business model than software?

Yes, but McKinsey consulting margins are 70%+. The business prints cash allowing it to invest unlike other services firms.
The software play is a gamechanger for McKinsey.

Software is now at the core of the relationship. It creates a stickiness that allows McKinsey to hang around.

Every client problem that comes up, McKinsey is in position to solve.

It’s whack a mole on steroids.
It wouldn’t surprise me if McKinsey builds a $25B+ software portfolio over the next 10 years. There’s a very quiet (but massive) value transformation story playing out.

Stay tuned. It’s only the second inning.

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Let's dig in.
1/ Dippin' Dots was started by Curt Jones, a microbiologist with a background in cryogenics.

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Here's the 101 on DC and why it'll break the internet:
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[THREAD]
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- Break down a decision into a series of questions
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I've invested in 2 co's that are growing like wildfire and want to do more. Let's talk if you're building in this space.

Here's what's going on and why you should pay attention now, if you weren't before:
1/ There are 5 factors that are simultaneously driving the rapid rise of edtech in India.

- Favorable demographics
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Let's talk about how all 5 are interconnected.
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India has:

- 500M+ people under 25
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