Why we invest in “painkillers” not “vitamins”

In the world of technology solutions, there’s a key distinction that determines whether a company becomes indispensable or merely a fleeting convenience: are you a vitamin or a painkiller?

The vitamin dilemma

Vitamins are nice to have. They’re designed to enhance, optimise, and contribute to overall well-being, but if you miss a dose, life goes on.? In the tech world, vitamins are those solutions that offer incremental improvements or additional features.? They’re valuable but not essential.? Their adoption often depends on a user’s willingness to invest in something extra or their curiosity to try out the “next big thing.”

For example, a social media scheduling tool might help a marketing team streamline their workflow, but they could still survive—albeit less efficiently—without it.? These solutions often face challenges in justifying their ROI and ensuring consistent user engagement.? When budgets tighten, vitamins are the first to go.

The painkiller advantage

Painkillers, on the other hand, address mission-critical problems.? They solve urgent, high-stakes issues that cannot be ignored.? In tech, painkillers are the platforms and solutions that keep businesses running, mitigate risks, or deliver significant cost savings.

Think of cloud infrastructure providers, cybersecurity platforms, or payroll processing systems.? If a company’s cloud services go down, the impact can be catastrophic.? Similarly, a lapse in cybersecurity can mean millions in losses or irreparable reputational damage.? These are non-negotiable investments because they address immediate and essential needs.

Why painkillers win

1. Clear value proposition: painkillers demonstrate their value through tangible outcomes.? The problem they solve is often measurable—downtime avoided, breaches prevented, or costs reduced
2. High stickiness: because painkillers integrate deeply into core operations, they’re harder to replace.? Customers become reliant on these solutions, leading to long-term relationships and predictable revenue streams
3. Budget immunity: in economic downturns, companies cut costs, but they’re far less likely to sacrifice mission-critical tools.? Painkillers enjoy a “protected” budget category because their absence could jeopardise the entire business.

Identifying painkillers

For investors, the key to long-term success often lies in identifying software companies that serve as painkillers.? Here’s how to spot them:

1. Assess market necessity: look for companies addressing high-stakes challenges—compliance, security, operational continuity, or core business processes.? If their absence would lead to significant disruption, they’re a strong candidate
2. Examine customer dependency: companies with deeply embedded solutions in their customers’ workflows are more likely to retain clients and generate recurring revenue
3. Evaluate performance metrics: prioritise businesses with measurable outcomes.? Companies that can demonstrate how they reduce downtime, mitigate risks, or save costs have a compelling value proposition
4. Investigate industry trends: focus on sectors where painkillers are essential and demand is growing, such as cybersecurity, cloud computing, or AI-driven analytics
5. Consider barriers to entry: companies with a large moat—due to intellectual property, regulatory approvals, or ecosystem lock-in—are harder for competitors to displace
6. Review customer retention: high customer retention rates are a strong indicator of a company’s indispensability. Pay attention to gross and net revenue retention, as well as churn rates
7. Ensure scalability and adaptability: mission-critical companies that continuously evolve to meet customer needs and scale with their clients’ growth are positioned for long-term success.

A world of painkillers

The most successful technology companies—think AWS, Salesforce, or Zoom—operate as painkillers.? They’ve entrenched themselves as indispensable parts of their customers’ operations.? These companies aren’t just selling products; they’re providing lifelines.

As you evaluate investment opportunities, focus on businesses that solve problems their customers can’t afford to ignore.? Painkiller companies don’t just weather economic storms; they thrive in them, offering stability and growth potential for investors.