Given the current interest rate environment, there’s been a lot of focus on fast-growing companies trying to reach breakeven or profitability. Many fueled their growth with losses when capital was cheap. Those days are likely over, and these companies are now concentrating on generating cash instead of consuming it. All of them won’t survive, but the ones that are solving painful problems and that have strong leadership teams have a higher probability of becoming profitable.

There’s another segment of companies that I haven’t heard discussed as much that I’m curious about: companies with recurring-revenue business models that grew rapidly because of COVID tailwinds and that generate material free cash flow, but that saw their growth rates slow or flatline. These companies can be cash registers. If they retain their current customers, they will generate cash on a recurring basis.

The recurring cash generation of these companies is key. They have cash from customers they can use to experiment with growth activities and ideas. The recurring-revenue nature of their business model means that cash will be replenished. They can keep experimenting. Learnings from failed experiments can be applied to new experiments. Hopefully, compounding learnings from experimentation will lead to the growth engine being restarted.

To be fair, restarting growth is hard—especially for a large company. It often involves retooling entire functions, such as sales and marketing. These efforts can be painful and take time to bear fruit. This isn’t something all management teams are able to achieve. But if they are successful, the rewards could be enormous when these companies are revalued.

I’m curious to see which cash-flow-positive, recurring-revenue companies can restart their growth and what impact it will have on their valuation multiples.