Project Tarnwell — Consumer Subscription Growth Investment
A 3-hour Growth Equity Minority Investment case study with a complete model answer
The Situation
Tarnwell Wellness, Inc. sells one thing: a monthly subscription to a sleep-and-recovery program, delivered as a mobile app with weekly coaching content and a physical kit shipped every month.
Tarnwell Wellness, Inc.
- Sector
- Consumer / direct-to-consumer subscription — a sleep-and-recovery program sold as an app with a monthly shipped kit
- Size
- Geography
- United States; headquartered in Portland, Oregon
- Ownership
- Situation
The Prompt
You are on the deal team at Vestrom Growth Partners.
Supporting Materials
What you are handed at the start of the case, in the format a real process would use.
What You Have to Produce
The deliverables, in the order the committee will read them. The exercise runs 180 minutes.
PART 1
Move the panel out of calendar space
PART 2
Fit the curve, and decide where it ends
PART 3
Contribution margin per subscriber, by tenure
PART 4
Lifetime value, on a stated basis
PART 5
Paid against organic, and a cost that moves with the spend
PART 6
The steady-state subscriber base
PART 7
The price, and what leverage this cash flow supports
How to Approach It
The order a strong candidate works in, and why. This is the shape of the answer — the finished memo and Excel model are in the solution set below.
- 01
Read the panel's footnotes before you read the panel (20 minutes)
- 02
Transform, then fit
- 03
Decide what happens after the data stops
- 04
Price a subscriber, by tenure
- 05
Solve the steady state in closed form (40 minutes)
- 06
Five years, and only then a price (50 minutes)
- 07
Write the memorandum (50 minutes)
Key Concepts
The ideas this case is built on. Know these cold and the case becomes a question of execution rather than knowledge.
Retention as a curve, not a rate
Consumer churn is front-loaded: the hazard in the first billed month is a large multiple of the hazard the surviving population settles at. The people who were going to leave leave early, so a cohort's measured churn falls with tenure without anybody improving anything. Applying one blended monthly rate forever is the standard way this underwrite goes wrong, and which months the rate was sampled from decides the direction of the error rather than its size.
Calendar space against tenure space
A vendor panel arrives as cohort against calendar month. Read down a calendar column and you are averaging subscribers of every age together, which is why a company-wide churn number moves when acquisition moves and says nothing about subscribers. The transform into periods since acquisition is mechanical, and it is the only step that makes the data mean anything.
Right-censoring
The newest cohorts have only been observed for a month or two. Any statistic computed at a fixed tenure is computed over the cohorts old enough to be in it, so an average taken across all cohorts at tenure twelve is an average over the older half of the book — and if the older half was acquired differently, the statistic is about acquisition and not about retention.
The tail
Everything past the last observed tenure month is an assumption. In a business with a long-lived surviving population, most of a subscriber's expected billed months sit there, so the assumption is worth more than the fitted curve. State it as one number, price alternatives to it, and never let it hide inside a fitted parameter.
Paid, organic and blended acquisition cost
Blended cost divides marketing spend by all gross adds, including the ones nobody paid for. It is a statistic about the acquisition MIX: it falls when organic grows and it can move in the opposite direction to the cost of the subscribers the money actually buys. A lifetime-value ratio struck on a blended cost is wrong twice in the same direction, because organic subscribers are also the ones who stay longest.
Acquisition cost as a function of spend
A performance channel saturates, so the cost per subscriber rises with the monthly spend. That makes acquisition cost an output of the plan rather than an input to it, and it is why a plan that spends more can be worth less than a plan that does not — the extra subscribers arrive at a cost the contribution margin cannot repay.
Steady-state subscriber base
At a constant acquisition spend the base converges to gross adds times mean lifetime. Where organic acquisition is partly driven by the existing base, the two pools are coupled and the organic one is amplified by its own referral loop — which converges only while the loop is below one. It is closed form, it is three lines, and it is the number that decides whether a growth story has a ceiling anybody should pay for.
Contribution margin by tenure
In a subscription with physical fulfillment the first billed month carries a starter kit, onboarding support and a much higher refund rate. A subscriber who leaves in month one is a loss, not a small profit. Applying one contribution margin to every tenure month against a front-loaded churn curve overstates the value of exactly the subscribers who are least valuable.
What Makes It Hard
The specific traps in this case — the places candidates lose the assessment without noticing.
Check Your Answer
Type the figures you produced and find out how many are right before you open the worked answer. You get a verdict and, where you are off, a pointer to the part of the build to re-check — never the number itself. Everything you type stays on this device.
How to type a figure. Digits, with an optional unit: 1,234.5, $1,234.5, 2.6x, 21.4%. For a negative use (20.0) or -20.0. Enter as many decimals as you carried — precision is never penalised.
What the Case Asked For
The arithmetic is only half of it. Tick off what you actually produced — this half is yours to score, because nothing can grade a written recommendation from a checkbox.
The Model Answer
The worked answer in full: memo and Excel model, built the way a banker would actually build them. It is a reference, not a submission — a strong answer under the clock is far shorter.
What the Solution Covers
- —Subscriber cohort retention curves
- —Contribution margin per subscriber
- —CAC payback and blended versus paid CAC
- —Churn decomposition by cohort age
- —Steady-state subscriber base at a given spend
- —Underwriting a consumer growth round
Memo
The written recommendation and how it was reached
Upgrade to Diamond
Sign up and upgrade to Diamond to unlock the memo, the Excel model and the audio walkthrough.
Get StartedThe Excel Model
The model is linked and tied out end to end — every schedule, every formula and every check, in the file itself.
Downloads are available to Diamond members
Excel Model and Memo (PDF) — yours to open, edit and rebuild
Walkthrough
A conversational walkthrough of how to approach the case under time pressure — where to start, what to cut, and how the recommendation gets defended.
Audio Walkthrough
How to approach Project Tarnwell — Consumer Subscription Growth Investment
60-second preview — upgrade to Diamond for the full walkthrough
Frequently Asked Questions
Why is there no discounted cash flow in this case?
Because the committee is not being asked what Tarnwell is worth in the abstract. It is being asked whether the firm's own required return clears at a stated post-money, which is a price solve: you fix the return and the plan and solve for the price. A discount rate appears once, on lifetime value, and it is declared there.
Why is there no debt schedule?
Because there is no debt. This is a primary minority round for a business that is loss-making at the Adjusted EBITDA line. Leverage appears once in the model, as a diagnostic: what a lender would advance against this cash flow in each forecast year. The answer for the first year explains, in one line, why this is an equity investment and not a buyout.
How much of the three hours should go on the model?
About 20 minutes reading the panel, 110 minutes on the workbook and 50 on the memorandum. The template leaves 1,974 cells across 380 authored rows, which is 418 distinct formulas once you account for the tenure grids being written once and dragged — roughly 16 seconds a formula. It is comfortable if you build one forecast case and copy it, and impossible if you rebuild each case from scratch.
Is the cohort transform really worth twenty minutes?
It is worth all of them. The transform is one formula filled over a block; what takes the time is deciding which cohorts belong in each tenure average, what to do with the promotional vintage, and whether the panel can tell you anything about the subscribers it does not cover. Candidates who paste a cohort triangle and move on have skipped the exercise.
What separates a strong answer from an average one?
Three things: naming the tail assumption out loud and pricing alternatives to it rather than letting it hide inside a fitted parameter; striking every ratio on the paid acquisition cost and saying what the blended one would have shown; and answering the question that was actually asked — a steady-state subscriber number — instead of answering with a growth rate.
What does the podcast cover that the memorandum does not?
How to read the panel under time pressure, the order to build in, and the four failure modes that sink otherwise competent answers — modeling the income statement instead of the cohorts, applying one blended churn rate, quoting a blended acquisition cost against a mixed lifetime value, and underwriting a tail nobody has observed without saying so.
About This Growth Equity Minority Investment Case Study
Growth Equity Minority Investment case study for venture & growth interviews. 180-minute format covering subscriber cohort retention curves, contribution margin per subscriber, cac payback and blended versus paid cac. Includes the full prompt, a written memo, a tied-out Excel model and an audio walkthrough.
This case study sits in Venture & Growth, under Growth Equity. Every case ships with the full prompt, the supporting materials, a complete model answer and an audio walkthrough of the judgment behind the recommendation.
180-Minute Format
The time limit a real assessment would give you
Memo
Included in the model answer
Excel Model
Included in the model answer
Audio Walkthrough
How to approach the case under time pressure
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