While not an expert, I've tried the regression the author has done with CapitalIQ before. There's a third hidden axis which is whatever you want to define size/maturity/runway to be. That potentially explains some of the lift in multiple as well.
Similarly his example of investors not paying attention to gross margin seems a bit stretched. While I've never personally participated in a venture deal, pre-public private equity investors scrutinize gross margin a lot, and so does equity research converign listed firms.
While conceptually interesting, saying that a 30% EBITDA company that adds 1500 basis points of COGS goes to 15% margins and therefore ROIC falls (or valuation) is relatively boring. But his point about margins persevering post IPO was super interesting. I wonder if for the existing incumbents, after entry of one of these sexy unicorns, gross margin goes down after...
While not an expert, I've tried the regression the author has done with CapitalIQ before. There's a third hidden axis which is whatever you want to define size/maturity/runway to be. That potentially explains some of the lift in multiple as well.
Similarly his example of investors not paying attention to gross margin seems a bit stretched. While I've never personally participated in a venture deal, pre-public private equity investors scrutinize gross margin a lot, and so does equity research converign listed firms.
While conceptually interesting, saying that a 30% EBITDA company that adds 1500 basis points of COGS goes to 15% margins and therefore ROIC falls (or valuation) is relatively boring. But his point about margins persevering post IPO was super interesting. I wonder if for the existing incumbents, after entry of one of these sexy unicorns, gross margin goes down after...