What I read/listened to this week (week of 10/31/2022)
What I read this week
Unicorns face 5-1 odds as they wait for public markets to warm
- at least for now, growth is no longer enough to maximize corporate value.
- In the last 10 years, Battery counts 200 software companies that went public. In contrast, the venture firm counts more than 1,000 new unicorns minted over the same time frame. That’s a 5-1 ratio of IPOs to new billion-dollar companies.
- It should also be a centaur. Coined by Bessemer Venture Partners, the term refers to cloud companies with more than $100 million in annual recurring revenue (ARR).
- Hence the importance not just of ARR increasing by more than 30% year on year, but also of EBIT margin being above 25%.
Pairing with a report on looking at cloud and software companies from Battery Ventures ran the math on how investors are rewarding faster growth from less unprofitable companies
Really long article, but an instant masterpiece by Matt Levine.
There was a moment not so long ago when I thought, “What if I’ve had this crypto thing all wrong?” I’m a doubting normie who, if I’m being honest, hasn’t always understood this alternate universe that’s been percolating and expanding for more than a decade now. If you’re a disciple, this new dimension is the future. If you’re a skeptic, this upside-down world is just a modern Ponzi scheme that’s going to end badly—and the recent “crypto winter” is evidence of its long-overdue ending. But crypto has dug itself into finance, into technology, and into our heads. And if crypto isn’t going away, we’d better attempt to understand it. Which is why we asked the finest finance writer around, Matt Levine of Bloomberg Opinion, to write a cover-to-cover issue of Bloomberg Businessweek, something a single author has done only one other time in the magazine’s 93-year history (“What Is Code?,” by Paul Ford). What follows is his brilliant explanation of what this maddening, often absurd, and always fascinating technology means, and where it might go.
Facebook and Conglomerate curse
- Silicon Valley’s five big tech giants, Alphabet, Amazon, Apple, Meta and Microsoft, have long been the bedrock of America’s stockmarket and economy, miraculously combining reliable growth and profitability. But after a torrid third quarter their market capitalisations have now collectively dropped by 37% so far this year. About $3.7trn of value has evaporated.
- As they have grown bigger, they have become tied to the economic cycle; a fact which the digital surge during the pandemic only temporarily masked. Penetration rates for smartphones, digital advertising and streaming are plateauing. With slowing core businesses, the giants are venturing onto each other’s turf, increasing competition.
What I listened to this week
Business breakdown - The Home Depot: The Pro Builder’s Choice
Why has Home Depot been such a strong performer following a housing crash in the e-commerce revolution? This episode covers how Home Depot transitioned their approach to business, from customer focus to capital allocation, and while Home Depot has reported strong earnings growth over the past decade, and beyond that, this isn't a simple story about a growing footprint.
Stay warm!
