Nubank CEO dishes on the neobank’s profit surge and how tourist VCs in LatAm have gone homeListen here or wherever you get your podcasts.
Hello, and welcome back to Equity, the podcast about the business of startups, where we unpack the numbers and nuance behind the headlines.
This is our interview show, where we sit down with a guest, think about their work, and unpack the rest.
This week, we talked to David Vélez, the co-founder and CEO of Nubank, the $50 billion São Paulo, Brazil-based digital bank that offers credit cards, checking accounts and life insurance to consumers.
Businesses are working hard to conform to traditional heuristics like Rule of 40 (i.e., the idea that the sum of revenue growth and profit margin should equal 40%+, a metric that Bessemer helped popularize).
The world has over-rotated into an FCF margin mindset over a growth mindset, which is backward for growing efficient businesses.
Long-term models show that even in tight markets, growth should be valued at least ~2x to 3x more than FCF margin.
While a margin increase has a linear impact on value, a growth rate increase can have a compounding impact on value.
We show the detailed math below, and it’s confirmed by public market valuation correlations when you backtest the relative importance of growth versus FCF margin.
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