rule

“Uncertainty Ahead: Predicting the Fate of Startups in 2024”

Gettyimages 500878886
Even though the economy is signaling a bit of a bounce-back, 2024 might not be much better than 2023 when it comes to startups sharing a piece of the budget pie. If startups want a chance of making it through yet another bumpy year, they need to prove their worth now more than ever. Investors told TechCrunch’s Ron Miller and Rebecca Szkutak that they’re still expecting some pockets of growth. Get the TechCrunch+ Roundup newsletter in your inbox! For example, 70% of respondents said they plan to hire next year and none are looking to downsize.

The Dominance of X: Approaching Growth and Profit in the Cloud Industry

Gettyimages 1367347232
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.