We did an analysis looking at the revenue, equity, and debt of publicly traded tech companies at the time they filed to go public. Using the equation above (revenue / [equity invested + debt]), we were able to observe the cash efficiency of each company. As you would expect, cash efficiency varies by industry: for instance, hardware is the most efficient generating $3.60 per $1.00 of revenue and social media is least efficient, generating $0.62 per $1.00 of investment. Below is the data.
A few observations:
Investment prior to IPO is way up. The amount of cash required to get to IPO has changed dramatically. For instance, Apple in 1980 filed to go public having invested $22mm in equity and debt in the company. On the other hand, Fitbit which filed in 2014 had total investment of $207mm, nearly 10x Apple.
Marketplaces are the least efficient, generating only $0.67 of revenue per $1 of investment while Social Media businesses generate a median of $0.62 per $1 of investment, with Snapchat being the worst in the group at only $0.15.
sammy@blossomstreetventures.com
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