Not all revenue is created equal

The route to growth and high valuations

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Bill Gurley surmised 10 properties of good quality revenue but since his post is a) very long and b) focussed on exit valuation multiples, here are the 7 that matter to me:

  • Sustainable - good quality moats making it hard for the competition

  • Network effects - each new customer adds value to others, meaning viral referral patterns

  • Predictability - subscriptions being one of the best examples

  • Customer lock-in - it’s hard and/or expensive to move to a competitor

  • Gross margin levels - i.e. each dollar sold generates significant +ve cashflow

  • No customer dependency - i.e. no customer contributing more than 10% rev

  • No partner dependency - your company’s destiny is not tied to another’s management team

I use this to rate the health of revenue regardless of exit plans.

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