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Tren Griffin
@trengriffin
, 3 tweets, 2 min read Read on Twitter
Key to SaaS unit economics: "Common yardsticks such as dividend yield, the ratio of price to earnings or to book value, and even growth rates have nothing to do with valuation except to the extent they provide clues to amounts and timing of cash flows into and from the business."
Do you know who is quoted in the previous tweet? Do you know who said: "There's a class of business where the eventual cash back part of the equation tends to be an illusion. There are businesses where you constantly keep pouring it in and in, but where no cash ever comes back."
Have you read these Michael Mauboussin essays? If not, why the heck not?

public.asu.edu/~bac524/counti…

kellogg.northwestern.edu/faculty/korajc…

covestreetcapital.com/wp-content/upl…

…31jz0lglwdu48.wpengine.netdna-cdn.com/wp-content/upl…

research-doc.credit-suisse.com/docView?langua…

Big list here: google.com/amp/s/hurrican…
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Tren Griffin
@trengriffin
Today's SaaS businesses remind me of McCaw Cellular which was sold to the predecessor to today's AT&T in 1994 for $11.5B. They are recurring revenue businesses with an up front customer acquisition cost. The operator can use telemetry to make the product better and manage LTV.
At the same time Craig McCaw was building a cable tv business another team was building a software business with very different economics. Microsoft flowed cash from a time very shortly after it was created. Bill Gates never needed to raise growth capital prior to MSFT's IPO.
McCaw Cellular and Microsoft grew up together founded by people from families that knew each other well. Capital needs in the businesses and ways in which they were operated were different because the nature of the business was different. In 1994 $11.5B was a lot of money. ;-)
Read 3 tweets
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Tren Griffin
@trengriffin
In 1945, Arthur C. Clarke first proposed the use of equatorial geostationary orbits (about 35,786 km above the Earth) for communications satellites. It took the form of a letter to the editor in Wireless World magazine entitled "Peaceful Uses for V2": lakdiva.org/clarke/1945ww/…
GEO orbit solved a tricky problem since a satellite otherwise does not remain stationary above the same spot on the Earth. Once satellites are moving the ground antenna must track them which can be done mechanically or electronically. Mechanical tracking requires two antennas.
Lower cost and weight electronics + lower launch costs means constellations of 100s of satellites at far lower weight (e.g., 500 lbs) a low orbits can create continuous coverage. The critical factor then is electronically steered antenna cost and form factor (e.g., pizza box)
Read 3 tweets
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Tren Griffin
@trengriffin
An individual can form an opinion on which team win a sporting event relatively quickly. They are free to express that view on Twitter. You can see people do the same thing for a stock. The best investors focus on finding the better "betting value" instead of predicting winners.
Michael Mauboussin: "expected value [is] a central concept in any probabilistic exercise. Expected value formalizes the idea that your return on an investment is the product of the probabilities and the various outcomes and the payoff from each outcome.” google.com/amp/s/25iq.com…
Venture capital is an extreme case since better betting value is determined by how cheaply one can buy optionality. Optionality is sometimes mis-priced and can be bought at a bargain. Those situations tend to be in places where others are not looking and the failure rate is high.
Read 3 tweets

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Dan McCarthy
@d_mccar
We took a deep dive into unit economics at @lyft. Main take-aways: constructive unit economics stemming from positive CLV's, low and stable CAC, but with risk in that the value is coming from a fairly small proportion of each cohort:
bit.ly/2UqpdVk
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(1) they spend $32 to acquire customers then make ~$51 after acquisition, implying a CLV of $19.
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#economics thread

@aoc's expansionary, unconstrained domestic spending proposal #GND (Green New Deal) is based on #MMT (Modern Monetary Theory).

It argues only regulating inflation & unemployment matters, not
deficits.

Some of my problems with MMT...

en.m.wikipedia.org/wiki/Modern_Mo…
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wiiw
@wiiw_news
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