Gross margins–which are essentially a company’s revenue from products and services minus the costs to deliver those products and services to customers–are one of the most important financial metrics for any startup and growing business. And yet, figuring out what goes into the “cost” for delivering products and services is not as simple as it may sound, particularly for high-growth software businesses that might use emerging business models or be leveraging new technology.
In this episode from June 2020, a16z general partners Martin Casado, David George, and Sarah Wang talk all things gross margins, from early to late stage. Why do gross margins matter? When do they matter during a company’s growth? And how do you use them to plan for the future? The conversation ranges from the nuances of and strategy for calculating margins with things like cloud costs, freemium users, or implementation costs, to the impact margins can have on valuations.
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Martin Casado is a general partner at Andreessen Horowitz, where he focuses on enterprise investing.
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David George is a General Partner at Andreessen Horowitz, where he leads the firm’s Growth investing team.
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Sarah Wang is a general partner on the Growth team at Andreessen Horowitz, where she focuses on enterprise technology companies.
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The a16z Podcast discusses the most important ideas within technology with the people building it. Each episode aims to put listeners ahead of the curve, covering topics like AI, energy, genomics, space, and more.