“Of course, the focus on gross margins is understandable. A high gross margin is a preferred business feature. Higher gross margins allow for more percentage points of revenue to be spent on growth and product development. Higher gross margins also tend to translate to higher cash flow margin, and in a world where “how much runway do you have” has become a (if not, the) preeminent question, cash is paramount. For these reasons, high gross margin companies typically have higher revenue multiples than their low gross margin counterparts.”

https://a16z.com/2020/05/28/moats-before-gross-margins/

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Moats Before (Gross) Margins | Andreessen Horowitz

In 2019, long before the outbreak of COVID-19, many lower gross margin tech companies were not being well-received by the public markets, and an excessive spotlight was cast by many on company gross margins. In the present moment, that attention … Continue reading