Henrik Torstensson's Weblog

In 2022 the focus of public market stock valuations went from revenue growth to profitability. This has impacted small and large technology companies, and layoffs started already last year (in Stockholm both Klara and Kry made cuts to their respective organizations). Now a second phase of layoffs are coming with Salesforce, Amazon and Vimeo announcing…

If the founders of a startup manage to build an extraordinary software company that becomes very large (billions of dollars in revenue), at some point the company will be valued in-line with other mature, successful technology companies. Based on observation my rule of thumb that is a price/earnings ratio of circa 20. The P/E ratio…

Bill Gurley interviewed by McKinsey Quarterly. ‘If you’re going to build something from scratch, this might be as good a time as in a decade’ Starting a startup now is probably better than in late 2021 or 2022.

Many tech companies used EBITDA (Earnings before interest, taxes, depreciation and amortization) or even Adjusted EBITDA as highlighted profitability measures. EBITDA excludes financings costs, taxes, depreciation and amortization and Adjusted EBITDAs exclude a bunch of other costs and generally are all over the place as Adjusted EBITDA is not an official GAAP (Generally Accepted Accounting…

First day of 2023. My ambition is to write something everyday this year. Even if it might be both short and not terribly groundbreaking most days, I think writing something each day will lead to more interesting writing overall. For startups in Stockholm and Sweden/Nordics at large, I believe 2023 will be quite a good…

Mark Leonard founded Constellation Software, a serial acquirer of niche software companies, in 1995. Today it has revenue of more than 4 billion Canadian dollars and thanks to high revenue growth, strong margins and predictable growth by acquisitions is valued very highly. Mark Leonard has kept a reasonably low profile, which makes his presentation at…

Jamin Ball writes Clouded Judgement, and is anything but, about SaaS and valuations and the last issue of 2022 included a wrap-up for the year. A chart of enterprise value divided with expected revenue for the next twelve month shows just how high valuations got in 2020 and 2021. Inflation and higher interest rates have…

Have enough cash on the balance sheet to either get to profitability or to get to a compelling set of milestones that makes raising additional financing a “no brainer” — even in a poor market environment. Roger Ehrenberg highlights one of the eternal truths, regardless of the market environment, for founders and CEOs building a…

Sometimes old technology die over a couple of years when new technology comes along, sometimes it takes a much longer time. If technology is embedded into core systems that works, even if not perfectly, there’s a bunch of reasons to “if it is not broken, don’t fix it”. Which is good for legacy sellers like…

Good discussion with Brad Gerstner about large tech companies (incl Meta), software stock valuations, interest rates etc. Nothing entirely new if you’ve been following what has been going on the last 6-9 months, but worth a listen/watch regardless.