Imagine these two pitches to investors:
A. We will get to $10m annual revenue with $7m costs and $3m Free Cash Flow. After that growth will be nominal. At best investors will value that $3m Free Cash Flow at some discount to the US Treasury 30 year return.
B. We will get to $100m annual revenue with $200m costs and losing $100m a year. After that we will go into hypergrowth to get to $500m annual revenue with $300m costs and $200m Free Cash Flow. Investors issue press release about funding the latest unicorn with lots of capital
Now imagine you are one of 8 billion people living on our planet. You want many more A pitches. Capitalism has failed us. What we need is a way to invest in 10 companies of Type A with an aggregate of $100m annual revenue with $70m costs and $30m Free Cash Flow. That is such a simple thing to do yet we do not have it. We have no way to fund sustainable capitalism.
This is why the pandemic killed small business while big business prospered – big business had a much lower cost of capital. Quiz – what would you prefer to invest in:
- 100 family owned hairdressers each making $100k annual profit ie $10m net aggregate profit.
- A rollup of 100 family owned hairdressers each making $100k annual profit, making a gross contribution of $10m less $5m of overhead costs ie $5m net aggregate profit.
Logically the answer is A but lenders and equity investors line up to fund B. Capitalism is failing at the simple task of capital allocation.
Some subjects are too complex for our short attention spans, so we do 4 posts one week apart (see here for 2,3, 4 some may not be published yet), each one short enough not to lose your attention but in aggregate doing justice to the complexity of the subject. Stay tuned by subscribing.
Daily Fintech’s original insight is made available to you for US$143 a year (which equates to $2.75 per week). $2.75 buys you a coffee (maybe), or the cost of a week’s subscription to the global Fintech blog – caffeine for the mind that could be worth $ millions.
Some subjects are too complex for our short attention spans, so we do 4 posts one week apart (see here for see here for 1 2,4 (some may not be published yet), each one short enough not to lose your attention but in aggregate doing justice to the complexity of the subject. Stay tuned by subscribing.
Daily Fintech’s original insight is made available to you for US$143 a year (which equates to $2.75 per week). $2.75 buys you a coffee (maybe), or the cost of a week’s subscription to the global Fintech blog – caffeine for the mind that could be worth $ millions.
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Think about these two pitches to traders:
A. We’ll get to $10m annual income with $7m prices and $3m Free Money Circulation. After that progress might be nominal. At finest traders will worth that $3m Free Money Circulation at some low cost to the US Treasury 30 yr return.
B. We’ll get to $100m annual income with $200m prices and dropping $100m a yr. After that we’ll go into hypergrowth to get to $500m annual income with $300m prices and $200m Free Money Circulation. Buyers subject press launch about funding the newest unicorn with a number of capital
Now think about you’re certainly one of 8 billion individuals residing on our planet. You need many extra A pitches. Capitalism has failed us. What we’d like is a solution to put money into 10 firms of Kind A with an combination of $100m annual income with $70m prices and $30m Free Money Circulation. That’s such a easy factor to do but we should not have it. We now have no solution to fund sustainable capitalism.
For this reason the pandemic killed small enterprise whereas massive enterprise prospered – massive enterprise had a a lot decrease value of capital. Quiz – what would you like to put money into:
- 100 household owned hairdressers every making $100k annual revenue ie $10m internet combination revenue.
- A rollup of 100 household owned hairdressers every making $100k annual revenue, making a gross contribution of $10m much less $5m of overhead prices ie $5m internet combination revenue.
Logically the reply is A however lenders and fairness traders line as much as fund B. Capitalism is failing on the easy activity of capital allocation.
Some topics are too complicated for our brief consideration spans, so we do 4 posts one week aside (see right here for two,3, 4 some might not be revealed but), every one brief sufficient to not lose your consideration however in combination doing justice to the complexity of the topic. Keep tuned by subscribing.
Each day Fintech’s authentic perception is made out there to you for US$143 a yr (which equates to $2.75 per week). $2.75 buys you a espresso (perhaps), or the price of per week’s subscription to the worldwide Fintech weblog – caffeine for the thoughts that could possibly be value $ hundreds of thousands.
Some topics are too complicated for our brief consideration spans, so we do 4 posts one week aside (see right here for see right here for 1 2,4 (some might not be revealed but), every one brief sufficient to not lose your consideration however in combination doing justice to the complexity of the topic. Keep tuned by subscribing.
Each day Fintech’s authentic perception is made out there to you for US$143 a yr (which equates to $2.75 per week). $2.75 buys you a espresso (perhaps), or the price of per week’s subscription to the worldwide Fintech weblog – caffeine for the thoughts that could possibly be value $ hundreds of thousands.
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