Growth, ROIC, and growth+sales are all important factors to consider when valuing a digital business. Growth is important because it shows that the business is expanding and has the potential to generate more revenue in the future. ROIC is important because it shows how efficiently the business is using its capital. Growth+sales is important because it shows how much revenue the business is generating from each new customer.
This is my third article on digital valuation. In Part 1, I talked about DCF – and where it works and where it doesn’t. In Part 2, I talked about the discount rate, which is a particularly inaccurate factor. And that brings me to Part 3, which is about growth – and when it creates […]
In podcast 101 (Why DCF Sucks for Digital Valuation), I went through how I use DCF for digital valuation. And I basically argued that much of DCF thinking is a ridiculous attempt at a precision that is not actually possible. As an example, I talked about how projecting my weight vs. my happiness into the […]
Discounted cash flow (DCF) is a common method for valuing businesses. However, DCF is a poor method for valuing digital businesses. This is because digital businesses are characterized by rapid growth, unpredictable cash flows, and network effects. As a result, the assumptions underlying DCF are not met, and the resulting valuations are often inaccurate.
I have been expanding from digital strategy to digital valuation as a topic. I recently summarized (briefly) how I do valuation long hand (i.e., pen and paper) with one form. That was in: Valuation Like Warren Buffett in 1 Slide (Asia Tech Strategy – Daily Lesson / Update) But the relevant slide from that article […]
Hillhouse Capital is a leading private equity firm that invests in China. The firm has a successful track record of investing in and digitizing Chinese companies. Hillhouse’s approach is based on three key principles: identifying strong management teams, investing in digital transformation, and building moats.
Chinese recruiting company Kanzhun has gone public on the Nasdaq. It runs a pretty interesting recruiting platform called Boss Zhipin. An Introduction to Boss Zhipin Boss Zhipin is a marketplace platform for recruiting. So this is a pretty standard platform for connecting job-seekers and companies (and recruiting agencies). In 2020, it had 25M monthly active […]
In the digital age, sustainable competitive advantage comes from scale and growth at small incremental cost, targeting a real or imagined 10x or 100x market space, continuous personalization and customer-facing innovation, a digital core for operations, ecosystem and connectedness, people, culture and work design, and money-making at scale.
I’ve been trying to get a handle on the growth and development of cloud in China. But the four companies that account for about 80% of infrastructure spending (Alibaba, Tencent, Baidu and Huawei) don’t really publish many cloud details in their financials and filings. Fortunately, Kingsoft Cloud has gone public as a stand-alone China cloud […]
In the digital age, sustainable competitive advantage comes from scale and growth at small incremental cost, personalization, a digital core for operations, ecosystem and connectedness, people, culture and work design, and operational cash flow.