Chinese vs US Tech Valuations

With the US market becoming an attractive destination for Chinese tech IPOs, it is worth revisiting the relative valuations of Chinese tech companies versus their US counterparts. I have chosen to compare three US tech companies with their closest China counterparts. The primary two valuations metrics I will focus on are Enterprise Value (EV) / … Continue reading Chinese vs US Tech Valuations

Profitability Measures for Tech Companies

With the tech funding market’s shift in focus from revenue growth to profitability as come a lot of confusion on which measure of profitability is a suitable benchmark for tech companies. Gross Profit Revenue less costs directly associated with delivering that product/service. The costs are relatively straightforward for physical goods (ie the cost of originally … Continue reading Profitability Measures for Tech Companies

The State of FinTech

The recent travails of Lending Club have shone a not-so-flattering light on FinTech startups. On the surface, the finance industry replete with large slow-to-innovate institutions appears ripe for disruption. However, the performance of the recently public FinTech companies shows that finance make not be as easy a target for disruption as FinTech companies have made out. … Continue reading The State of FinTech

Tech Valuation Trends to Watch in 2016

In a previous article I discussed the declining importance of revenue growth in setting valuations, the question that now needs to be asked is what factors are now driving valuations and what the remainder of 2016 holds for tech valuations. A conundrum in understanding the recent selloff in stocks (and the associated compression in tech … Continue reading Tech Valuation Trends to Watch in 2016

The Declining Importance of Revenue Growth

To recap the first post on the Great Compression in Tech Valuations there are two related trends in EV/Revenue for Saas companies over the past three years – the overall decline in valuations (ie EV/Revenue ratios) and the clustering of valuations around the average (so it is increasingly unusual to be able to achieve a … Continue reading The Declining Importance of Revenue Growth

Revenue Recognition For Technology Firms

When and how much revenue to recognise in a firm’s accounts is one of the most contentious and important issues in financial accounting. The issue is especially acute for tech firms since early-stage tech firms may not yet have reached profitability, thus revenue and revenue growth will be key financial metrics. In addition, technology firms … Continue reading Revenue Recognition For Technology Firms

Developing Financial Applications using XBRL

  XBRL (eXtensible Business Reporting Language) is a data format for company financial reporting which can be easily consumed by software applications. The ‘Language’ in the name is actually a misnomer, XBRL is simply a data format as opposed to a computer language capable of performing operations. XBRL is a variant of the XML format … Continue reading Developing Financial Applications using XBRL

What is ‘Cash’ on the Balance Sheet?

Cash on hand and cash flow are key indicators of financial health for any company, especially for young companies which are vulnerable to cash shortages. Although it would seem to be a straight-forward balance to assess and interpret, the cash balance is frequently misinterpreted and manipulated.   Cash Definition The cash balance reported on the … Continue reading What is ‘Cash’ on the Balance Sheet?

Changes of Accounting Policy

Firms are at liberty to change the accounting policy applied to their financial results. Changes to accounting policy fall into three main categories: 1. Changes of Accounting Principle 2. Changes in Accounting Estimates 3. Changes in the Reporting Entities Changes of Accounting Principle In preparing their financial accounts, firms may select from several alternative accounting … Continue reading Changes of Accounting Policy