Levie: Applying identical multiples to 5% and 90% margin businesses is crazy
Aaron Levie · BG2 with Bill Gurley, Brad Gerstner & Aaron Levie | Software Valuations, Earnings, Immigration | E02 · Bg2 Pod · Feb 8, 2024 · at 5:09
Box CEO Aaron Levie critiques tech market valuations that assign similar revenue multiples regardless of massive gross margin differences.
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“If you're like one click or two clicks removed from Sandhill Road and Sandhill's equally to probably blame at certain points, you're sort of like, oh, tech enabled, everything should all get a six or 10 X revenue multiple when the underlying economics of this business, you know, could be literally a hundred X difference. You could have like a five or 10% margin company versus a 90, you know, 90% margin, 95% margin company. And, but yet the outside capital inflow is treating those as exactly the same revenue multiple, which is obviously, you know, diabolically crazy.”
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