Tren Griffin @trengriffin I work for Microsoft. Previously I was a partner at Eagle River, a private equity firm established by Craig McCaw. I am on the board of directors of Kymeta. Sep. 14, 2019 1 min read

1/ 25iQ term of the day is "gross margin". The gross margin of a business is the percentage of each dollar of net revenue that is available after accounting for cost of net revenue. 

2/ Software businesses and pharmaceutical firms often have high gross margins. Costco and Exxon have low gross margins. Some firms make up for relatively low gross margins by selling a lot of products and some don’t. Low gross margins don't leave much room for operating expenses.

3/ Mark Suster:

“In the startup world, low gross margin almost always equals death. Many software companies have >80% gross margins. But software companies often take longer to scale top-line revenue than retailers so it takes a while to cover your nut." 

4/ "Two startups selling products at $1M price points. The first has 5% gross margins and the second 95%. The first will be able to spend about $50k per sale on Sales & Marketing, R&D and general operational costs. The second will deploy $950k" Tom Tunguz 

You can follow @trengriffin.


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