Is It Part of Your Cogs?

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From a start up standpoint, it's very difficult to predict how much of the work you're doing is actually repeatable. In management, then mutt umber of systems you've got to connect owith this very, very long tail and that just ends up being part of your cogs. Yes, you can go through a number of examples in early companies of why you don't really know what the cogs are going to pencil out. That would be kind of the highest gross margins. There are many cases where, even if it's not corr and, but it is some sort of scripting or some sort of integration, it's simply something that you're going to have paper

Gross margins–which are essentially a company’s revenue from products and services minus the costs to deliver those products and services to customers–are one of the most important financial metrics for any startup and growing business. And yet, figuring out what goes into the “cost” for delivering products and services is not as simple as it may sound, particularly for high-growth software businesses that might use emerging business models or be leveraging new technology.

In this episode from June 2020, a16z general partners Martin Casado, David George, and Sarah Wang talk all things gross margins, from early to late stage. Why do gross margins matter? When do they matter during a company’s growth? And how do you use them to plan for the future? The conversation ranges from the nuances of and strategy for calculating margins with things like cloud costs, freemium users, or implementation costs, to the impact margins can have on valuations.