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Special: Sequoia Capital's Investment Playbook (with Alfred Lin)
Acquired
Navigate Nuance for Profitability
Understanding business margins requires a nuanced approach that goes beyond simple percentage metrics. It's crucial to focus on margin dollars rather than just margin percentages, as high dollar margins can compensate for lower percentage margins when operating within high-volume markets. This also means recognizing that different industries, such as software and platforms like Airbnb, measure profitability differently, often prioritizing take rates over gross merchandise value (GMV). Therefore, unit economics play a vital role, as businesses must eventually be valued based on profits and earnings multiples. The perception of excessive capital in the venture ecosystem is longstanding, and navigating this landscape requires adaptation rather than mere observation.
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