In turbulent times, getting down to the fundamentals of how your business operates is critical.

One of the key metrics to understand is gross margins.

This week, in an episode from June 2020, A16Z general partners, Martin Kasato, David George, and Sarah

Wang discuss all things gross margins, including what it is, strategies for calculating and defining it as a company

matures, and how this one core business metric drives everything from cloud

costs to valuations.

The content here is for informational purposes only should not be taken as legal business tax or investment advice or be used to evaluate any investment or security and is not directed at any investors or potential investors in any

A16Z fund. For more details please see A16Z.com slash disclosures.

Hi and welcome to the A16Z podcast.

I'm Amelia.

Gross margins, basically a company's revenue for products and services

minus the cost spent to deliver that revenue

are one of the most important financial metrics in any startup. But

figuring out what does and doesn't go into margins, the ideal ratio for a growing

business and how this ratio changes from early to later stages of a startup is not as simple as it

may sound. So A16Z general partners, Martin Casado, who invests in early stage

enterprise startups and David George, who leads our growth fund,

along with Sarah Wang on the growth investing team,

share why margins matter from their vantage points,

as well as how modern software business models and technology shifts are changing the way we think about them.

We also briefly touch on how margins can impact valuations.

But we begin with why gross margins matter at all, especially as companies mature.

...