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As inflation rises there will be a tightening of money supply and higher interest rates to control it. This causes a repricing of assets and, in particular, high-growth tech stocks. The median public company software valuations dropped from 12x forward revenue to 5x or less—an almost 60% decline.
The probability of a recession in the near term based on estimates from economists at investment banks.
A burn multiple is the amount of cash burned by annual recurring revenue (ARR). For example, if a company burns $10MM to add $30MM ARR the burn multiple is 3.0x. Higher burn multiples are worse and imply the company will run out of money faster. This is a better measure of overall efficiency compared to LTV/CAC because it encompasses all costs (burn).
We are probably in a recession later, but we can’t know for sure for another quarter or so. With inflation on the rise and interest-rate hikes making less money available, it will be some time before things grow again.
There have been 115 tech companies with layoffs since April 2022 and a steep increase in May.