A fundamental insight about finance: Suppose the bank has $250k and you want to buy a house costing that. The bank, by convincing you to take out a mortgage, ends the day *materially* better off than it started, because your promise to repay is worth *a lot* more than $250k.
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“What do you mean, negative?” Well a bank is a pot of money and an operating business, right? A SaaS company is a smaller pot of money, an operating business, and a large number of probable future cash flows. You might be able to efficiently value those cash flows directly.
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But effectively the equity markets let you sell someone very attractive cash flows bundled with an operating business that maaaaaaaaybe they’re paying quite a lot of money for relative to similar software factories.
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V interesting. This seems deep+subtle. Doesn’t this analysis ignore defensibility though? Mortgages and sedans are pretty interchangeable. But if your car is truly unique, you want to own the relationship because of pricing power and ability to change package+price.
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Ferrari actually does this I believe (license the car with restrictions). Tesla owns the charging stations and digital services. So when exactly does selling ownership of a revenue stream make sense?
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