Tech companies are finding their profitability groove

2 min read
Tech companies are finding their profitability groove

Tech companies are getting the hang of making money — or at least they’re losing far less than they used to when money was cheap and “growth” was sexy. We’re seeing this happen across the tech sector: in enterprise software, fintech, and heck, even in the tech-adjacent digital direct-to-consumer market.

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It’s hard to tell exactly how much more frugal startups have become as they seek to conserve cash. But if they are indeed aping their larger brethren, the technology space as a whole could be finding its profitability groove in a way that should change how we value these companies.

We’re collecting string this morning, pulling in data from across the space, including Klarna’s recent H1 2023 results, and quarterly results from Amplitude, Asana and GitLab, as well as recent IPO filings. The resulting picture demonstrates that generating cash, instead of burning it, is increasingly table stakes in tech, especially so for those still building in the later stages of the private markets.

Once that’s done, we’ll take what we’ve learned and put it into context by comparing historical valuations. New data from Altimeter investor Jamin Ball argues that tech startups today are more expensive than you might think, but when we add in the point about profitability, how does that perspective change?

Let’s have some fun!

Profitability’s so hot right now

This quote from Amplitude’s CEO when it reported its Q2 2023 results has remained stuck in my mind:

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