Re:U.S. Tech Funding – What’s Going On?
by timr on Tuesday June 16, 2015 @03:19AM
(#9724232)
Yeah, this is definitely a reasonably-sized elephant in the room. It's clear that a big chunk of tech revenues come from spending by other tech companies. You can't throw a stone in SOMA without hitting the fancy offices of a startup-servicing startup.
In the late 90s, this happened because all of the companies were buying ad contracts from one another, booking the total value of the contract as revenue, and using that to pad revenue growth. Today's version is the deferred ARR, which turns a tiny cash flow from subscription software into a magically big top-line number. But what goes up quickly, can fall just as fast...it doesn't take many companies to pare back on spending before your fictional deferred revenue graph falls off a cliff.
In the late 90s, this happened because all of the companies were buying ad contracts from one another, booking the total value of the contract as revenue, and using that to pad revenue growth. Today's version is the deferred ARR, which turns a tiny cash flow from subscription software into a magically big top-line number. But what goes up quickly, can fall just as fast...it doesn't take many companies to pare back on spending before your fictional deferred revenue graph falls off a cliff.