There is a relationship between capital, revenue, profits, and equity values:
- Enterprise software companies tend to require lots of capital to get to scale but command high equity values once they do, partly because enterprises are risk averse and like to adopt the most popular technology, leading to winner-take-all dynamics
- Adtech companies tend to be quick to revenue but slower to equity value, and sometimes risk becoming service businesses.
- The equity value of consumer internet companies vary widely, depending on their defensibility (usually brand or networks effects) and business models (e.g. transactional vs ad supported).
- Biotech companies require boatloads of capital for R&D and regulatory approval but then can generate lots of equity value, with the defensibility coming primarily from patents
- E-commerce companies generally require a lot of capital as well, since their defensibility comes mostly through brand and economies of scale.