In early 2022, when we began transforming Albert, the banking app I run, from burning cash to profitable growth, we started by defining metrics that make a great software business. For the prior five years, we hadn't built a great business; we had only built a fast growing one.
Cheap capital clouded judgement, convincing operators and investors that companies could be worth 30 times revenue, that gross profit margin and cash flow margin should not affect valuation, that it's sensible to spend 40% of revenue on people, and more.
To build a great business, we had to forget lessons learned. We had to channel our inner Charlie Munger.
This post is the third in a series of posts on how to transform a fast-growing, money-losing company into a profitable one, without sacrificing growth.
When interest rates were low, growth came at the expense of sound business.
For the first six years at Albert, we ran a business solely optimized...