Chapter 14. The TMT Special

Technology, Media & Telecom, Business Models, Metrics & Diligence

Two Volumes. One Operating Manual.

Volume I Scope: Core TMT business models, B2B SaaS revenue mechanics, unit economics, forecasting. Cloud infrastructure, embedded finance, consumer subscriptions, adtech/martech, vertical SaaS. Key metrics tables and model comparison frameworks. Volume II Scope: Advanced dynamics, network effects and non-contractual retention. Marketplace economics (buyer/seller dynamics, take rates, disintermediation). Consumer platforms, superapps, creator economies.

Structural weaknesses of niche models. Diligence red flags. LTV derivations and exit patterns. Design: This chapter merges both volumes into one comprehensive reference. Each beat is dense, treat it as a full page of a technical reference manual. Designed for investment banking interview prep and due diligence work.

SaaS & Subscription Metrics

ARR / MRR Annual/Monthly Recurring Revenue. ARR = MRR × 12. The north star of SaaS. Components: new ARR, expansion ARR, churned ARR, contraction ARR, net new ARR. Waterfall analysis essential for understanding cohort health. NRR (Net Revenue Retention) The percentage of revenue retained from existing customers including expansion minus churn and contraction. Formula: NRR = (Beginning ARR + Expansion − Churn − Contraction) / Beginning ARR.

Above 120% is elite (Snowflake, Datadog-tier). 100-120% is very strong. Below 100% means the business is leaking revenue customer-by-customer. GRR (Gross Revenue Retention) Same as NRR but excludes expansion revenue. Measures pure retention/churn without upsell. GRR above 90% is strong for enterprise SaaS. Below 80% signals serious retention issues regardless of how many new customers you acquire. Rule of 40 Revenue Growth Rate (%) + EBITDA Margin (%) ≥ 40.

Companies above the line are considered healthy, balancing growth and profitability. Below the line suggests either underinvesting in growth or burning capital unprofitably. Typical profiles: 40% growth + 0% margin (hypergrowth), 20% growth + 20% margin (balanced), 0% growth + 40% margin (cash cow). Magic Number Net New ARR / Prior Quarter S&M Spend. Measures sales efficiency. Above 1.0 = efficient growth (each $1 spent generates $1+ new ARR).

Below 0.5 = burning cash inefficiently and will require massive upfront spend before seeing returns. Burn Multiple Net Burn / Net New ARR. For unprofitable SaaS, measures how much cash is being consumed per $1 of new revenue. Below 1.5x is efficient. 1.5x-2.5x is acceptable. Above 2x is concerning and suggests engineering or go-to-market inefficiency.