> There are a lot of industries with a much higher COGS that do fine.
But not many that have such a ridiculously high PE ratio. One of the main reasons tech businesses (specifically SaaS) can command such a high valuation is because their gross margins are amazingly high (some up to 90%, on average around 70-80%), which means 90% of their revenue can be reinvested back into growth (S&M and R&D). I think it's certainly fine to discredit Twilio when looking through the lens of publicly traded SaaS businesses (they're on the low side of gross margins), but if you compare to other industries, you're right, it's a very healthy business.
But not many that have such a ridiculously high PE ratio. One of the main reasons tech businesses (specifically SaaS) can command such a high valuation is because their gross margins are amazingly high (some up to 90%, on average around 70-80%), which means 90% of their revenue can be reinvested back into growth (S&M and R&D). I think it's certainly fine to discredit Twilio when looking through the lens of publicly traded SaaS businesses (they're on the low side of gross margins), but if you compare to other industries, you're right, it's a very healthy business.
Good read on this:
http://tomtunguz.com/not-all-revenue-dollars-are-created-equ...