Financials in the Digital World

Really interesting take by HBR on how financial statements in the digital era are becoming redundant and new metrics have to be used to quantitatively harness the value present in digital companies.

Examples such as WhatsApp’s $19bn sale to Facebook whilst having no revenues and Twitter’s lack a profit since inception only go to prove that today’s investment decisions are not driven solely by management accounts. And this is something that we at iCare Benefits have come across lately. During our latest investment round in 2016, one of the main pitching angles to our panel of potential investors was the non-tangible stickiness of the iCare platform for our customers. By positioning ourselves as the everyday retailer of our clients, we were harnessing intangible value through the increased share-of-habit that we were instilling in our networks (both on customers but also on suppliers). This allowed us to not only experience high customer returns but also increase data gathering through our digital infrastructure.

But conveying this to investors as a value creator well outside of the financial statements was a hefty task.

HBR’s Why Financial Statements Donโ€™t Work for Digital Companies

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