in Berkshire Hathaway, Constellation Software, cost of goods sold, gross profit, people operations, Slack, software, Starbucks, Tesla, Unity Software

Finding the “Best” Software Companies

Perhaps there many ways to compare the best and I attempted to build on Kai Wu / Sparkline Capital’s analysis on the human side of disruption. More companies are now tech-enabled and I’ve always maintained that behind tech is people.

People build companies, people are the ones companies build for. It does sometimes get lost on most of us (including myself) and at the end of the day so much of the products one builds is ultimately for humans.

I think it’s worthwhile to consider that companies that use tech versus the ones that are themselves are tech companies is a good distinction to make to be able to find the best software companies.

I would say these are the companies who build the “tools” that are purely digital and sell it to businesses or consumers.

Of these companies, I would further bifurcate if there are truly the cream of the crop. Of course there are still many that aren’t even cash flow positive or profitable yet. So the best way to do this analysis is by Gross Profit. And the metric to measure against is Gross Profit per Employee.

Gross Profit is what I’ve chosen because it more closely ties by taking out the Cost of Goods Sold from the Revenue coming in.

Let’s take a look below. I’ve also include some quality companies that aren’t technology companies (per se) to juxtapose how they fit amongst the more techie names.

Gross Profit per Employee.
Underlying data from and