https://lethain.com/ex-technology-companies/
Marginal cost of adding users
The first perspective is Ben Thompson’s “Software has zero marginal costs.” You’re a technology company if adding your next user doesn’t create more costs to support that user. Yes, it’s not really zero, e.g. Stripe has some additional human overhead for managing fraud for each incremental user it adds, but it’s a sufficiently low coefficient that it’s effectively zero. This is the investor perspective, and matters predominantly to companies because it will change how their valuation is calculated, which in turn plays a significant role in investor, founder, and employee compensation.
If a company is a technology company in a “good” vertical, then the valuation might be 7-10x revenue. If it’s not a technology company, the valuation might be 2-5x revenue. The rationale behind this difference is that a technology company should be able to push its gross margin to 70+% as it matures, which will drive significantly higher cash flow, and most valuations are anchored in discounted future cash flow. This also means that if you’re perceived as a technology company one year, and then not perceived as a technology company a few years later, your company’s valuation plummets.
Engineering culture
The second perspective on being a technology company is captured by Camille Fournier, “A company where engineering has a seat at the table for strategic discussions.” … If they don’t have much influence, then they’ll generally be treated as a cost center.