The Rule of 40 is a very popular concept and we see founders working hard to generate growth and profitability at the same time. But valuable publicly traded companies are not actually achieving Rule of 40.
Below is every SaaS company that has IPO’d since October 2017, of which 57 are still public. The data shows their Rule of 40 results in Q3 2025. The median is 11% and average is -3%. Of the 57 publicly traded SaaS companies, only 21 of them (38%) are achieving Rule of 40 or better.
So where is the Rule of 40? Only a third of publicly traded companies are achieving it. Our advice to founders is to continue to push hard for cash-efficient growth. That means generating ARR of at least $0.75 for every dollar of operating loss (which implies a 1.5 year payback). Don’t forsake growth just to get to profitability; the former is still far more valuable than the latter as long as you’re achieving it cash efficiently.
Thank you for the readership. Visit blossomstreetventures.com for more blogs and SaaS data. Email the author at sammy@blossomstreetventures.com or connect on LinkedIn.
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