Below is the Rule of 40 data for every SaaS company that has IPO’d since October 2017, of which 44 are still public and not distressed.
Our observations:
Nowhere near 40. The Rule of 40 median and average were 18% and 17% respectively, which are quite far from 40.
Very few actually achieve it. Additionally, of the 44 publicly traded SaaS companies, only 3 of them (7%) are achieving Rule of 40 or better. That number is actually down from 2023 and 2024, when the average was more like 7 companies.
Stability at 18%. Finally, this is the second straight quarter where the median was 18%, a material improvement over the ~11% average that prevailed in most of 2024 and 2025. But again, there’s a lot of wood to chop to get to a true ‘Rule of 40’.
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 your readership. See more blogs and SaaS data at blossomstreetventures.com. Other resources we’ve built for founders include: SoftwareMultiples.com; softwareMRRcalculator.com; FounderInvited.com, and TwoFoundersTalk.com. Founders are always welcome to reach out to sammy@blossomstreetventures.com as well.
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