Are publicly traded SaaS companies consistently achieved ‘The Rule of 40’? No.
Below is every SaaS company that has IPO’d since October 2017, of which 58 are still public. The data shows their Rule of 40 results over the past 6 quarters through Q1 2025. In Q1 the median Rule of 40 was only 6%, and over the past 6 quarters it’s the median is trending around ~10%.
The paradox here is that we’re all told we must achieve Rule of 40 to be valuable, yet the most valuable SaaS companies in the world on median are nowhere close. And they have a combined enterprise value in the trillions of dollars.
So where is the Rule of 40? Few 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 $0.80 for every dollar of operating loss. 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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