The Data Behind the Rule of 40%
Tom Tunguz
FEBRUARY 10, 2015
In “The Rule of 40% for a Healthy SaaS Company,” Brad Feld shared a simple rule of thumb growth investors often apply to judge the attractiveness of a $50M business. “The 40% rule is that your growth rate + your profit should add up to 40%.” I was curious if this theory were broadly true, applicable for growth stage companies Brad mentioned, but also early stage companies.
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