📄 Article
✓ Link checked
Free
Intermediate
Short, and it does the thing most Rule of 40 explainers skip: it checks the rule against actual public SaaS company histories and shows where the threshold does and does not apply.
The Data Behind the Rule of 40%
From tomtunguz.com by Tomasz Tunguz 4 min read
- The rule is simply growth rate plus profit margin adding to 40 percent.
- It only starts to bind around year five or six: early companies routinely score over 100 percent.
- Workday hit 189 percent in 2010, growing revenue 252 percent at negative 57 percent net income.
- Across about 15 years the median public SaaS score drifts from 100 plus down to roughly 30, so before growth stage, watch unit economics instead.
