The 40% Rule

Category
Series B Team’s org
Market Practices
Revenue Growth Rate + Burn Rate = 40%
Critical
The 40% rule implies that early-stage companies with either low or negative profitability could still be reasonably priced at a high valuation multiple if their growth rate can offset their burn rate.

Ruleof40=RevenueGrowthRate+EBITDAMarginRule of 40 = Revenue Growth Rate + EBITDA Margin

Market Practices

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Additional resources