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Dictionary by pitch.dog
Startup traction, burn & capital efficiency · Working

Rule of 40

Also called: Rule of Forty

ELI5

Growth rate plus margin is compared with forty.

Used in conversation

“The Rule of 40 depends on consistent metric definitions.”

Definition

A SaaS heuristic adding revenue growth percentage and profit or cash-flow margin, with forty as a common benchmark.

Here “Rule of 40” means: A SaaS heuristic adding revenue growth percentage and profit or cash-flow margin, with forty as a common benchmark.

Pitch context

You will see “Rule of 40” in fundraising decks, data rooms, term sheets and investor conversations when the discussion reaches startup traction, burn & capital efficiency.

Why it matters: It helps a reader interpret startup traction, burn & capital efficiency without confusing the measure, decision, role or evidence being discussed.

When the words have to travel

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Sources & evidence · 5

Supporting source families. This entry is an editorial synthesis rather than a quotation from one canonical glossary.