Rule of 40
Noun · Startup & VC
Definitions
A software-company heuristic stating that revenue growth rate plus profit margin should total around 40 or more for a healthy balance of growth and efficiency. It is most often used for later-stage SaaS evaluation.
In plain English: A SaaS rule of thumb combining growth and profitability into one benchmark.
Example: "They were still below the Rule of 40 because growth stayed high but margins remained deeply negative."