RULE OF 40 - Tech companies

 

 

 

The “Rule of 40” is a classic software investing framework:

Revenue growth % + profitability margin % = Rule of 40 score

Why it matters: sustaining rapid growth and strong profitability simultaneously is exceptionally difficult for public software companies.

>Above 40: healthy, sustainable

>Above 100: rare territory.

>Above 140: stupendous performance.