Why VCs Demand Strong Growth: The Rule of 100

Name: Why VCs Demand Strong Growth: The Rule of 100
Uploaded: 2024-12-10T19:29:11+00:00
Duration: 4 s
Channel: Jason M. Lemkin
Description: SaaS investor Jason M. Lemkin explains why VCs now demand the Rule of 100: companies must grow at double-digit rates while burning less cash than their…

10 Dec 2024 · 0 min

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SaaS investor Jason M. Lemkin explains why VCs now demand the Rule of 100: companies must grow at double-digit rates while burning less cash than their new bookings. The old Rule of 40, which balanced profit and growth, no longer cuts it in today's capital-intensive market.

magic number rather than just growth in 2023. So, can you share—
Sort of.
Yeah. Can you share some of these examples where a company used to grow at all cost, but then they kind of changed the way they operate and they be able to optimize their Rule of 40 or magic numbers either savings or spending?
I don't think any of that stuff's true. Yeah? Again, I think this is where Twitter does founders a disservice. I don't think VCs, care about the rule of 40 per se. I don't think they— what VCs want today, and they did not want in 2021, is they want very strong growth that's capital efficient. They want companies at a minimum burning less than their booking. Not that— I know we talked about bookings, but if you're going to go from 40 to 80 this year, um, and add 40, they want you to be burning 20. And it's not really so much the rule of 40. It makes sense, but those metrics are really for public and very mature companies. They're still true, but rule of 40 kind of implies that mediocre growth is okay if you're profitable, and that's the disservice. No VC is interested in mediocre growth that's profitable. Like we started this early day. No one's interested in rule of 30. VCs want rule of 100. Okay? That's true.