What is the rule of 40 Bessemer?

Written by Editorial Team | Last Updated: August 2026

The Rule of 40 popularized by venture capital firms like Bessemer Venture Partners is a foundational financial metric used to evaluate software-as-a-service and cloud enterprises. It states that a healthy company's combined annual revenue growth rate and profit or free cash flow margin should equal or exceed 40 percent, balancing the trade-off between aggressive scaling and sustainable profitability.

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