The right level of SaaS burn

Sammy is the Managing Director and Cofounder of Blossom Street Ventures. Connect on LinkedIn or email him directly at, especially founders at all stages.

On median and average, fast growing SaaS businesses are unprofitable. So what is the “healthy” level of burn to drive growth? We looked at the last 36 software IPOs to answer the question (going back to MongoDB in 2017). The data is below and observations follow.

Revenue to burn is 3.5 : 1. That’s the acceptable level of SaaS burn. We arrive at that figure by looking at the median and average operating income which is -26% and -31% respectively. That’s 3.8x revenue to operating income and 3.2x, respectively. Since all of these companies are very successful (they IPO’d after all), it’s safe to say that so long as SaaS revenue is growing nicely and you’re retaining the customer, you’re allowed to lose money; just make sure to generate 3.5x as much revenue for every dollar of loss.

Few are profitable. Only 8 of the 36 companies (22%) are profitable with Zoominfo and Certara showing the best margins at 32% and 28% respectively.

A few are very unprofitable. Qualtrics which just went public has an anemic margin of -168%. Coming in second place is the highly valued and hyped Snowflake at -135%.

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