The acceptable level of SaaS operating loss

Profitability is not a requirement in SaaS. Of the 64 SaaS IPO’s below, 53 of them were not profitable at the time they went public (83%). Clearly a certain level of burn is ok so long as you’re growing, but what is that level?

On median, the operating margin was -23%, meaning for every $1 of revenue, there was $0.23 of operating loss. For the 14 SaaS business that have IPO’d since January 2018, the median was $0.27 of operating loss for every $1 of revenue.

In summary, so long as you’re growing fast and there is a clear path to profitability, burning about $0.25 for every $1 of revenue is acceptable.

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