Earning The Multiple
As investors, we’ve noticed a recurring theme: most pro-forma business plans from EBITDA-negative companies assume that growth alone will carry them to breakeven. Rarely do we see plans that factor in meaningful operational optimization or adherence to empirical growth endurance metrics in their sector (growth typically decays over time). This is a risky bet. If growth assumptions prove overly ambitious—as they increasingly do—the cost of the investment rises dramatically. According to the 2025 Benchmarkit report, the median SaaS growth rate slowed to 26% in the past 3 years, and the top quartile dropped from 60% to 50%.
📉 Slowing growth compounds investor risk. When an unprofitable company misses growth targets, it doesn’t just lose momentum—it erodes investor confidence. Over 26% of private rounds in Q1 2025 were flat or down. At the same time, public markets are rewarding profitability: profitable SaaS companies trade at higher revenue multiples (~7.8x) than unprofitable peers (~6.7x). As rates remain high, investors are shortening duration on capital and assigning greater weight to near-term EBITDA. When capital has a cost, cash flow matters more because it means more optionality for stakeholders to make decisions.
🛠️ Optimization isn’t optional anymore. The best teams adjust in real time. In product & engineering, it means narrowing focus, adopting agile workflows, automating CI/CD, and delegating non-core builds to smartshoring partners. In sales & marketing, it’s reallocating spend toward conversion and CAC efficiency—not just lead volume. In G&A, it’s automating finance ops, leveraging fractional roles, and applying zero-based budgeting. This is more than cost control—it’s the structural retooling needed to evolve a normalized capital environment.
📏 Efficiency must scale with ambition. What’s “lean” at $2M ARR isn’t what’s efficient at $20M. Sub-$5M companies should design lean operations from day one. Mid-stage teams must drive repeatable GTM with strong unit economics. Later-stage companies should be showing operating leverage and margin expansion. Across all stages, high growth endurance—company's ability to maintain revenue growth as it scales—is the standard. Hitting that mark isn’t a vanity metric anymore. It’s how companies prove they’re building something real.
👉🏼 In short, growth must be earned. According to Benchmarkit, the average Growth Endurance has fallen to just 65%, down from historical norms near 80%. This means that without a deliberate focus on efficiency, the compounding power of growth decays faster than most plans account for. That’s why operational discipline isn’t just a safeguard—it’s a multiplier. Companies that optimize spend and build margin resilience are better equipped to withstand growth decay and still create lasting enterprise value. In this market, it’s not enough to grow. You have to grow well.
