Understanding the Mendoza Line for SaaS growth

“How fast do I need to be growing to be interesting to a venture investor?”

This is a question we get asked all the time by CEOs, and we realize “it depends” is not the most actionable answer to give. Instead, we have come up with a simple model that allows us to give a clear numerical answer to this question.

The model allows us to identify, at every stage in the life of a SaaS company, a growth rate, below which that company is not on a clear, venture-backable trajectory. We call the graph of those growth rates the Mendoza Line for Growth. For non-baseball fans, the Mendoza Line is a baseball term for the batting average below which a hitter is not worth hiring for Major League Baseball.

We admit to the massive simplifications of this Mendoza Line model, and recognize…

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